The Twenty-something Credit Ocean

The new Gen-Y stereotypically known for their opinionated dialogue and free-spending habits are our twentysomething entering the workforce without building up a cash cushion and amassing too much with credit card debts.

According to statistics from Credit Bureau (Singapore), Singapore’s leading consumer credit bureau, the proportion of consumers aged 21-29 who are saddled with debt has increased compared to a year ago (see table 1: 4.23% in Jul 10 vs.3.85% in Jul 09), whereas the proportion of the overall population in debt has stayed constant at 4.95%.

Table 1: Percentage of Group in Debt

Even within Gen Y, our national financial hardships have created a new mentality about money.The growing observation seeing young adults surfacing from new Gen-Y with a more indolent lifestyle and I-don’t-care attitude where many things would have been believed to be taken care by their family.Thus, the financial responsibility seems to kick-in a tad slower than the previous generations of depression-fuelled frugal spenders.

Despite the increasing twenty-something in debts, the overall figures stay relevant as compared to the national average with 4.23% of consumers aged 20-29 owed credit card debt in July 2010.(See table 2 on the figures shown on comparing with national average at 4.95%).

Credit card debt is defined as accounts that are 30 or more days past due (denoted by status “B”, “C” and “D” on CBS’ consumer credit report), closed with outstanding balance (“F”, “G” and “H”) or declared by banks as bad debt (“W”).

The proportion of twentysomething consumers who have chalked up credit card debt is lower than the national average of 4.95%.

The amount of debt owed by young consumers is also lower than the national average.In July 2010, consumers aged 21-29 owed an average outstanding balance of $5,368 on their credit cards compared to the overall average balance of $6,360.

Table 2: Percentage of Debtor and Average Spending

Although the proportion of twentysomething in debt has increased, the average debt they owe has decreased compared to a year ago, while the average debt owed by the overall population has increased slightly (see table 3).

Table 3: Average Debt per Person

Nevertheless in the era of low unemployment rate and easy credit, the freedom of luxury spending by the new Gen-Y vs.the national average which may still be swimming in a pool of debts from previous recession, tells us how the younger generation today embraces the range of financial pitfalls in a different perspective.Or is it otherwise that the ratio of their paycheque to increasing costs of living is getting beyond reach for young couples planning for a wedding or newly-weds with housing or baby plans.

Having said that, it sets us thinking if the young Gen-Y is ready to juggle between responsible spending and keeping a good credit reputation that can give them a better head start when more essential credit necessities are coming their way.

The above figures are culled from uploads by all card issuing banks and financial institutions in Singapore.CBS is the only Consumer Credit Bureau in Singapore that has a full-industry upload.CBS, an associate company of The Association of Banks in Singapore, has 21 member banks and financial institutions.For a full list, please visit www.creditbureau.com.sg.