Are We have to Pay Credit Card Tax?

In the recent 2010 budget announcement, Prime Minister was announce that there will be a service charge of RM50 a year to be imposed on each principal credit card and charge card and RM25 a year on each supplementary card including those with free for life effective from Jan 1, 2010.

This cause dissatisfaction to many credit card holders because in average, each person hold two to three cards. Some have more than half a dozen, including co-brand cards between banks and retailers, airlines and hypermarkets.

Will customers have to pay the RM50 service tax on principal credit cards or can it be absorbed by the banks that issue them or do government willing to abolish them due to many complains?

Currently there are 9.8 million principal and 1.3 million supplementary credit cards issued according to statistics from Bank Negara. From the soon-to-be imposed tax, the Government will earn about RM555mil every year.

By looking at the figure, it is unlikely that banks will be able to absorb the service tax across the board. It would also defeat the purpose of implementing the tax to promote prudent spending.