LAST year we charged more than $25 billion worth of purchases to just over six million credit cards. It comes to more than $4,000 per card. For most of us, it is the way to pay.

TEXT & ILLUSTRATIONS: LARRY HAVERKAMP & MAROO

A big issue has been who should pay for unauthorised charges if your card is lost or stolen.

The rule had been that the cardholder pays. It became controversial after Ms Tan Shock Ling, 39, lost her credit card and thieves made $17,100 in purchases, including three Rolex watches.

Closed-circuit TV recorded the whole thing. The crooks didn't look anything like Ms Tan, but it didn't matter. The banks still required her to pay for the watches.

The Association of Banks in Singapore (ABS) has taken the position: 'The first and primary line of defence is the customer, who has custody and possession of the card'.

Okay, but what about online and phone purchases? The problem with those isn't solved by the customer retaining possession of his card. All it takes is a credit card number to make an online or phone purchase.

We have all heard stories about syndicates stealing millions of credit card numbers. Of course, all they need is the numbers and not the cards to commit fraud.

New times need new rules. The banks have caught up by limiting cardholder liability to $100 for unauthorised charges from 1 Nov.

This new rule puts us on par with other countries - like Malaysia and the US - which do the same.

The day after announcing banks would be liable, we read reports about plans to arm credit cards with security devices that may soon make all credit card fraud - including online fraud - next to impossible.

When fraud was more prevalent, banks made consumers responsible for unauthorised transactions until the card was reported lost or stolen.

Why relieve them of liability now when new technology is making credit card fraud a thing of the past?

ABS told me: 'Banks have decided to make the changes so as to provide clarity and to give credit cardholders certainty about their liability for unauthorised transactions.'

Make interest rates lower and clearer

IT'S an empty gesture for banks to pay for credit card fraud if there is none. As The New Paper reported on 8 Sep, new technologies have the potential to eliminate this type of fraud.

Two more meaningful initiatives banks could take immediately are:

Credit card interest rates are capped at 24 per cent. These sky-high rates haven't budged even though interest rates have fallen for loans and deposits.

Why not pass on these cost savings to credit cardholders, especially those who pay their bills on time?

Consider this rule: 'The interest rate for on-time payers will be capped at 13.5 per cent. All others cardholders will pay 17.5 per cent.'

An impossible dream? No. It has already happened for our neighbour to the north.

Since 1 Jul last year, Malaysia's central bank, Bank Negara, has capped credit card interest rates at 17.5 per cent. For cardholders with a history of paying their bills on time, the ceiling is 13.5 per cent.

We have the potential to do even better since our base interest rates are lower than Malaysia's.

The effective annual rate (EAR) is almost double the flat rate, which is used to advertise auto and personal term loans. EAR is always mentioned, but usually in a small footnote of advertisements. The lower - and misleading - flat rate is what gets highlighted in the ads.

We really pay EAR and not the flat rate, so why not require it to be prominently displayed? It could be printed in bold and in the largest font in the ad.

While we are at it, let's also tell banks to include all fees and charges in their advertised rates.

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