2022年1月29日

The central bank untied credit card overdraft interest rate payment market is expected to reshape

In recent years, credit card business has become one of the key points of bank financial retail transformation, and it is also the “trump card” for commercial banks and Internet consumer finance companies to compete for customers.

 

Starting this year, credit card overdraft interest rates will be determined independently by issuers and cardholders, and the upper and lower limits on credit card overdraft interest rates will be abolished, according to a circular from the central bank. This means that credit card overdraft interest rates will be fully market-oriented.

 

Eliminate limits on credit card overdraft rates

 

Recently, the People’s Bank of China (PBOC) issued the “Notice of the People’s Bank of China on Promoting the Marketization Reform of Credit Card Overdraft Interest Rate” (hereinafter referred to as the “Notice”). “Notice” pointed out that to further promote the reform of interest rate marketization, the People’s Bank of China, since January 1, 2021, credit card overdraft interest rate shall be determined between card issuers and the cardholder autonomous, cancel the management of credit card overdraft interest rate upper limit and lower limit (the original cap of five over ten thousand of the daily rate, lower limit for five over ten thousand of the daily rate 0.7 times).

 

The Circular requires that card issuers should fully disclose and update the interest rate of credit card overdraft through their official websites and other channels, and prompt the interest rate of credit card overdraft and the method of calculation and settlement in a prominent way in the credit card agreement to ensure that cardholders fully understand and confirm their acceptance. When disclosing the interest rate of credit card overdraft, the annual interest rate should be displayed in an obvious way, and not only the daily interest rate and the daily payment amount, etc.

 

Altogether credit card overdraws interest rate, basically be the interest rate that the amount of current bill that points to credit card holder was not on time full amount of repayment, place generation overdue plan interest, instalment repayment, and the plan interest rate that the person that hold credit card uses credit card to take when showing is payable.

 

Reporters learned that credit card interest rates before the upper and lower limits are dominated by the central bank of the interval management system. Central bank in April 15, 2016, issued the notice about the credit card business related matters, will be in the past unified regulation of credit card overdraft rate standard (five over ten thousand) of daily cancelled, start the range management, up to 0.7 times daily five over ten thousand, five over ten thousand of the lower limit for the daily, to calculate the year after interest rate between 18.25% and 12.78%, continues to this day.

 

Dong Zheng, a senior credit card researcher, told Securities Daily that the credit card business has been losing ground to other consumer credit products for years due to lack of competitive advantages in policy compliance, transaction scenarios, business processes and other aspects, despite the same overdraft rates. The announcement is expected to regain the mainstream status of the credit card business.

 

We will improve banks’ ability to differentiate pricing

 

Consumer finance expert Su Xiaorui told the Securities Daily reporter that deepening the market quotation rate reform is an important work goal of the financial industry. In recent years, with the continuous progress of preventing and resolving major risks, problems such as “shadow banking” have been effectively solved. On the one hand, the timely release of lending rates of commercial banks can enhance the efficiency of bank management and improve the loan quality of commercial banks. On the other hand, it can fill the demand gap caused by the cleaning up of “shadow banking”, which is the concrete embodiment of “opening the front door” after “blocking the side door”. The liberalization of credit card interest rate is an attempt to cut into the reform of the demand side through consumption upgrading under the background of the current economy with “internal circulation as the main part and external circulation as the energy”, which can effectively stimulate more vitality of the consumer market.

 

Wang Peng, an assistant professor at Renmin University of China, said in an interview with Securities Daily that the People’s Bank of China issued a new regulation on credit card overdraft recently, which reflects the direction and principle of interest rate liberalization reform, and is bound to set off a credit card interest rate war between banks.

 

Wang Peng believes that for a long time, China’s credit card business is handled in the majority of commercial banks, through the licensing agencies, through legal procedures for standardized operation. Since the beginning of this year, the relevant supervision and public security departments have launched a heavy attack to crack down on and control the online loans and routine loans on the Internet financial platforms. In this process, the original relatively compliant consumption and expenditure market will become a place for financial institutions to contend for.

 

Wang Peng further analysis said that after the credit card overdraft interest rate fully marketization, differentiation pricing ability will be greatly enhanced. Compared with non-bank financial products, credit card financing has low cost, rich rights and interests, and combined with interest rate advantages, which is likely to win back a situation for traditional financial institutions in the lending market, and win back advantages in the fight against consumer financial company products, Huabei, Xiebei and other Internet financial products. Traditional commercial financial institutions can expand this part of the market through credit cards and interest rate marketization such as overdraft and withdrawal. The bank can offer overdraft preferential treatment to the customers with good credit and timely repayment. Bad to credit user, can properly float overdraw interest amount, adopt flexible system. The move will also boost competition in the credit card business, with banks likely to offer further cuts in overdraft rates as they compete for more customers, a boon for cardholders.

 

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