2021年11月27日

Overdraft interest rate fully open credit card will not appear bottomless “price war”

Original title: Overdraft interest rate fully open, credit card will not appear no bottom line “price war”

According to the Economic Daily, the People’s Bank of China (PBOC) issued a notice on promoting the market-oriented reform of credit card overdraft interest rates recently. The new rules make it clear that credit card overdraft interest rates are determined by the issuing institutions and cardholders through independent consultation, and the upper and lower limits of credit card overdraft interest rates are cancelled. This caused the concern of many consumers, credit card overdraws interest rate in the round “loose tie”, whether means will aggravate bank competition, bring about credit card overdraws interest rate “precipice type” fall? In this regard, experts believe that no bottom line “price war” will not appear.

Credit card overdraft interest rate, in simple terms, is if the credit card holder fails to pay in full within the interest-free period, after the expiration of the interest-free period, the bank will charge the cardholder a certain amount of interest, overdraft interest rate is the price of this part of the interest.

In recent years, the management of credit card overdraft interest rate developed from fixed interest rate to floating interest rate. Before the notice was issued, the central bank limited the upper and lower limits of credit card overdraft interest rate to banks, with the upper and lower limits of 5 ‰ daily interest rate and 0.7 times of 5 ‰ daily interest rate. This interval is equivalent to the annual interest rate of 12.6% to 18%.

Why to liberalize credit card overdraft interest rate? The central bank said in its notice that the move was aimed at further liberalization of interest rates. To this, experts said, “notice” the starting point is to further promote the marketization of credit card business. As early as 2016, the central bank has given banks the right to determine the interest rate of credit card overpayment, the interest-free repayment period and the minimum repayment amount. At present, under the policy background of accelerating opening up in the field of bank card clearing, the marketization of overdraft interest rate is equivalent to the last step of marketization of credit card business.

Dong Ximiao, chief researcher at Zhaolian Financial, said the abolition of the upper and lower limits on credit card overdraft interest rates does not mean that overdraft interest rates will soon fall below the original lower limit, but that banks may make more differentiation in pricing. After lifting the upper and lower limits, regulators are expected to continue to guide banks to maintain a good order of competition through self-regulatory mechanisms and other means, and banks will not engage in bottomless “price war.”

“Don’t worry about credit card interest rates going down.” Dong Zheng, a senior credit card expert, said that bank funds are not free and have costs. Therefore, even if the credit card issuing bank is priced according to the market overdraft interest rate, the factor of capital cost cannot be opened around. Even if there is competition among banks, there will eventually be an industry-accepted pricing range.

Data from the People’s Bank of China shows that by the end of the third quarter of 2020, a total of 766 million credit and loan cards had been issued in China, up 1.29% from the previous quarter. However, as consumer financial institutions and all kinds of Internet consumer credit products join the competition, the competitiveness of bank credit card products has declined.

Insiders believe that after giving banks more independent pricing power, it will be conducive to better serve consumers and enhance the competitiveness of bank credit card products. According to Dong, financial consumers with high overdraft frequency and amount and good credit will get more favorable overdraft rates.

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