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PBOC Issues Circular on Matters Related to Credit Card Business

The People’s Bank of China (PBOC) recently issued its Circular on Matters Related to Credit Card Business. Effective 1 January 2017, late payment fees of credit card will be scrapped, the upper and lower limits of the interest rate of credit card overdraft will be regulated, and clear requirements on credit card cash advances will be spelled out.

Scrapping the credit card late payment charge will benefit cardholders most. By agreements with cardholders, card issuers are allowed to decide whether or not and how much they will charge if cardholders fail to repay their outstanding balance on time. Card issuers shall not charge overlimit fees for providing service above the credit card limit. Neither shall they charge interest on penalty for default of payment, annual fee payment, cash withdrawal fee and currency conversion fee.

The circular also provides for the lifting of restrictions on interest-free payment period and the minimum payment amount. Card issuers can set those terms themselves with flexibility according to its business strategies and credit risk of cardholders. Under the Measures for the Administration of Bank Card Business, currently card issuers can offer up to 60 days interest-free period for credit cardholders, and the minimum payment of a credit card in the first month may not be lower than 10% of the overdraft balance of that month. There are also unified requirements on interest-free period and minimum payment.

According to a report on the general situation of the payment system in 2015 released by the PBOC, as of the end of 2015, a total of 432 million credit cards had been issued in China, with the 2015 growth rate down by 21.5 percentage points year on year.

Despite slowdown in the number of credit cards issued, as of the end of 2105, the total credit extended to credit cardholders was Rmb7.08 trillion, up 26.43% year on year; credit cards outstanding balance was Rmb3.09 trillion, an increase of 32.05% year on year; average credit limit of credit cards was Rmb17,900, with credit utilisation rate at 43.77%. Credit volume of credit cards continues to grow alongside credit utilisation rate.

Content provided by Picture: HKTDC Research
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