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SCMP Reporter

THOSE considering using bank credit to help them through the expense of Christmas can tailor their loans to their ability to repay.

  The territory's banks offer a range of products from overdrafts to credit cards to help shoppers spread their repayments and potentially halve their interest payments.

   The traditional method of running up a bill on a credit card could cost dearly for those who miss their repayment deadline.

  Overdrafts are a cheaper alternative, offering the same level of flexibility as credit cards in repayments.

   Unlike personal instalment loans the repayments need not be set for a fixed period.

   Secured overdrafts allow borrowings of a percentage of the amount held in deposits.

  Hongkong Bank's Power Vantage account holders, for example, can borrow up to 100 per cent of Hong Kong dollar and US dollar deposits, 80 per cent of foreign currency deposits and and 70 per cent of the value held in a gold account.

    Citibank allows Currency Manager account holders up to 80 per cent of deposits as an overdraft.

  A spokeswoman said: 'It is for customers who need cash but don't want to break their time deposits and don't want to sacrifice income.'     The maximum being offered by the banks was typically three or four times monthly salary up to $200,000 in unsecured overdrafts.

    In addition to the unsecured overdraft facility with the Power Vantage account, Hongkong Bank offers a Personal Overdraft Account.

  A current account must used to access the money through cheques or automatic teller machines (ATMs).

    Standard Chartered Bank's Flexiline personal overdraft is offered in conjunction with a cheque account. Of the banks surveyed, it is offering the highest overdraft amount of $200,000.

    Grace Tsang, manager of product quality in Hongkong Bank's retail marketing and planning department, said the key benefit of overdrafts was flexibility.

  Ms Tsang said: 'For those people who need standby cash, it is a revolving credit facility.'    Once approved, the money can be drawn whenever needed.

   She added: 'When they [borrowers] have money, they can pay it back anytime, whenever it suits them.'    Borrowers usually are required to pay at least five per cent of the interest per month.

  The minimum monthly payment required typically ranges from $50 to $100.

  Because the applicant's salary must be paid by autopay into a Hongkong Bank account to qualify for a personal overdraft account, there is no set minimum monthly repayment requirement.

    The banks surveyed were charging interest of between 13 per cent and 15 per cent per year on overdrafts.

  An annual fee of one per cent of the overdraft amount available per year or $200 may also be charged.

    But the overdraft interest rates are almost half the annual interest rates charged on credit cards.

   If credit card balances are not settled within the interest free period, normally eight weeks, interest is charged at a flat rate of two per cent per month on goods and services, giving an annual percentage rate of about 27 per cent.

    For cash advances, 2.5 per cent per month is charged immediately, which equates to just over 30 per cent per year.

    Interest on overdrafts is charged on a daily basis once the credit line is used.

  Ms Tsang explained: 'You pay interest only on the portion of the overdraft used for as many days as you are overdrawn.'   Interest payments are calculated at the end of every month and automatically debited from the account.

  The amount debited in interest and the outstanding overdraft amount are shown on the monthly statements.



Tailor-made credit suits the occasion