Securities trading credit line launched
Hongkong Chinese Bank has introduced a credit card that provides holders with an overdraft facility for securities trading on top of the regular spending credit line.
The bank will charge an annualised interest rate of 18 per cent for the securities-trading facility.
Regular credit cards normally attract an interest rate of about 30 per cent.
Nonetheless, the 18 per cent rate is considerably higher than the 12 per cent charged by the average margin share trading facility.
Hong Kong Chinese Bank's marketing manager for securities investment Stephen Kwan Chi-sing said the overdraft facility was unsecured lending because the shares bought were not required to be lodged at the bank.
That is why the facility commands a higher interest rate than a normal margin share trading facility, which requires the shares bought to be used as collateral.
Assistant general manager for consumer and branch banking Simon Chau Kwok-hing said the granting of the unsecured facility would not necessarily increase bad loans because the bank continued to be careful when approving an application for credit.
The credit limit for the securities trading facility is five times the card holder's monthly salary. while the normal card spending line is capped at two times the card holder's monthly salary.
The credit limit, including the two facilities, is six times the card holder's monthly salary or $500,000, whichever is lower.
A customer has to earn at least $300,000 a year to be eligible to apply for the card.