Customers warned to examine small print
Hong Kong's consumers are spending less with their credit cards. Of the city's nearly 12 million credit cards in circulation, card receivables declined by HK$6.3 billion, or 8.1 per cent, in the first quarter of this year after rising 4.3 per cent in the previous quarter, according to a recent Hong Kong Monetary Authority (HKMA) survey. The decline was largely due to the receding effect of payment of salaries tax by credit card and a cutback in spending.
The rollover amount, which reflects the amount of borrowing by customers using credit cards, declined to HK$22.9 billion from HK$23.8 billion quarter on quarter. The level for non-payments outside the normal repayment period increased to HK$350 million, up from HK$263 million.
While the lure of bonus points and high credit limits may seem attractive, consumer watchdogs stress that reading the small print on credit card agreements should be a priority.
For example, in recent months several Hong Kong credit card issuers have made changes to interest rates and terms and conditions. In February, HSBC raised its interest rate to 31.86 per cent from 26.81 per cent. The bank said it made the move to bring it in line with other issuers.
The HKMA said the setting of the terms and conditions including fees, charges and interest rates on credit card services was a commercial decision for banks. The guiding principle for the HKMA is that banks should provide customers with readily available, clear and up-to-date information about terms and conditions of services.
'When banks want to introduce any amendments to their terms and conditions that affect fees and charges, or the liabilities or obligations of customers, they should give customers 30 days' notice before such amendments take effect. If a cardholder refuses to accept the revised terms and conditions and wants to cancel his or her credit card, the bank should refund part of the annual fee to the cardholder on a pro-rata basis,' an HKMA spokesman said.
He said card issuers were required to draw the attention of customers to those major terms and conditions, which impose significant liabilities or obligations on their part. These terms and conditions should be described or highlighted in plain language.
In the United States, where credit card debt is about US$800 billion, President Barack Obama recently signed into law new credit card rules designed to restrict deceptive and unfair practices. Under the new law, penalty fees must be 'reasonable and proportional' to the violation and card issuers need to get parents' permission or verify ability to pay for those under 21.
The HKMA said it was aware of the new credit card rules in the US. 'We are studying the rules and will consider in collaboration with the industry's Code of Banking Practice Committee if there are any lessons that [the] banking sector can learn,' the spokesman said.
HSBC, Hong Kong's largest credit card issuer with 3.1 million cards in circulation, said the spending trend for credit cards was in line with the market trend. 'Despite ... an uncertain economic environment, there has not been any recent change in HSBC's ... criteria used for issuing credit cards,' said Diana Cesar, HSBC's head of distribution strategy and management, and asset business, personal financial services, Hong Kong.