A thicket of credit-card fees
It is easy to get a credit card in Hong Kong. Banks make a lot of money from this business and, to attract new customers, they offer promotions such as cash coupons and free subscriptions on pay-television channels.
People who sign up thus enter a world of potentially steep fees and interest expenses.
To help people make informed decision about credit-card use, we've compiled a table of the most basic fees for entry-level cards issued by eight of Hong Kong's major banks. The essential finding: it can get expensive to use your plastic if you do not pay attention.
All banks apply a late-payment charge, which is calculated using various formulas (see table). The main point is that, regardless of how little you owe, a late-payment charge will kick in ranging from a minimum of HK$130 for Industrial and Commercial Bank of China and HK$180 for all other banks.
Banks also charge a cash-advance handling fee when a customer uses a credit card to get money from an ATM. The banks surveyed charge between 3 per cent and 4 per cent of money withdrawn. A few also charge administrative fees, such as Bank of China and DBS.
Given these costs, it makes little sense to get a cash advance with a credit card if one's ATM card is handy (for which no fee is charged).
Transferring money deposited with your credit card account to your savings account can also be costly. This can happen if, for example, you return a purchase and the vendor reimburses to your credit card account.
Some banks - such as Citibank and Standard Chartered - waive fees should you transfer that cash to your savings account. But other banks consider this to be a cash advance (even though no money is being 'advanced') and charge you for it.
But the cash advance-fee is small beer compared with the interest charged on unpaid credit card bills. This is calculated as an annualised percentage rate (APR), which is the interest rate calculated over the whole year. The Money Lenders Ordinance, section 24, states that it is an offence to charge interest of 60 per cent or more.
Banks often charge a higher interest rate on money borrowed via cash advances using their credit cards at ATMs than they do for credit card bills accumulated as a result of shopping.
For example, Hang Seng Bank charges up to 45.07 per cent APR for an ATM cash advance, which comes on top of the bank's 3 per cent cash-advance charge discussed above.
For a retail transactions, however, Hang Seng would charge annualised interest of 40.38 per cent on the unpaid balance.
In January, the Hong Kong Association of Banks announced a list of 'enhanced credit card practices' to increase customer protection, including transparency of credit card charges. One of the new measures stipulated was that customers have 60 days to reject an APR rise by closing their account.
The second batch of measures, to be implemented next year, states that card issuers should show all details of fees and the APR, broken down by retail purchases and cash advances. This will enable customers to make up their own minds as to which bank offers the best deal on credit cards.