Why don't banks give credit where it is needed?

PUBLISHED : Monday, 21 January, 2013, 12:00am
UPDATED : Monday, 21 January, 2013, 3:49am

Claire is a 32-year-old mother and the wife of a fund manager at one of Hong Kong's biggest banks, but when she hands her credit card to a waiter after a meal, she never knows if it will be declined.

When Claire and John (not their real names), who earns a six-figure salary, returned to Hong Kong after a two-year stint working in Japan, HSBC would only offer the couple a joint credit card with a limit of HK$40,000, despite the balance on their savings account being 10 times that amount.

"The limit was a fraction of my monthly salary," says John, 34. "So when we pay for flights or were trying to book a private hospital for my daughter's birth, we couldn't use the card. In restaurants we'd often be declined as my wife and I wouldn't know how much the other one had spent. I had several cards, but she only had one. It meant trawling the streets with a small child to find an ATM."

Yet when John wrote to HSBC asking to increase the limit he was declined without explanation.

His story is not uncommon - if anything, John and Claire are the lucky ones.

A growing number of Hong Kong expats with unblemished credit records, little debt, permanent employment contracts and respectable salaries find it difficult to obtain a credit card at all - and impossible to find out why. Many couples report one partner being approved while the other - sometimes better paid - is rejected.

While there are not yet any official figures on the problem, a quick internet search unearths multiple threads on sites such as GeoExpat and AsiaXPAT, discussing this problem as far back as 2006.

A GeoExpat user, who goes by Jackillin1, from Sheung Wan, writes: "I have just been rejected for my first ever credit card (HSBC). I have been working for the same company for two years - they just renewed my contract, as of the end of March I will have HK$60,000 in my savings account, I earn between HK$20,000 and HK$35,000 a month and I have no debt. I don't actually want credit … but I'm finding it increasingly difficult to book hotels, flights and hire cars without a credit card."

On another four-page thread entitled Is It Easy To Get A Credit Card In Hong Kong?, HKKM writes: "When we came to Hong Kong three years ago, Hang Seng wouldn't give my husband a credit card, even though he had a good salary and a three-year contract, and wouldn't tell him why. We heard from a couple of our friends [also expats] that had the same experience."

When Money Post contacted the Consumer Council we were told that it was not aware of this issue - if anything, credit in Hong Kong was too widely available, it said.

Megan Choy, a 27-year-old chiropractor from Oregon who now lives in Cheung Sha Wan, would disagree. When she graduated from school in 2010, she moved to Hong Kong. After submitting her employment contract to HSBC she was rejected for a credit card, then denied a second time by Hang Seng.

"Like many students, after graduating I had huge student debt in the States. Because I couldn't get a credit card, I had to use my US account […] and accrued a bunch of fees because everything is a foreign transaction," Choy says.

Choy subsequently reapplied to HSBC, which requested the same information again before approving her for HK$30,000. They later declined her request for an increase. "But my husband applied as soon as he got to Hong Kong and HSBC gave him HK$60,000 and have offered to increase it twice. He works as a chef earning HK$20,000; I'm a chiropractor, earning HK$30,000 guaranteed and commission."

Manuela Fridrich, a 50-year-old former fashion industry employee, and her husband, Mike, 60, who works for the Civil Aviation Department, also found Hong Kong's credit card system for expats baffling. Manuela says: "When I arrived in Hong Kong, I had no problem getting a credit card with HSBC. But my husband, who works for the government, was rejected. He applied two or three more times and was declined. He earns twice what I do. He went into HSBC at Discovery Bay and the manager couldn't explain it to him. In the end, he went to Citibank, which seems to be more reasonable."

Similarly, Joel Taylor, a Hong Kong identity card holder with a position at Polytechnic University, and no outstanding debt, could not discover why he was rejected for credit. "I had been in Hong Kong for just under three months when I applied, and had my current account with HSBC. [I was declined] and encouraged to 'apply again some time in the future'. Needless to say, I was not amused with ambiguous statements like this, and went with Standard Chartered."

Fridrich also raised concerns that the more times one is rejected for a credit card, the worse their credit rating becomes.

So why has a trend emerged of rejecting expats for credit cards? According to HSBC's Expat Explorer Survey 2012, wages for expats in Hong Kong are "well above world averages" with 55 per cent earning more than HK$150,000 a month.

The banks themselves are tight-lipped about their credit approval system. Citibank declined to comment on its credit card policy, describing it as a sensitive issue.

Maggie Ng, director of cards and unsecured lending at Citibank Global Consumer Banking, says the "customer-centric financial institution" requires identification, such as a Hong Kong identity card or passport and proof of a local address, as well as an employment contract. She adds that all banks must run a credit check through the Hong Kong positive data bureau, and that Citibank does make allowances for non-Hong Kong residents "who may not have a record in Hong Kong".

On the matter of unsuccessful applicants, a spokesman for HSBC said: "Very often expat applicants get rejected due to insufficient documents, such as a local employment contract."

Yet many expats do provide this paperwork and are still declined, leaving the specific reasons for rejection unclear.

Taylor says this grey area is what makes the expat credit card scene so perplexing. "The main frustration for me was that they did not give me any reason. As an expat trying to find my feet in Hong Kong it was nerve-racking to just not know why."