Hong Kong credit card holders least aware of the impact on credit score if they just pay the minimum, survey reveals

Researcher in international credit information company warns that minimum payment could affect an individual’s credit rating and terms for future loans

PUBLISHED : Sunday, 05 March, 2017, 4:54pm
UPDATED : Sunday, 05 March, 2017, 10:45pm

Hong Kong credit card holders were the least certain about the importance of paying more than the minimum balance on their monthly statement, according to a survey conducted by an international credit information company.

In Hong Kong, 41 per cent of credit card holders were unsure about the benefits of paying above the minimum balance, according to a consumer credit behaviour survey by TransUnion, which polled 1,010 people aged between 18 and 64 in the city in December.

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Consumers in the United States and Canada were 25 and 39 per cent uncertain respectively on this issue. Those in South Africa were the least uncertain at 21 per cent.

“A good credit score is not just a pat on the back,” TransUnion Asia-Pacific director of research and consulting Brendan Le Grange said.

Only paying the minimum can have a negative impact on a person’s credit score.

The survey also asked Hong Kong consumers whether they understood how their credit score was calculated.

Young credit card holders – aged below 25 – produced the worst result at just 11 per cent.

Le Grange warned that if young consumers were to apply for loans or mortgages in the future, they may not receive a favourable interest rate or repayment schedule due to a poor credit score.

“It’s a group that would benefit by having a little bit more of an idea of small changes they might make to benefit their score,” he said.

Breaking down credit score knowledge in Hong Kong further, the survey found those on Hong Kong Island were most familiar with how their credit score was tallied – at 41 per cent. Consumers in Kowloon and the New Territories recorded scores of 26 and 19 per cent respectively.

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“Perhaps based on the financial services on Hong Kong Island, they’ve probably got a group of people there that are more credit savvy,” Le Grange said.

Income levels also played a role in awareness of credit scores, with 44 per cent of those in the low-income group – those making HK$163,000 or less annually – and 81 per cent of high-income earners – those making HK$654,000 or more annually – being aware of how their credit score was calculated.

However, when consumers were asked in the survey if they only paid the minimum balance, 10 per cent in the lowest and highest income groups responded positively.

Le Grange said those in the highest income group could be paying the minimum to manage cash flow, while those in the lower income group could be doing it because of an inability to pay more due to a lack of income or a lack of awareness of the risks of paying the minimum.

People who take a negative hit to their credit score, either by missing a payment or two or making a larger than usual purchase, should not be discouraged because they can still improve their rating.

“People don’t need to look at their score today and think ‘it’s in a bad situation; it’s not going to change’,” Le Grange said.

“[Their credit score] gets updated every month.”