Credit card relaxation may be the next debt problem for China
Central bank plans will allow credit card issuers to operate more like Western counterparts, but could fuel personal debt problems.
The People’s Bank of China (PBOC), central bank to the world’s most populous country, is going to relax its restrictions on mainland banks’ credit card business. So, it is time to worry about a spike in personal debt from overspending.
More education should be done to prevent that from happening.
The PBOC has said that from the January 1, 2017, mainland banks will be given more freedom to conduct their credit card business.
The daily cash withdrawal limits from the credit card lending will be increased to 10,000 yuan (HK$11,994 ) from the current cap of 2,000 yuan. Also, mainland banks will be allowed to set their own periods of how much they will charge if clients fail to repay their bills on time.
The move has pros and cons.
On one hand, it will allow mainland banks to run more like the western peers because they will be allowed to decide how much interest they charge clients if they fail to repay their bills on time. It has not yet reached the freedom of Hong Kong or Western lenders who can freely set the cash withdrawal limit for clients.