The central bank recently released the upper and lower limit management of credit card overdraft interest rates. Some people in the industry believe that the central bank is loosening the interest rate management of bank credit cards, which means that while further promoting the marketization of loan interest rates, the competition in the bank credit card market will intensify, and it may even shake the “quack status” of consumer credit products on Internet platforms such as Huabei and Baitiao.
In fact, the overdraft interest rate of bank credit card is one of the main income sources of bank credit card business, which is mainly the interest generated by the bill amount not being paid in full and on time, and the interest payable by the cash withdrawal of credit card.
According to the notice of the people’s Bank of China on promoting the market-oriented reform of credit card overdraft interest rate, the overdraft interest rate of credit card will be determined by the card issuing institutions and cardholders through independent negotiation from January 1, 2021. The upper limit and lower limit management of credit card overdraft interest rate will be cancelled, that is, the upper limit is 0.5 times of the daily interest rate and the lower limit is 0.7 times of the daily interest rate.
“It is expected that the central bank will abolish this interest rate. In the future, there may be two kinds of differences in the bank’s credit card overdraft interest rate. ” Dong ximiao, chief researcher of Zhaolian finance, told the financial association that first, the pricing of different institutions will be different. Some small and medium-sized banks are likely to adopt lower interest rates to attract more users due to their low popularity; second, different customers may also enjoy different interest rates in the same bank, and some high-quality customers may enjoy lower investment interest rates 。
Different pricing will also bring further competition. In addition to intensified competition among banks, some industry insiders said that banks will also start to fight back against Internet consumer credit products such as Huabei.
Dong Zheng, a senior credit card expert, said that the central bank’s move is equivalent to liberalizing the constraints of bank credit card interest rates. In the future, bank credit cards can use different interest rate strategies to attract customers, which will also strike back at the credit products like credit cards provided by Huabei and other Internet companies.
“Before, the overdraft interest rate of credit card basically had no way to compete with these Internet products, and after releasing the shackles, the bank credit card will seize the development space of these products. “Dong Zheng said that the bank itself has a lower capital advantage.
It is understood that although the overdraft rate of credit card was allowed to float within a certain range before, the overdraft rate was generally 5 / 10000 per day, and only a few individual credit cards of banks had an overdraft rate lower than 5 / 10000. Previously, the content of ant group’s prospectus disclosed that the daily interest rate of Huabei could be as low as 2 / 10000 during the 12-month period ending June 30, 2020, and the daily interest rate of most loans was about 4 / 10000 or less.
Dong ximiao also believes that after the central bank’s deregulation, the overdraft rate of bank credit cards will probably show a downward trend. However, there will be no vicious price competition for bank credit cards. Deregulation does not mean that there is no regulatory constraint. However, China’s consumer credit market is large enough, and the future “small profit but quick turnover” of bank credit cards may further increase the revenue of this business.
In addition, the documents of the central bank also require that card issuers should fully disclose and timely update the overdraft interest rate of credit cards through their official websites and other channels, and prominently prompt the overdraft interest rate and interest settlement method of credit cards in the credit card agreement, so as to ensure that card issuers fully know and confirm their acceptance.