Paying on the 'never-never' skyrockets

Cards to the fore in nation as they take over from cash payments

Wang Haofeng was less than pleased at being charged a 30 yuan ($4.82) service fee for using his credit card fewer than six times in a year.

"I had totally forgotten about this credit card because I have another five in my wallet," said the 29-year-old hair stylist in Shanghai.

Wang is just one of the Shanghai residents who spent a total of more than 311 billion yuan in 2012, representing a 43 percent year-on-year increase. About 265 billion yuan of transactions were carried out using credit cards, according to statistics from Shanghai Banking Association.

Bank cards in China have been experiencing a boom in use over the past two years, especially credit cards. Banks in China had issued a total of 331 million credit cards by the end of 2012, exceeding the number of debit cards, according to statistics from the People's Bank of China. The figure represented a rise of 16 percent year-on-year. On average, one in four Chinese people have credit cards, a 19 percent year-on-year growth. In Beijing and Shanghai, residents have more than one credit card on average.

By the end of 2012, banks in China had issued a total of 3.5 billion bank cards, according to statistics from the People's Bank of China. Some 44.4 percent of Chinese residents who have bank accounts own one or more bank cards, the data said.

The number of transactions carried out increased by 46 percent year-on-year in 2012 and withdrawals from automatic telling machines rose 26 percent, according to statistics from China UnionPay.

"The trend is that an increasing number of consumers prefer swiping cards to dealing in cash," said Qin Zhong, the manager of a restaurant in Ningbo, Zhejiang province.

"Some customers do not carry much cash and are happy to pay without hesitation by swiping their card even if they are just buying a cup of tea for 10 yuan," said Qin.

On average, the value of transactions carried out using bank cards in China was 5,894 yuan for every person, up 6.6 percent over the year. The average value of each transaction was 2,312 yuan, down 2.6 percent, according to statistics from the People's Bank of China.

The increasing number of transactions using bank cards is a result of the rising purchasing power of China's residents, the expansion of e-commerce channels and the shifting of social conventions, analysts said.

In the past people regarded using credit cards as the shouldering of debt that would eventually become a great burden but now, with the widespread usage of payment by installments, personal loans and measures to help people make financial plans and purchase wisely, bank cards are playing more significant roles than ever, said Liu Chenxi, a wealth manager with China Construction Bank.

"People need to have a clear plan for their consumption, deposits and credits before they swipe cards. We recommend thinking carefully about applying for a new bank. Being lured simply by a gift from a bank is not reason enough," said Chang Ying, a senior consultant with Shanghai Fuding Consultancy Co Ltd.

People who spend more than they can afford to pay back cause problems for the entire industry, said analysts, pointing to the surge in credit card debt in recent years.

By the end of the fourth quarter of 2012, the total value of overdue credit with an outstanding term of more than six months in the credit card business was 14.66 billion yuan, a 1.6 percent quarter-to-quarter increase, according to statistics from the People's Bank of China.

"In fact the credit card business is not profitable for many banks in China," said a source with a company in Changsha whose major business is as an agent issuing bank cards.

The source said in recent years checks and verification of card applicants' ability to pay bills on time has not been sufficiently strict with some banks lowering the bar for applicants in order to issue as many cards as possible to gain more market share.

In the longer term, banks will raise the bar for applicants, take good control of risks and design creative card products to cater for market needs because the credit card business is one of the fastest growing sectors of private banking in China and will continue to grow, according to Huo Xiaohua, an analyst with CIConsulting, a Shenzhen-based industry research institution.

wuyiyao@chinadaily.com.cn