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Bank cards' status show growing trend
By Chuan Yu (China Daily)
Updated: 2004-10-11 09:30
With the rapid development of China's financial industry and gradual
acceptance of consumer credit, the status of various types of bank cards in
people's social lives has been gradually elevated.
Horizon Research and Vision Investment conducted a survey among 2,210
residents aged between 14 and 60 in the cities of Beijing, Shanghai, Guangzhou,
Wuhan, Chengdu, Shenyang and Xi'an in May, on how Chinese consumers have been
utilizing the overdraft function of credit cards.
Results showed that 225 respondents, or 10.2 per cent of all survey
participants, had a credit card, and 105 of them had overdrawn their bank
accounts at least once, representing 4.8 per cent of all participants.
In terms of the use of overdraft and the incentives of and habits in
overdrawing, Chinese consumers are still at a preliminary stage in utilizing the
overdraft function of credit cards.
Overdraft mainly used for daily consumption, urgent expenditures
The most important area where Chinese consumers overdraw their accounts is
"purchasing daily necessities," followed by "leisure and entertainment" and
"sightseeing and business trips."
Consumers go into overdraft far less frequently when making larger
expenditures such as buying homes, cars and home decoration.
Therefore, consumers choose overdrafts mainly for the purposes of daily
consumption and urgent spending.
Overdraft frequency and amounts overdrawn remain low
Survey results also indicated a low monthly average of overdrafts and a low
average of amounts overdrawn. The respondents made an average of 2.1 overdrafts
per month, with the monthly average for 65.5 per cent of them less than three
times, while only 6 per cent indicated clearly that they went into overdraft
more than three times each month.
The average amount of overdraft stood at 943 yuan (US$113). Nearly half of
the overdraft users had an average overdraft amount below 500 yuan (US$60),
while 60 per cent of them had an average below 1,000 yuan (US$120).
Only 6 per cent of overdraft users indicated clearly their average overdraft
amount exceeded 2,000 yuan (US$240). Two respondents reported the highest
average overdraft amount 5,000 yuan (US$600).
Young and middle-aged working females constitute the majority of overdraft
card users
Overdraft users are mostly female, aged between 23 and 40, with monthly
average income of more than 1,000 yuan (US$120), and are among low-level
employees.
An earlier survey by Horizon Research on consumption habits of females aged
between 18 and 35 in Beijing, Shanghai and Guangzhou found a nature of high
sensitivity among women, especially young women, which made them susceptible to
moods and surroundings and often led to irregular and impulsive spending.
Such irregular spending was, in many cases, the direct cause of "overdraft
consumption."
Most middle-aged women shoulder the responsibility of daily household
shopping, not only for themselves but for their children and husbands.
The high frequency of their shopping behavior inevitably led to overdraft
consumption when urgent needs arose.
Eyeing the high profitability of credit card business, Chinese banks are
actively exploring promotion methods for differentiated market segments, some of
which target female consumers.
But existing promotion methods are mainly focused on young women, with lesser
attention to middle-aged females.
Horizon Research says, as China's current situation of overdraft consumption
suggests more attention should be given to middle-aged women when promoting
credit cards.
Reluctance to pay interest makes most overdraft users stop at "positive
overdrawing"
In the area of repayment methods, two-thirds of the respondents chose to
repay the entire balance within the interest-free period,further confirming that
consumers are using the overdraft function of credit cards only to meet urgent
needs, rather than to borrow and spend in a purposeful and planned manner.
Consumers found the overdraft services available somewhere between
"satisfactory" and "acceptable." Consumers mostly complained about "financial
costs (such as annual fees and interest)" the reason 97 per cent of the
respondents gave for dissatisfaction.
This reflects the widespread mentality among Chinese consumers that it is not
worthwhile to borrow money for the purpose of consumption, and that borrowing
for consumption benefits the bank more than the borrower.
Let's take a further look at the consumption mentality of Chinese consumers.
Sixty per cent of the 2,210 respondents maintain a "spend no more than you earn"
stance, while only 7 per cent of them support the "borrow to spend" approach.
The consumption mentality among overdraft users is more advanced, with 27.6
per cent of them advocating "borrow to spend," although the percentage is still
not a high one.
Among the consumers who are already "borrowing to spend," 43.3 per cent still
borrowed for urgent needs, and a fairly high percentage 26.3 per cent maintain
the "spend no more than you earn" stance.
In summary, borrowing actively for consumption purposes is only advanced
among a small fraction of Chinese consumers. The deep-rooted perception of
"spend no more than you earn" makes the credit card a tool to meet urgent
consumption needs for Chinese consumers, while its role in financial management
is largely neglected.
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