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Stop seducing with credit

(China Daily)
Updated: 2008-11-17 07:33

Banks should avoid the risks of issuing too many credit cards to youths for some of them may lack the ability to repay, says an article in Wuhan Evening Post. The following is an excerpt:

The Shanghai banking regulatory authority recently received quite a number of complaints about credit cards, saying that some youths have become slaves of credit cards. They are seduced by banks soon after they leave school and start working. Therefore, the authorities demanded that banks issue credit cards more cautiously and have more checks in place.

It's true that now banks are issuing credit cards like crazy. Youths, especially college students, are the targets all banks are vying for. Whenever a new semester starts, banks will send their salespeople to every university dormitory.

It was reported that a certain bank even promoted a package of six cards to students and staff in some banks have to fulfill a quota of selling 10 campus credit cards per person per month. It's already quite common for young people to own credit cards of three to four banks.

As long as the overdraft can be paid by the card holders, it's okay to promote these cards to eligible youths. But the fierce competition among the banks for market shares will definitely lead to a lowered threshold and loosened rating of applicants.

Some banks even overlooked the fact that some users already had a poor credit record but they continued to issue cards to them or raised their limit of overdraft.

Meanwhile, as the survey from the Shanghai authority showed, to seek the amount of card issuance, banks usually avoid telling would-be holders about related risks of using cards and only talk about the benefits.

Youths usually lack self-control and tend to overspend with many cards in their hands. Some even use the new cards to pay back the debt of old ones, resulting in heavy debt burdens.

In fact, the alarm raised by the Shanghai authority came at the same time when American credit card issuers have already suffered from the holders' failure to repay the overdraft.

Obviously, the risks of credit card slaves will finally be switched to banks. So, banks should stop seducing youths to blindly use credit cards; else, they will eat the own bitter fruits of their action.

(China Daily 11/17/2008 page4)