Chinese Not Racking Up Enough Credit Card Debt

In April 7, 2006

Americans have a lot to learn from the Chinese when it comes to managing credit cards. Recent articles about use of credit cards in China are actually quite amusing. It’s pretty funny to hear bank executives whining about the Chinese paying off their balances every month. Sure, people are using the credit cards for everyday purchases in increasing numbers, but they aren’t rolling over the balances from one month to the next. Translation: The credit card banks aren’t making any money in China.

Although only a small fraction of the Chinese population have obtained credit cards compared with the U.S., the difference in statistics among those using cards is staggering: Only 2 percent of Chinese credit card holders carry a balance forward on a frequent basis, compared to a whopping 56% in the U.S.

We just can’t have this! How dare the Chinese save 16% of their nation’s gross domestic product. They have a long way to go to catch up with our negative 3.5% savings rate here in the States. Those folks are just not consuming enough, spending enough, and racking up enough debt to suit the banks trying to make an honest buck over there.

Of course, the banks are determined to get the Chinese addicted to credit card debt. So they are using enticing low interest offers, 0% promotions (sound familiar?), and deferred payments for high-income earners. It’s probably only a matter of time before we hear tales of mounting credit card debt in China. But for now, it’s rather fun to watch the banks trying to figure out ways to get the frugal Chinese population to behave like American consumers.


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