Today, let’s talk about some trivia about credit card revolving balances. Today someone in the community happened to ask me: What does the proportion of credit card revolving balance disclosed in China Merchants Bank’s annual report mean. Why has the proportion of circulating balances declined in recent years? To be honest, I quite admire this brother's spirit of breaking the casserole and getting to the bottom of it. Because most banks will not disclose this data at all. So, today I will take some time to fill you in on some trivia about recurring quotas.

First of all, the knowledge point to be supplemented is: What is revolving credit (balance)? We know that credit cards have many options when repaying: not paying off the current balance at all, repaying the amount between the minimum payment amount and full payment, and repaying the balance in full. Only the second of these three repayment methods generates revolving credit. The definition of revolving credit is as follows: When the customer's repayment amount is equal to or higher than the minimum payment amount of the current bill, but lower than the amount due in the current period, the remaining deferred payment amount is the revolving credit balance. In addition, there is another case of cash withdrawal by credit card. As long as the cash withdrawal occurs on the credit card, it will be immediately included in the revolving credit.

The second knowledge point to add is the proportion of revolving credit. The so-called revolving credit ratio refers to the proportion of revolving credit balance to credit card loans. The higher the ratio, the more potential interest-bearing loans there are. However, higher is not always better, because if it is an ordinary credit card loan, its revolving credit ratio has a certain ceiling and cannot be very high. We will discuss the reasons later. When the proportion of revolving credit is high, the only possibility is to withdraw cash via credit card. Credit card cash withdrawal itself is a very high-risk overdraft behavior, because this kind of overdraft is not tied to the consumption scenario and can easily breed malicious overdrafts. Therefore, the higher the bank's revolving credit ratio, the better.

Now, let’s explain why the proportion of revolving credit is not too high. For example, the billing date of an account is the 15th (the due date for repayment is the 5th of the following month), and a consumption of 2,000 yuan is made on July 10th (assuming that no transactions occurred before July 10th), and on 8th Repay 200 yuan on the due payment date of August 5th, and repay all outstanding debts on August 15th. In this way, from July 10 to August 5, the revolving credit of the account is 0, from August 6 to August 15, it is 1,800 yuan, and after August 16, it is 0. Correspondingly, the values ??included in the revolving credit balance of this account at each stage are also 0, 1800 and 0 respectively. However, when recording the credit card loan balance, the balance was 2,000 yuan from July 10 to August 5, 1,800 yuan from August 6 to August 15, and 0 after August 16. So during the period from July 10 to August 15, the average daily loan balance of credit cards was 1,944.44 yuan, while the average daily revolving credit balance was only 500 yuan. Therefore, the revolving credit ratio for this account is only 25.71%.

It can be seen that for ordinary credit card consumption, the proportion of revolving credit and the proportion of outstanding amount, as well as the final date of repayment, are related. The fact that revolving credit is not generated during the interest-free period determines that this indicator has a certain ceiling. Credit card loans are recorded from the moment the card is swiped, and those accounts before the final payment date do not generate revolving credit. Even if revolving credit is generated, the interest-free period will still be deducted when calculating the proportion. So this determines that the final revolving credit ratio cannot be very high. Next, let’s take a look at the data on the revolving credit ratio of China Merchants Bank’s credit cards in recent years, as shown in Table 1:

Through Table 1, we can see the revolving credit ratio of China Merchants Bank in the past five years. It is basically stable and fluctuates around the range of 21% to 24%. This ratio belongs to the same range as the ratio calculated in the example just now. It can be seen that the proportion of revolving credit of China Merchants Bank has not been low in recent years. However, we also noticed that China Merchants Bank's recycling ratio in 2014 was relatively high. However, there is a change that needs to be noted. Starting from 2015, China Merchants Bank began to include installment fees in interest income. I can't confirm whether this is the reason for the decrease in revolving credit ratio.

In addition, you may have noticed a phenomenon. The revolving interest rate in the table is seriously higher than the daily interest rate of Wanwu that we usually know (revolving interest rate = interest income / revolving balance). The main reason for this problem is the interest calculation method of bank cards. Let’s use the above example to illustrate.

After the minimum payment is made on August 5, the balance will be paid off in full on August 15. How will interest be calculated during this period? Perhaps most people think that 1800*0.05%*10=9 yuan is used. However, the actual situation depends on the interest accrual strategy of the bank. One is to accrue interest only on the unpaid amount, while the other is to accrue interest on the entire consumption amount. The calculation formulas of the two are as follows:

Method 2: 2000*0.05%*36=36 yuan

You can see , whether it is method 1 or method 2, interest will be calculated for the interest-free period between July 10th and August 5th. In other words, the interest-free period is only meaningful to those who repay in full before the final repayment date. As long as you fail to repay in full, the previous interest-free period will be involved in interest calculation. Therefore, if calculated according to method 2, the average daily revolving credit balance during the entire cycle is 500 yuan, so the calculated revolving interest rate will be 4 times the actual interest rate.