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Analysis of Bank Credit Card Risks

Summary of content: With the rapid development of the credit card business and the continuous growth of the credit card business, the risks in the credit card business have The frequency has also increased, causing greater and greater losses to card issuers, special merchants, and cardholders, and the risks involved have become increasingly serious. Risks in card-issuing banks are mainly their own problems. Card-issuing banks are the source of all problems. Loopholes in the bank's own operations provide opportunities for credit card violators, leading to the continuous occurrence of risks. Banks should strengthen credit card risk management and strengthen legal The supervision of laws and regulations improves the overall quality of employees to prevent violations of laws and regulations and enhances the rights of card issuing banks so that they can operate normally, efficiently and legally. Special merchants play a role as a link between the previous and the following. We should pay great attention to the process of connecting up and down, check every link and block every loophole that may occur. In addition, one's own risks are also an important issue, and the overall quality of personnel should be improved in order to better protect themselves and their rights. Cardholders are the vulnerable group among the three. In addition to paying attention to "self-protection", they should also pay attention to some unreasonable legal provisions, etc., and should have a strong awareness of self-protection. In short, the development of my country's credit card business is not yet very mature, and various laws and regulations are not yet very complete. We should learn more from foreign experience and formulate relevant laws or regulations more from the perspective of safeguarding social public interests and protecting consumers. It stipulates that we cannot just protect the interests of the industry, and we cannot promote the development of the banking industry at the expense of the interests of consumers.

Keywords: Credit Card Risk Analysis

Since Bank of China Zhujiang Branch issued the first credit card (Bank of China Card) in China in June 1985, it has been favored by public customers due to its convenience and speed. favor. my country's bank card business has made great progress. The card-issuing banks, the number of card issuances, and the transaction amount have all increased significantly. The credit card usage environment has also been greatly improved. Take Shanghai as an example. By the end of 2002, the total number of bank cards issued in the city reached 35.65 million, an increase of 27.5% over the previous year. The number of bank card transactions was 107.5 million, and the total transaction amount was 106.5 billion yuan. There were 3,282 ATMs and 16,938 POS units deployed. In 2002, the number of online bank card merchants increased from 2,184 at the beginning of the year to 5,780, with 16,234 POS units connected to the network. The total number of ATM and POS cross-bank transaction settlements throughout the year was 5,185.72. (According to conservative estimates, by 2007, the total investment in the construction of Shanghai's bank card industry will exceed 10 billion yuan, the total annual output value will reach more than 20 billion yuan, and the number of employees will reach about 30,000)

The credit card business has become one of the most profitable departments of commercial banks. In Western developed countries, credit card business is the main business and main source of profits for many large international banks. For example, Citibank's credit card business revenue accounts for one-third of its total profits, and American Express's Express card business profits account for 70% of the company's total profits.

1. The occurrence of credit card risks

With the further development of the credit card business, credit card risks occur more and more frequently. Risks may exist in many aspects of the issuance, use, and settlement of credit cards. Moreover, with the increase in the number of card issuers, special merchants and cardholders, credit card risks are characterized by wide coverage, diverse risk types, and high hazards. The profits of card issuers are gradually decreasing. In most cases, these losses are The bank's profits are used to make up for it. Therefore, several legal issues related to credit card risks have become prominent.

We know that one of the main reasons for credit card risks is caused by the card issuer itself. For example: In addition to China Construction Bank, which uses two methods to confirm relationships for credit card purchases, Guangdong Development Bank, Bank of China, China Merchants Bank and other banks still use signature confirmation, and cardholders use the card to make purchases. No password is required. These are loopholes in the card issuer's own operations, which also provide many opportunities for credit card violators, thus leading to risks.

Strengthening credit card risk management is also necessary to safeguard the interests of special merchants and cardholders. Another major reason why credit card risks occur is due to illegal operations and negligence of special merchants and cardholders not using credit cards in accordance with regulations.

In the process of strengthening risk management, card issuers attach great importance to the training of special merchants and promote the awareness of credit card use to the general public. This plays a great role in reducing the occurrence of risks and safeguarding the interests of special merchants and cardholders.

The second and third parties have different views on whether to adopt the signature confirmation system or the password confirmation system for consumption

However, in the past few years, various banks have adopted the signature confirmation system or the password confirmation system for credit card consumption. Attitudes and behaviors vary, and all sectors of society disagree on this. Those who support the password confirmation system believe that this is to meet the consumption habits and security needs of cardholders, and many card-issuing banks have also put it into practice. Those who support the signature confirmation system believe that the signature confirmation system is in line with the international practice of credit cards. Password credit cards will bring a lot of convenience to consumers. The signature confirmation system can protect the cardholder’s financial security. Many banks still use the signature confirmation system.

Article 43 of the "Credit Card Business Management Measures" issued by the People's Bank of China on January 26, 1996: When accepting credit cards, the handling staff of a special unit shall review the following contents: (1) It is indeed the unit's Accepted credit cards; (2) The credit card is not included in the "stop payment list" within the validity period; (3) There are no words such as "Sample Card" or "Special Card" on the signature strip; (4) The credit card has no holes or cuts. (5) The cardholder’s ID card or photo on the card matches the cardholder; (6) The pinyin name on the front of the card is consistent with the signature on the back of the card and the name on the ID card. These regulations show that there are many loopholes in bank credit cards.

From the current point of view, the voice of supporting the password confirmation system is getting louder and louder. Banks that adopt the password confirmation system particularly emphasize that this is a strong need of users. According to information released by Shenzhen Development Bank, among the nearly 100,000 credit cards issued by it, 98.5% of cardholders choose password confirmation, and only 1.7% choose signature confirmation. China UnionPay also expressed support for the cryptographic system. It seems that the use of password confirmation system for credit card consumption is popular and the general trend, and it is the safest method. The core reason put forward by those who advocate the password confirmation system for credit card consumption is that the current signature cannot effectively confirm the identity of the "cardholder" (the person who presents the credit card to the special merchant), and cannot effectively prevent credit card theft and protect the cardholder ( If a credit card is issued to the card issuer with the consent of the card issuer, and there is no other special agreement, the card use security includes the principal card holder and the supplementary card holder).

When consumers use their cards to make purchases, credit card merchants need to verify the identity of the "cardholder" and confirm the identity of the "cardholder", that is, the "cardholder" Is the holder of the credit card who legally uses the credit card with the consent of the card issuer. How do specially appointed merchants confirm the identity of the "cardholder" and on what basis? Let’s observe from the consumer usage regulations of credit card issuers that currently have a larger issuance volume, a larger number of cardholders, and a wider range of uses.

The articles of association of Bank of China Great Wall Credit Card stipulate that Great Wall cardholders can make purchases directly at Bank of China’s special merchants with their Great Wall card and proof of identity card (resident ID card, military officer’s ID card, passport) without paying anything. Additional charges apply.

The Articles of Association of China Construction Bank Dragon Card Credit Card stipulate that when using the Dragon Card, cardholders are required to present their valid ID cards (color photos are exempt from the requirement for Dragon Cards) and sign authentic receipts for cash withdrawals, consumption, transfers, etc. in accordance with the Bank's regulations. Name.

Articles and Regulations of ICBC Peony Credit Card: Cardholders who use the Peony Card to shop, consume or withdraw cash must also present their identity documents (resident ID card, military officer's ID card, passport, return home permit). When depositing or withdrawing cash at an automated teller machine or making a transfer settlement at a point-of-sale terminal, you must comply with the relevant regulations of the card issuer.

Agricultural Bank of China Credit Golden Harvest Card one-way: Golden Harvest Card cardholders can deposit and withdraw cash at institutions designated by the Agricultural Bank of China, handle transfers, and make special purchases at specially appointed merchants with their Golden Harvest Credit Card and their valid identity documents. .

From the analysis of the credit card regulations and usage instructions of the banks listed above, it cannot be concluded that the special merchants should use the ID card presented by the "cardholder" according to the pinyin and signature of the credit card name and the name on the ID card. The identity is confirmed by the consistency between the ID card photo and the image of the "card holder", or the consistency between the credit card photo and the image of the "card holder".

If the signature is a way to confirm the identity of the "cardholder", and there is no need for the cardholder's signature style to have special needs, the cardholder can even write a few words in his usual font, through writing habits Verify the identity of the writer.

Then the special merchants should have measures to authenticate signatures, which includes certain technical equipment and personnel with good authentication experience. In fact, the special merchants do not have such conditions. And it is not practical to do so. In addition to considering the current development level of identification technology itself, from an economic point of view, it is not necessary and the cost is very high. After all, credit card consumption is a transaction, and the transaction requires convenience and speed. Strict handwriting identification is not required. It is very critical in criminal litigation activities, but this is not the case in civil activities. Civil activities are always based on a certain degree of credit. The law gives a presumption under certain conditions for the parties' trust in certain facts.

So, in China, signature is not a means for merchants to verify the identity of the "card holder" and confirm the identity of the "card holder" and the sample card holder. The real significance of requiring the cardholder's signature to be consistent is that the signature is proof of the cardholder's transaction intention.

When we use cash for consumption, the transaction is settled in time. The consumer receives the goods or services from the merchant and pays him in cash. There is no need for a certain form of contract between the two parties, because A contract is actually a future sale or purchase between the parties. Merchants only provide certain receipts to consumers for reimbursement, returns, or as evidence that the merchant assumes product responsibility, or do not provide any evidence at all.

Credit card consumption is a kind of credit consumption. When the merchant provides goods or services to the cardholder, the cardholder does not pay the price to the merchant, but gives Chi a certain amount of credit, and then the card issuer will To make payment to a merchant, such merchant must retain evidence that it has provided goods or services to the cardholder to prove that it has a creditor-debt relationship with the cardholder. The card issuer, as the person who grants credit to the cardholder, has the responsibility to Pay-your-own business. The "cardholder's" signature on the purchase order is an expression of the "cardholder's" approval of the transaction. This purchase order is proof that both parties have the same intention in the transaction. At the same time, the signature of the "cardholder" is consistent with the signature on the credit card, which proves that the expression of intention is made by a legal cardholder with credit from the card issuer. The credit relationship is established between the special merchant and the cardholder. According to the issuer and the cardholder, In the credit relationship between cardholders, the card issuer, the bank, pays the price to the special merchant, and then the cardholder repays the card issuer.

It can be seen that in the entire credit consumption transaction relationship, the real transaction relationship between the special merchant and the cardholder is the foundation. Without this foundation, the subsequent card issuer and special merchant, cardholder and No relationship between card issuers can be established, and the purchase order with the cardholder's qualified signature is proof of this real transaction relationship for both parties. In addition, card issuing banks stipulate that only those with full capacity for civil conduct can apply for credit cards and apply for supplementary cards for their spouses or relatives with full capacity for civil conduct. This shows that credit consumption is a civil legal act and the perpetrator needs to have the corresponding capacity for civil conduct. and ability to express meaning. So in fact, the consistency of the cardholder's signature and the signature on the credit card is the interest of the special merchants and card issuing banks. Confirming the consistency of the signatures is to protect their own rights and interests, and the purchase order is a valid certificate for credit transactions. In this way, all the obligations and responsibilities that should be paid attention to are transferred to the cardholders by the card issuer and the special merchants, and the card issuer and the special merchants do not assume the obligations and responsibilities that they should bear.

Credit cards are special cards issued by banks to those with good financial status, used for shopping and consumption at designated merchants, or for depositing and withdrawing cash at designated banking institutions. They have consumer credit, transfer settlement, and cash deposits and withdrawals. A credit payment instrument with all or part of its functions is a special credit voucher. The process of credit card consumption transactions is that the cardholder makes purchases at a special merchant, the card issuing bank pays the price to the special merchant, and the cardholder repays the card to the issuing bank. This involves three parties, namely the cardholder, the special merchant and the card issuing bank. Three legal relationships: In credit card consumption, the card issuing bank promises to bear payment obligations to the special merchants who grant credit to legal cardholders for transactions. From a civil point of view, when the special merchants conduct credit transactions with "cardholders", they must first confirm " "Cardholder" is a legal cardholder with credit granted by the card issuer, otherwise it cannot require payment from the card issuer. In fact, this duty of care is for your own benefit and is not an additional burden for the benefit of others. From a criminal point of view, credit card theft may constitute a criminal offence. Special merchants have the obligation to confirm the identity of the "card holder" and prevent crimes. If it fails to fulfill its duty of care, or intentionally fails to fulfill its duty of care, in a sense it is The perpetrator of credit card fraud.

If a special merchant fails to fulfill its duty of care and causes credit card theft, the loss shall be borne by the merchant itself and the card issuer shall not pay the card holder. The cardholder has no obligation to repay the card-issuing bank. However, this duty of care and losses have been cleverly, unfairly and grandly passed on to honest cardholders by banks and special agents. The card issuers all indicate in the credit card articles: "24-hour exemption clause for reporting loss". (The cardholder shall be responsible for losses incurred within 24 hours of the cardholder's loss and before the card is lost, and the bank shall be responsible for losses incurred after 24 hours the day after the card is lost).

The "24-hour exemption clause for reporting loss" seems to be the bank's allocation of risks and responsibilities to itself and the cardholder. A certain period of time after the loss is reported is used as the boundary. The credit card was stolen before the order and the risks and resulting The loss will be borne by the cardholder, and subsequent risks and losses will be borne by the bank. When the credit card is stolen and used before 24 hours after the cardholder reports the loss, the risk and loss are borne by the cardholder. The bank pays the special merchant and the cardholder repays the bank. In addition, the Bank Card Business Management issued by the central bank Article 52 of the Measures: Banks with bank cards are obligated and should provide bank card loss reporting services to cardholders. They should set up a 24-hour loss reporting service hotline and provide two loss reporting methods: telephone and written. A written loss report is a formal loss report. The loss reporting responsibilities between the card issuer and the cardholder shall be clarified in the articles of association or relevant agreements. This seems to be the legal basis for the bank’s “24-hour exemption clause for reporting losses”.

However, the principle of liability in civil law is not like this. It is based on fault, and the person at fault must bear responsibility. The cardholder has the obligation to keep the credit card properly. If he loses control of the credit card, sometimes there is indeed a fault, but if it is just a general fault and the obligation to report the loss is actively fulfilled, the credit card will be "lost---theft---loss" There is no necessary connection between them, and there is no attribution. After all, one of the characteristics of credit cards respected by card issuers and cardholders is "security", that is, credit cards are not like cash---if they are lost, they will be lost. A complete and definite loss. Therefore, just because the cardholder has lost control of the credit card, the cardholder cannot be required to bear the loss because the cardholder is at fault.

In the United States, federal law protects cardholders as follows: consumers are only liable for a maximum of $50 in unauthorized purchases after the credit card is lost; it can be said that U.S. law provides cardholders with Adequate protection is provided.

In this way, strengthening credit card risk management can effectively promote the business personnel of the card-issuing bank to operate in accordance with the law, prevent the occurrence of illegal activities, improve the business level of the employees of the card-issuing bank and the ability to safeguard the rights of the card-issuing bank. It can promote banks to establish standardized and effective credit card risk prevention mechanisms, so that the credit card risk prevention work of the entire card issuing bank can be carried out in an orderly manner.

3. Detailed analysis of credit card risk management methods

1. Risk avoidance

Risk avoidance means that the card issuer consciously takes avoidance measures and abandons or refuses a certain business because it discovers that engaging in certain business activities may bring risk losses. That is to say, based on the analysis of the losses that may be caused by the risks involved in the business and the benefits that can be obtained by taking such risks, the card issuer believes that the benefits are less than the losses, and then tries to avoid them. Arguably this is the simplest way to handle risk. For example, during the credit card application process, the card issuer actively refuses to grant the applicant a credit card in order to avoid future risks because it is difficult for the card issuer to conduct a comprehensive investigation of the applicant's credit status or it cannot be convinced of the authenticity of the information provided by the applicant. The behavior is risk avoidance.

Risk avoidance measures are neat and tidy. The card issuing bank does not need to worry about the possibility of future risks for this business, which means the cost is very small or even zero. But we should see that along with zero cost comes zero benefit. Because giving up or rejecting a certain business also gives up the possible benefits from engaging in that business. Commercial banks are corporate legal persons and must adhere to the "three characteristics" as their operating principles, (((((((((((((((((((((((((((((((((((((((()) Profitability). If he often adopts risk avoidance in developing credit card business, it will have a great impact on his business development, which will make it difficult to compete with other banks. Therefore, although risk avoidance is extremely effective, it is very uneconomical. While keeping risks out, it also keeps out benefits. Therefore, avoidance is a temporary measure because it is a passive defensive approach.

2. Risk prevention

Prevention strategy refers to certain preventive measures taken by the card issuer in advance to reduce or reduce the possibility of credit card risks before they occur. The biggest difference between the prevention strategy and the avoidance strategy is that it is a proactive and active strategy, in which the bank proactively takes measures to reduce the number of risk occurrences and the scale of losses. Current risk prevention methods generally include risk prevention for cardholders, risk prevention for special merchants, internal risk prevention within card issuers, and risk prevention for credit card fraud.

Compared with other strategies for credit card risks, prevention has the advantages of safety, reliability, low cost, and good social effects. What is particularly worthy of recognition is that it can effectively prevent problems before they occur and truly achieve the goal of "combination of prevention and treatment, with prevention first". If preventive measures are taken well, the chance of credit card violations will be greatly reduced, and risks can be eliminated from the source and reduce the probability of risk occurrence. Of course, we should also pay attention to how to face risks correctly. Because risk does not equal loss, some risks may not actually occur. ((((We have to weigh the proportion of risks and possible benefits. If we are sure that the benefits will be greater than the losses caused by the risks, we should boldly do it.

In practice, banks can take many preventive measures, such as Strengthen the training of special merchants, provide cardholders with card usage knowledge, strengthen the management of overdrafts and loss reports and stop payments, etc. Here we only provide a detailed analysis of overdraft and loss report and stop payment management.

(1) Overdraft risk management. “A credit card overdraft is essentially a loan issued by the card issuer, but unlike other loans, it is generally formed and discovered during the payment settlement and authorization process.”(((Credit card overdraft can It is divided into good-faith overdrafts and malicious overdrafts. Good-faith overdrafts are normal overdrafts and generally do not involve too much risk. Bad-faith overdrafts refer to cases where the cardholder exceeds the prescribed limit or prescribed period for the purpose of illegal possession, and the collection by the card issuer is invalid. Overdraft behavior. The losses caused by malicious overdrafts directly constitute the cost of credit card business. In particular, the development of electronic means in our country is slow, the automatic authorization equipment is imperfect, coupled with the loopholes in the management of the business management department and the failure of special merchants to review orders. Due to serious reasons, malicious overdrafts occur more and more frequently, and the losses caused by malicious overdrafts are also increasing. But can we be afraid of overdraft business just because malicious overdrafts will cause large losses? Article 23 of the Measures for the Administration of Card Business stipulates: Credit card overdrafts will be charged with compound interest on a monthly basis, and quasi-credit card overdrafts will be charged with simple interest on a monthly basis. The overdraft interest rate is 0.05% of the daily interest rate, and according to the People's Bank of China's This interest rate is adjusted. It can be seen that the interest rate of credit card overdrafts is very high. The main sources of credit card business income are cardholder annual fees, information exchange income, interest income and other fees and income, among which interest income accounts for the largest proportion. (The overdraft interest income of many foreign banks accounts for 80% of all credit card business income).

By comparison, it is easy to find that the development of overdraft business is beneficial to the card issuer, even though the overdraft risk does exist. We cannot easily cancel the overdraft function of customers' credit cards. The key is to correctly distinguish between reasonable overdrafts and malicious overdrafts. We must try to increase the number of reasonable overdrafts and reduce or even eliminate the number of malicious overdrafts. In practice, we must establish a correct concept of risk (from In a sense, the risk is high and the return is high), use risk management as a way to maximize profits, strengthen the management of credit card overdrafts, follow the relevant regulations of the central bank on credit card business, do not engage in agreement overdrafts, and minimize the settlement of credit card transactions. , improve the settlement speed, thereby accounting for credit card overdrafts in a timely manner and ensuring the bank's normal income.

(2) Risk management of loss reporting and payment stop. Credit card payment stop is caused by the cardholder's credit card being lost or stolen. Theft, malicious overdraft and violation of credit card regulations are implemented by the card issuer to protect the cardholder and the card issuer's own interests. It can improve the financial security of the card issuer and the cardholder and effectively reduce credit card risks. Disputes are likely to arise over the determination of the time for reporting a loss and the issue of risk liability after the loss is reported and payment stopped.

The determination of the time for reporting loss and stopping payment is of great significance to the assumption of risk liability. Paragraph 5 of Article 52 of the "Measures for the Administration of Bank Card Business" stipulates: The card-issuing bank shall provide cardholders with bank card loss reporting services, shall set up a 24-hour loss reporting service hotline, and provide two methods of reporting loss by phone and in writing. Written loss reporting shall be Formal way to report loss.

The loss reporting responsibilities between the card-issuing bank and the cardholder shall be clarified in the articles of association or relevant agreements. Since there are no unified regulations, each card issuer has its own loss reporting and payment stop time and liability regulations. For losses incurred before payment is reported as lost, the regulations of each card issuer stipulate that the loss shall be borne by the cardholder. However, there are different regulations regarding the risks after reporting a loss. According to the credit card regulations promulgated by domestic banks (see "General Theory of Credit Card Business Operation and Management" edited by Wang Zhengzhong, People's Publishing House, 1996 edition), the main periods include the time when the loss is reported, 24 hours after the loss is reported, 24 hours the next day after the loss is reported, 36 hours after the loss is reported, etc. Determine the assumption of risk responsibility for the point in time. ((((((((((((((((((((((((((((((((((((((((((((((((((((((((((?(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((?(((( From an economic point of view, this is not in line with the purpose of maximizing benefits. According to the empirical economic analysis of the law, “the purpose is to allocate losses to the party that can bear the risk of such losses at the lowest cost.” (((( That is to say, we must first judge the cost of predicting and preventing this risk for both parties, and then decide whether the party with less expenditure will bear this risk and responsibility. From the perspective of both the cardholder and the card issuer, the card issuer is undoubtedly the easiest. Anticipate and prevent this risk. The card issuing bank should foresee the risk that the credit card is easy to be lost and used fraudulently when starting this business, and only the card issuing bank can effectively prevent the credit card from being used fraudulently. Furthermore, even if the loss is real. If a loss occurs, the card issuer can also transfer the risk through insurance and other measures, thereby effectively avoiding the resulting losses, which is difficult for cardholders to do. It can be seen that the card issuer can prevent the loss after reporting it. The risk cost is obviously lower.

Moreover, in practice, it is still doubtful whether the court will support it when a dispute occurs. Moreover, the domestic credit card business is booming. If the card issuer takes the responsibility decisively, The risk of loss after reporting a loss can effectively attract customers and develop special merchants, which is of great significance to establishing a good bank image.

3. Risks. Decentralized transfer. The decentralized transfer method is a method often used in credit card risk management. This method means that the card issuer transfers the credit card risks it faces to other economic entities through certain legal transaction methods or business means. A strategy. The objects of risk transfer are generally guarantors, cardholders, insurance companies, etc. However, we should clearly see that an important feature of this strategy is that the risk diversification must be borne by someone. For this reason, decentralized transfers should be legitimate and legal.

Risk transfers need to be analyzed on a case-by-case basis. The costs and benefits are also different, and they can only be used correctly on the basis of scientific analysis.

(1) Transfer to the guarantor. In the actual operation process, the card issuer will require the applicant to provide a guarantor or entity, and clarify the rights and obligations of each other on the basis of signing an agreement. When the debt is fulfilled, the guarantor bears the responsibility, thereby transferring the risk to the guarantor. However, disputes often arise over the time, amount and scope of the guarantor's liability, especially in the case of malicious overdraft by the cardholder. Some card issuers stipulate that the guarantor must bear the entire amount of the overdraft from the date of guarantee. This is questionable. Although the guarantor has signed a contract with the card issuer and is willing to bear the cardholder's payment responsibility, this does not mean that the guarantor has signed a contract with the card issuer. The guarantor is willing to bear all the losses caused by malicious overdrafts, especially the losses caused by fraudulent use after the credit card is reported as lost and stopped for payment, because this amount is difficult to determine. Because of this, some domestic scholars have proposed that the guarantor bears the maximum guarantee liability. Some scholars also believe that responsibilities should be allocated based on whether banks can technically prevent and stop malicious overdrafts. ((((We will not discuss whether the card issuer’s approach complies with the provisions of the Contract Law and whether it will be supported by court judgments in practice. At least such a provision will damage the enthusiasm of the guarantor and even the social image of the card issuer. , This will undoubtedly have a negative impact on the development of guarantee business.

Therefore, bank card issuers should pay attention to how to design the time, amount and scope of the guarantor's guarantee liability in the most economical way. , the cost is smaller and the benefits are larger.

(2) Transfer to cardholders.

For example, in the process of applying for a credit card, the applicant is required to use deposit certificates, securities, etc. to mortgage, pledge, etc. to apply for a credit card from the bank and the applicant is required to pay a certain deposit. In addition, there are common methods to transfer risks to cardholders as much as possible through the management of overdraft accounts and reporting loss and stopping payment.

(3) Transfer to insurance institution. This refers to a form in which card issuers purchase insurance from insurance companies and are compensated by insurance companies when risk losses occur, thereby avoiding or reducing actual losses. As a risk management strategy, insurance has a long history in financial risk management. As early as the 1930s, after the Great Depression, the United States began a deposit insurance system. Nowadays, it is increasingly used in credit card risk management, and it is an important means to spread risks and compensate for losses. Card issuers can obtain timely and satisfactory compensation for some unpredictable unexpected losses in credit card business through the expenditure of a small amount of insurance premiums, thereby reducing or reducing risks, which is very economical for card issuers. What should be noted here is the division of risk losses, insurance period, premium and insurance liability of the insurance company, etc.

4. Compensation for risk. The so-called credit card risk compensation refers to a management method in which the card issuer seeks partial or full compensation for financial risk losses that have occurred or will occur through certain channels to reduce or avoid credit card risk losses. A common method is to establish a risk reserve system, that is, during the development of credit card business, the issuing institution actively incorporates credit card risks into daily management work, and regularly withdraws a certain proportion from the profits earned from the credit card business to establish risk reserves. Reserves are managed in separate accounts to cover risk losses or bad debts, and the balance is used to offset profits.

In practice, there are always some losses that cannot be avoided, and the card issuing bank must bear this part of the responsibility. Establishing a risk reserve system can effectively handle this risk loss. Moreover, this method does not cost much, especially since it can be used in conjunction with the aforementioned prevention, decentralized transfer and other measures. After credit card overdrafts are included in loan management, write-offs can be written off when other risk management methods are ineffective.

IV. Some Suggestions

Through the above economic analysis of credit card risk management, we can see that the credit card risk management department should pay special attention to risk prevention and formulate strict policies. Risk management rules and regulations; attention should be paid to the training of business personnel and special merchants, especially the internal management of card issuers. During the credit card application process, customers are required to deposit reserves and provide guarantees. It is necessary to strengthen the management of overdrafts and loss reports and stop payments, formulate reasonable operating rules for overdrafts and loss reports and stop payments, strengthen contact with insurance institutions, and try to obtain insurance from insurance institutions. At the same time, we must establish a correct risk awareness and establish a risk reserve account. If you are really unsure, you should decisively adopt risk avoidance strategies. In short, effectively reducing costs and increasing returns is the purpose of credit card risk management.

References:

1. Shanghai "Wenhui Po", April 15, 2003, page 14.

2. Shanghai International Finance News, March 26, 2003, fifth edition.

3. "Civil Procedure Law"

4. "Commercial Bank Credit Card Operations" Beijing China Finance and Economics Press, 1999 Edition

5. Bank of China Credit Card Articles Online excerpt

6. Online excerpt of China Construction Bank Credit Card Articles

7. Online excerpt of Industrial and Commercial Bank of China Credit Card Articles

8. Online excerpt of Agricultural Bank of China Credit Card Articles