Why do banks issue credit cards?

Why do banks issue credit cards?

Banks issue credit cards just to make money, to be precise, to make money without risk.

When a bank issues a credit card, it is actually lending. Lending is not as simple as storing. The bank must consider the issue of capital risk. In order to control capital risks, banks have established a credit system as an important basis for corporate and personal loans. There is a credit mechanism, but without the customer's credit record, the bank still has no way to judge the quality of the customer. In order to establish a complete credit system, banks must introduce simple and easy borrowing methods for all customers, so credit cards appeared.

Because credit cards have the following characteristics:

1. Credit card auditing, card production, and issuance are all process-based, and the issuance cost is very low compared to other loans.

2. Credit card has the widest coverage among all bank loan methods.

3. Credit card bills are issued once a month, and customers must repay them every month. This is the fastest way to return funds.

4. Credit cards are the most profitable of all bank loans.

5. Credit card is the lowest risk way of lending.

As a special financial product and a modern financial tool, credit cards are an internationally popular advanced settlement method, payment tool and novel consumer credit method, and are increasingly favored by people. The issuance of credit cards gives banks a new means of gaining deposits from special merchants and credit card customers, which is conducive to expanding bank transfer settlement business and increasing the source of bank credit funds, thereby obtaining more interest and accelerating social mobility. . In addition, due to the use of credit cards, cash transactions are replaced by transfer settlements, which replace a certain amount of currency in market circulation, reduce the issuance of currency, and reduce the funds spent by the country on currency printing, allocation, transportation, warehousing and release every year. The issuance and use of credit cards free cardholders from the inconvenience and risk of carrying large amounts of cash, and they can also easily obtain bank loans through overdrafts. As a special merchant, due to the credit guarantee of the credit card issuing bank, the special merchant can safely provide cardholders with goods and services, thereby expanding the sales volume of goods, reducing the workload of collection and payment, and simplifying payment, The process of accounting and closing.

There are three ways to make money from credit cards: One is the huge overdraft interest on credit cards. The "Bank Card Business Management Measures" stipulate that compound interest will be charged on credit card overdrafts on a monthly basis, and simple interest will be charged on quasi-credit card overdrafts on a monthly basis. The overdraft interest rate is 0.05% of the daily interest rate. Calculated in this way, the annual interest rate is as high as 18.25%. , much higher than the current ordinary loan interest rate; the second is the handling fee withdrawn from the special merchants. According to regulations, commercial banks handling bank card acquiring business should charge no less than 2% of the transaction amount from hotels, restaurants, entertainment, tourism and other industries, and no less than 1% of the transaction amount from other industries; thirdly, the annual fee for credit cards fee. Different commercial banks charge different annual fees to credit card holders, ranging from tens to hundreds of yuan

It's simple, make money. Credit card swiping rates are higher than those of debit cards, and credit cards can derive many additional charging services, which is beneficial to banks.

Credit cards not only enable banks to attract customers who do not live near the bank, but at the same time, new credit card users provide banks with excellent development opportunities for other financial products. The attractiveness of both new sources of income and new deposits has led to high levels of competition. As more and more merchants accept credit cards, it becomes more and more convenient for cardholders to use credit cards. On the contrary, as the number of cardholders increases, the opportunities for merchants to sell goods also increase. The interaction between the two promotes the development of credit cards, and at the same time, banks also benefit from cardholders and merchants.

Why do banks issue credit cards?

The income from credit card business mainly includes: interest income; merchant commissions; punitive charges; cash withdrawal charges; annual fees; cross-selling and other value-added income .

With a credit card limit of 1 yuan, why do banks issue small-amount credit cards

Tips for daily use of credit cards to quickly increase credit limit

High card swiping frequency

In daily life, it is best to develop the habit of swiping your card whenever you can. On the one hand, you can use the bank's interest-free period to add a little extra financial income to yourself. On the other hand, you will also become an active user of the bank. Usually banks will have quota rewards for active users of the bank.

Continuous and stable consumption for a long time

Banks generally have credit card holders who have been cardholders for more than 1 year and have transactions every bill month. The bank's limit increase strategy is suitable for this part. Customers usually take the initiative to increase their limit. If the customer takes the initiative to apply for a permanent limit increase, the bank has a higher chance of approval.

Cardholders who withdraw cash frequently and frequently make credit card installments

For banks, cardholders who withdraw cash frequently have a very high risk factor, but at the same time, cardholders who withdraw cash frequently It also has the highest contribution to the bank; the risk for installment users is relatively low, but the contribution is not low. Therefore, for credit cards that mainly rely on interest and intermediary business as a means of generating income, cash withdrawals and installment users are the favorites of banks. When applying for a limit increase, the relative success rate will be very high.

High consumption amount

Irregular large-amount consumption, and then normal repayment. Banks usually define these cardholders as high-quality customers. When judging whether the cardholder has After a larger amount is needed, the amount will be increased as appropriate.

Why do banks issue credit cards?

Because there is market demand, the counter application process is:

1. Go to the bank branch where the credit card is processed, or find a local bank credit card center Staff, fill out the credit card application form. The content of the application form generally includes the applicant's name, basic information, financial status or source of income, guarantor and his/her basic information, etc.;

2. Submit certain photocopies and certificates of documents to the card-issuing bank. ;

3. After filling in the application form truthfully, you must submit the relevant credit certificate together with the completed application form;

4. The application form is accompanied by a credit card. According to the contract, the applicant authorizes the card issuer or relevant departments to investigate its relevant information, and submits a declaration of the authenticity of the information, the card issuer's privacy policy, etc., and must have his or her signature;

5. Credit card application process Basically completed, waiting for the credit card to be issued.

Why can banks issue credit cards?

For banks, adding credit card business only requires a credit card center and supporting business processes. The cost of this part is relatively small, and each bank has its own risk control system. There are cases where you are unable to repay the loan on time or even default for a long time, but there are not a lot of bad debts, and the interest rate of the credit card business itself is very high. Compared with the ordinary loan business, it can accept a higher bad debt rate;

2. The main source of income for banks is the interest rate difference between deposits and loans, but banks have restrictions on the loan-to-deposit ratio. They first need to pay the cost of deposits.

How to develop credit card business

1. Credit cards are an important part of the bank card industry. The development of credit cards can promote personal consumption credit, use bank money to meet personal consumption needs in advance, and drive the growth of banks' personal financial services. At the same time, it will help facilitate people's lives, expand social consumption, and promote social informatization and national economic development. Compared with Western developed countries, due to differences in my country's consumption habits, credit system, and understanding, the development of credit cards in my country has been hindered to a certain extent. The most prominent manifestations are the small scale of card holders, low credit card utilization rate, and especially the very low number of good-faith overdrafts. . How to develop credit card business is a topic that the banking industry needs to study.

2. Cultivate active marketing awareness

3. Counter marketing Bank front-line staff face a large number of customers handling business at the counter every day, and major commercial banks conduct business every year. From time to time, we offer discounts on different types of credit cards, waive the first-year annual fee or other types of promotions, which provide a lot of marketing space for counter staff.

Tellers should be familiar with the relevant supporting documents provided for card application, issues that should be paid attention to when using various credit cards and how to use them, etc. They should highlight marketing products with a focus on profitability and convenience to attract customers. Each grassroots branch of the door-to-door marketing bank should conduct a thorough investigation of enterprises and stores in the area under its jurisdiction, obtain first-hand information, and find out the number of enterprises and stores, their locations, and whether they have opened an account with our bank. On this basis, on, conduct proactive door-to-door marketing. In terms of procedures, the success rate of card application for corporate groups is higher than that of individual letters from society. Moreover, it can provide a more comprehensive understanding of personal information and has a higher degree of credit. Differential marketing focuses on the bank's VIPs, high-quality fund customers and other high-quality customers, and assigns dedicated personnel to take charge of management. While providing these customers with economic and financial information, investment consulting and other personal financial management, it also actively conducts credit card marketing to provide them with consumption services. Convenience, forming a true "package" service system.

4. Problems in marketing

5. Establishing a personal credit system is a prerequisite for the development of the credit card industry. Due to the lack of this aspect, banks have had to write off a large number of credit card bad debts in recent years. Due to the lack of a complete credit system, in order to reduce risks, card issuing banks must spend a lot of money to investigate personal information, and need to provide many supporting documents and materials, some of which even involve personal privacy, which greatly increases transaction costs. The possible consequence is that people with good credit will think that the benefits brought by credit card services cannot make up for the costs, and therefore withdraw from the credit card market; while some people with poor credit who may attempt to default will try their best to fight for credit lines. The inability to set levels according to needs and the lack of differentiation in services enjoyed by cardholders with different credit levels restrict the current development of the credit card industry. At present, the credit limit management of many domestic card issuers needs to be improved, and they can learn from foreign experience. Foreign card issuers usually do not initially give customers a very high limit. After tracking the customer's repayment behavior and consumption habits, they will adjust the limit based on the customer's actual needs. Improving the quality of card issuance, such as accepting all card applicants, will increase the number of card issuances, but it will not actually produce benefits. After applying for a card, it is often easy to have sleep cards or canceled cards, which wastes limited resources and increases operating costs. . Domestic credit card revolving credit is poor. Survey data shows that only 2% of customers regularly use revolving credit, and more than 85% of customers repay in full every month. Overdraft interest generated by revolving credit is an important channel for credit card profits. The domestic revolving credit market has potential, provided that banks must strengthen infrastructure construction for risk management. At the same time, banks can target high-income and high-consumption groups as expanded customer groups. Improve the quality of customer service. After a customer successfully applies for a credit card, the bank should have corresponding customer service facilities to provide convenience for customers in the future. Domestic banks do not do this well. At present, credit cards are used to settle consumption payments. Cardholders do not need to enter a password and can pay for consumption with just a signature. Therefore, if the credit card is lost and the cardholder does not report the loss in time, the person who finds the card can imitate the handwriting on the signature strip to sign the purchase order. The method adopted abroad for credit card theft is limited risk liability. If the credit card is stolen and the money on the card is misappropriated after the cardholder reports the loss, the cardholder will not suffer any loss and the bank and store will pay full compensation. Even if the cardholder's money has been misappropriated before reporting the loss, the cardholder only needs to pay $50 to get the money in the card back. The promotion of each new product must go through a long and exploratory process, and there will be bumps and problems on the road of development. However, as long as we introduce advanced foreign technology and experience, eliminate the rough and select the best, and create marketing channels with our own characteristics, our country's The credit card business will also be accepted and recognized by people like debit cards and achieve great development.

Why bank credit card business develops so fast

It is because the demand for credit cards in the market has increased, which has promoted the rapid development of credit card business.

As of the end of 2017, the number of credit cards issued in China has reached 588 million. Judging from the annual data growth, it is expected that the number of credit cards issued in China will reach 1.136 billion in 2021.

With the increase in the number of credit card issuances, the use of credit cards is becoming more and more frequent. According to market research, the total amount owed by cardholders has reached 3.57 trillion yuan, of which nearly 65% Cardholders' credit cards are in a long-term empty card status, and overdraft consumption is increasing.

Among these people who consume credit cards, Rong360 conducted a survey on the age of the people and found that 49.31% of the people are born in the 1990s, occupying the first place among their peers in Asia.

In the current environment of slowing economic growth and strict financial supervision, the growth of banks' corporate and interbank businesses has slowed down, and more banks are transforming into retail finance. In the retail finance sector, credit card revenue contribution has gradually increased. As of the third quarter of 2018, the number of domestic credit cards issued reached 659 million, an increase of 43% from the first quarter of 2015, and the number of cards per capita increased from 0.31 in the first quarter of 2015 to 0.47. With the rapid growth of card issuance volume in recent years, banks with larger card issuance volume have become more and more fierce in their marketing competition for high-quality credit card users in first- and second-tier cities. Each bank adopts various attractive sign-up gifts and preferential activities. When marketing new users, most banks' credit card business still focuses on card application and application, and the credit card market is gradually extending to third- and fourth-tier cities.

In terms of the number of credit cards per capita, in the first quarter of 2015, the number of domestic credit card holders per capita was only 0.31. By the end of the third quarter of 2018, the per capita number of credit card holders had risen to 0.47. , although the number of card holders per capita is still low compared with developed countries, the number of card holders per capita in first-tier cities Beijing and Shanghai exceeded one as early as 2010. After nearly eight years of expansion and expansion, the per capita number of card holders in first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen may be close to 1.5.

Next, banks will continue to provide quality services and occupy a higher share of the credit card market.

As a commercial bank, should it expand or shrink its credit card business? Why

should it expand its credit card business?

Because the expansion of the credit card business will push the credit card business into a new stage of professional, differentiated and refined high-quality development.

To develop the credit card business, we must adhere to business development as the leading factor, aim at improving economic efficiency, establish the awareness of using deposits to develop cards and use cards to increase deposits, and focus on expanding the number of card issuances and increasing deposit balances.

What is the purpose of banks issuing credit cards?

Credit card, also called debit card, is a consumer loan service provided by banks.

After a commercial bank issues a card to a consumer with qualified credit, the cardholder can go to a special commercial service department to shop or consume, and then the bank will settle the bill with the merchant and the cardholder. The cardholder can Overdraft within the prescribed limit.

The advantage of a credit card is that compared to a debit card, with a credit card you can make purchases on credit even if there is no cash in the card, and you only need to repay the consumption amount on schedule.

With the increase in residents’ income levels and changes in consumption concepts, more and more young white-collar workers and post-90s young people regard borrowing for consumption as a normal behavior and can enjoy a higher quality of life in advance. Banks see huge demand in this area and therefore focus on developing this area of ??business.

As a part of the loan business, banks have multiple purposes for developing credit card business:

The first is to increase the loan business to obtain interest income;

The second , increase customer stickiness, provide more products, and attract customers to handle other financial services in the bank through various means;

Third, increase the contact with special merchants and establish a database of credit card customers , analyze customers’ income levels, consumption preferences, etc., to develop other products and business services.

According to industry estimates, the credit card business has the largest interest rate spread among banking businesses, and its interest rate spread is much higher than that of home loans. The reason is that credit cards will charge customers interest, late payment fees, annual fees, handling fees, POS machine card swiping fees, SMS notification fees, etc., and the overall benefits are higher than other loan products.

Since the Bank of China issued its first credit card in 1985, my country has achieved huge growth in terms of card issuing banks, card issuance volume and transaction volume in the past 30 years. The credit card business has become the sector with the greatest growth potential among bank retail businesses.

As of 2017, according to incomplete statistics, domestic banks have issued nearly 700 million credit cards, and three of them have even entered the "100 million club". The credit card business of many joint-stock banks has contributed more than 40% to branch performance.

Although credit cards are convenient to use, they are different from debit cards after all. It is recommended that everyone pay special attention to the following aspects in daily use:

1. There is a fee for cash withdrawals

If you withdraw cash from an overdraft, it is equivalent to borrowing cash directly from the bank. Generally, banks will charge interest and handling fees; even if we withdraw "existing money" from a credit card, although the bank waives interest, there may still be handling fees. Received. ——In a word, don’t treat credit cards as debit cards.

2. Charge an annual fee

3. POS machine related.

Just like many Internet products charge for the B-side and are free for the C-side. When we use a POS machine to purchase items with a credit card, although the bank does not deduct additional fees from our account, it may take a certain commission from the merchant.

4. There may be card replacement fees, loss reporting fees and other related fees.

The above are details that are easily overlooked and need to be known in advance to avoid inconvenience.

In addition, remember to repay in time. Even if you do not have sufficient funds when repaying, you should choose to repay in installments or pay off the "minimum repayment amount". Only in this way will your credit not be affected. Otherwise, if you do not repay the loan on time, in addition to affecting the credit report of the People's Bank of China, you will also be subject to "penalty interest" from the bank, and even be subject to criminal liability for "malicious arrears".

This is the end of the introduction on why to develop credit card business and start credit card business. I wonder if you have found the information you need?