More than 760 million credit cards on the market ushered in major changes, and the central bank “relaxed” credit card overdraft interest rates.

The People’s Bank of China recently issued the “Notice on Promoting the Reform of Credit Card Overdraft Interest Rate Marketization” (hereinafter referred to as the “Notice”), in order to further promote the interest rate marketization reform, Starting from January 1, 2021, the credit card overdraft interest rate will be determined by the card issuer and the cardholder through independent negotiation. Cancel the upper and lower limit management of the credit card overdraft interest rate (that is, the upper limit is five ten thousandths of the daily interest rate, and the lower limit is the daily interest rate ten thousand 0.7 times of five).

The central bank requires in the “Notice” that the card issuer shall fully disclose the credit card overdraft interest rate through the official website of the institution and update it in a timely manner, and shall promptly indicate in the credit card agreement in a significant way Credit card overdraft interest rate and method of calculating and settlement of interest to ensure that cardholders fully understand and confirm acceptance. When disclosing the interest rate of credit card overdrafts, the annualized interest rate should be displayed in an obvious way, not only the daily interest rate, daily repayment amount, etc.

Reform after a lapse of 4 years

This is the first time the central bank has reformed credit card overdraft interest rates after a lapse of 4 years. Before the last reform, the credit card overdraft interest rate had been based on the daily rate of five ten thousandths.

Subsequently, the “Notice on Matters Concerning Credit Card Business”, which came into effect on January 1, 2017, implements upper and lower limit management on credit card overdraft interest rates, and upper limit on overdraft interest rates The daily interest rate is five ten thousandths, and the lower limit of the overdraft rate is 0.7 times the daily interest rate five ten thousandths. The method of calculating and closing interest on credit card overdrafts, as well as whether to calculate and pay interest on overpayment of credit card and its interest rate standards, shall be independently determined by the card issuer. In other words, the card issuing bank can implement a 30% discount on the credit card overdraft rate standard of ten-thousandths of a day, that is, 0.035% per day, which is reduced to 12.78% on an annualized basis.

Will the overdraft interest rate drop significantly?

After four years have passed since the central bank has once again released its release, will the banks lower their credit card overdraft interest rates?

It can be seen that although the central bank has long loosened its policy, the willingness of the credit card centers of various banks to act is not strong.

Currently, major card issuers have not “discounted” credit card interest rates, and the “30% off” interest rate is even more difficult to see. Basically, the upper limit of the overdraft interest rate is implemented, that is, if the credit card bill is not repaid in full on time, Interest will be incurred, and interest will be calculated and collected from the date of entry, and compound interest will be calculated and collected on a monthly basis. The interest rate is based on five ten thousandths of a day until the transaction is paid off.

This interest rate level is basically consistent with similar products launched by Internet financial platforms, such as “Huabei” and “Bai Tiao”.

As of the end of the third quarter of 2020, the number of credit cards and debit cards in use in China totaled 766 million, an increase of 1.29% from the previous quarter.