Chinatrust clings to card fees

Although most banks are abolishing credit card annual fees, Chinatrust Commercial Bank (中國信託商業銀行) will continue to charge them, as it claims it provides card-holders with superior service compared with non-fee-charging banks.

Analysts say, however, that as Chinatrust's card-holder numbers are holding steady, abolishing annual fees at this stage wouldn't be a wise move for the bank which would stand to lose a large chunk of revenue from such a move.

"Chinatrust was thinking about this [abolishing credit card annual fees]. They planned it originally in this year's annual budget," said Eddy Chang, a banking analyst at Credit Suisse-First Boston. "If Chinatrust cut their annual fee, Citibank would act too ... so it doesn't make sense for Chinatrust, as they would lose NT$1.3 billion to 1.5 billion in fee revenue. If they cut, they will have to compensate for that."

Chinatrust charges an annual fee of NT$1,200 for its standard cards, NT$2,400 for its gold cards, and NT$5,000 for its platinum cards, according to Phyllis Hung (洪秋萍), a deputy manager in the bank's credit card planning department.

Superficially a cut in the annual fee might seem to make sense. Taishin Bank cut their fee to an effective zero rate (for regular users) last year, and saw their card-holders more than double to the present 930,000 level, according to an official in the bank's planning department who declined to be named. They made the cut in response to other banks abolishing their fees, he added.

But it's hard to determine if the gamble has really paid off. Industry analysts say only the top three credit card banks -- Chinatrust (1.65 million cards), Citibank (花旗銀行) and Taishin -- are making money off their card operations at present. The Taishin official said he couldn't confirm whether credit card revenues had increased after the fee abolition. "Interest charge revenue has gone up, but I don't have the figures for overall revenue," he said. (Of course this is a rather simplistic analysis in any case, as credit cards provide a useful vehicle for the promotion of other products, such as insurance, which can also earn the bank substantial sums -- and naturally earnings from these sources are boosted significantly by having more card-holders.)

Instead, Chinatrust is sticking to a strategy of providing high quality service, and they claim the results of a survey they released yesterday show that the bank is way ahead of most of its competitors in this sphere. "Most promotions these days are emphasizing whether or not the credit card has an annual fee -- but they should be emphasizing the quality of service," said Hsu Ting-chang (許廷彰), assistant vice president in the bank's credit card planning and marketing section.

Their "Service, superiority and smile" survey had a sample size of 147 cardholders, drawn at random from Chinatrust cardholders who also possessed cards from other banks. Unsurprisingly, the two most common "other" banks were Citibank and Taishin, but a host of other smaller banks were represented.

The survey claimed Chinatrust was superior to "other banks" on a wide range of factors. For example, 87 percent of respondents said it was easier to apply for a Chinatrust card than for a card from "other banks," and 89 percent said Chinatrust's customer service center gave superior service.