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FSC urges banks to offer bare-bones cards

With more banks raising reserves to write off bad consumer loans, the financial watchdog has advised lenders to consider launching entry-level credit cards.

The entry-level product that Financial Supervisory Commission chairman Kong Jaw-sheng (龔照勝) suggested recently refers to credit cards stripped of popular bonus-point programs, cash-advance functions and cardholder benefits, such as insurances or free parking services.

Instead, the cards serve only as a payment tool and therefore should be able to offer lower revolving interest rates, as issuers can save on marketing expenses and issuance costs.

Major card issuers, which have been eager to launch products to meet the demands of different customers, welcomed the idea, saying it was feasible.

Michael Chang (張智銓), director of the credit card division of Chinatrust Commercial Bank (中國信託商銀), the nation's largest credit card issuer, said nothing was impossible in a free economy, as long as the marketing approach and product packaging proved attractive to customers.

He said removing card functions was not the only way to reduce operational costs, adding that this could also be achieved by encouraging the use of electronic bills or automatic transfers from cardholders' bank accounts.

The bank would conduct market surveys before launching any new products, Chang added.

Taipei Fubon Bank (台北富邦銀行), the market's sixth-largest player, held a similar view.

"With ... profits as the main goal, banks would definitely have to adjust the features of their credit card products, and promoting these kinds of plain cards could be one of the alternatives," said Tiger Chan (詹文虎), senior vice president of the bank's credit card group.

Citing experience in foreign markets, he said such cards can be designed to lure customers who contribute low monthly retail sales volumes, seldom take overseas trips or do not need parking services.

But whether the plain products would prove popular while credit cards with more features and services were still on the market was a big question, others said.

"If card issuers continue to promote the products that come with complete functions, people's willingness to apply for plain cards is likely to be weak, as lower revolving rates are not the only benefit cardholders look for," said Meiji Chen (陳明智), assistant vice president of the credit card center at Union Bank of Taiwan (聯邦銀行).

State-run banks, such as the Bank of Taiwan (台灣銀行) and Lank Bank of Taiwan (土地銀行), have been presenting such entry-level cards as they are restricted by the Government Procurement Law (政府採購法) and limited budgets when seeking partnerships with merchants.

Their card issuance numbers have lagged behind those of their private competitors, proving the low acceptance on the market, Chen said.

In addition, 13 banking institutions started offering tiered revolving rates this month to cardholders based on their credit scores. The lowest rate is 3.99 percent, offered by Anshin Card Services (安信信用卡).

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