Local credit and cash card issuers are weighing measures to cancel preferential benefits to cardholders or incur new fees in the face of possible legislative changes that would cap interest rates on revolving credit.
“It is certain that our bank will have to adjust the benefits we offer to cardholders now that profits will be negatively impacted,” a vice president at Taipei Fubon Bank’s (台北富邦銀行) credit card division said yesterday on the condition of anonymity.
“Many have mistaken us [card issuers] for loan sharks, but we are not and the profit is not as rosy as one might think,” the vice president said.
In February, credit card issuers reported an aggregate income of NT$2.7 billion (US$79 million) from a total revolving balance of NT$247.7 billion, the Financial Supervisory Commission’s latest statistics showed.
The Taipei Fubon official said no concrete measures had been finalized, but the adjustment would be based on how often cardholders use their cards, which represents their contribution to the bank’s earnings. The bank may consider tightening credit if risky cardholders apply for unsecured loans, the official added.
After two loss-making years, card issuers in Taiwan have already begun to cancel free annual membership, bonuses, parking benefits or free rides to the airport for inactive cardholders.
If the amendment to the Civil Code (民法) passes the third reading next week, it will place a cap on interest rates on cardholders’ late payments to 12.5 percent, down from the current 20 percent.
Citibank Taiwan, the nation’s second-largest card issuer with 1.5 million active cardholders, had the largest share of NT$492 million in revolving interest income in Feburary, while Chinatrust Commercial Bank (中國信託商銀), the nation’s largest card issuer with 3.5 million active cardholders, had the second-largest share of NT$251 million.
Representatives of both banks reportedly met on Thursday to discuss contingency plans if the rate cut takes effect, but none were available for comment yesterday.
Although banks will be less aggressive in offering benefits to attract new cardholders, Chan Ying-bor (詹英柏), executive vice president of Union Bank of Taiwan (聯邦銀行), yesterday said the bank would also be prudent in canceling credit card benefits.
“We can’t continue any loss-incurring businesses anymore. But we won’t necessarily cut everything since benefits are still incentives to attract card use,” he said, adding that the bank would fully evaluate market reaction before making changes.
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