Credit card

Credit card companies will meet BoT as debt mounts

Photo by Varuth Hirunyatheb

The Credit Card Club, a unit of the Thai Bankers Association, plans to meet with the Bank of Thailand to share information on the credit card market to address regulator concerns over rising household debt resulting unsecured loans.

The club has 16 members, mostly credit card providers from commercial banks and large non-banks, such as Krungthai Card and Aeon Thana Sinsap (Thailand) Plc.

Credit card holders with a minimum monthly income of 20,000 to 30,000 baht make up the majority of their customers, said club president Atis Ruchirawat.

Mr Atis said the club would share information with the central bank on customer segments in terms of purchasing power, debt repayment capacity and risk.

According to central bank regulations, the minimum income for credit card applicants is 15,000 baht per month, with a maximum interest rate set at 18% per annum.

Credit card providers do not classify their customers as vulnerable borrowers if they have higher debt-paying capacity and financial discipline. According to the club, around 90% of customers pay off their credit card debt in full by the monthly due date rather than maintaining the debt by paying the minimum amount.

Customers of unsecured lending products, covering credit cards and personal loans, are not considered part of the vulnerable segment under the definitions used by credit card providers, Atis said.

He said some credit card marketing campaigns, including those offering interest-free monthly payments, would help customers better manage their spending.

Campaigns correspond to particular spend categories or customer segments, he said.

The central bank plans to ask financial institutions to stop promoting wasteful unsecured loans early next year to reduce household debt. The Bank of Thailand wants to see household debt below 80% of GDP, down from 88% currently.

Mr Atis said the club was ready to work with the regulator to reduce the country’s household debt and conduct responsible lending.

The credit card industry has recovered, in line with Thailand’s economic recovery and pent-up demand due to the pandemic. Spending on cards in the last quarter of this year showed signs of improvement, he said.

Mr Atis, general manager of general card services at Bank of Ayudhya (Krungsri), said spending on Krungsri credit cards, including co-branded Central The 1, had increased. Non-performing credit card loans declined, compared to a significant increase in 2020-21.

On Tuesday, Central The 1 Credit Card launched a new card targeting young customers, aiming for total spending of 95 billion baht across all its products in 2022, up 25% year-on-year. The provider plans to enroll 120,000 new customers for its credit card aimed at young people in 2023.