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Stopping young shopaholics running amok with plastic and piling up debt
By Wu Jiayin |
July 22, 2009, Wednesday
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Print Edition
Print Edition
CHINA'S banking regulator urged credit issuers last week to assess applicants' credit ratings before giving them credit cards. It explicitly prohibits banks from issuing credit cards to students under 18.
Parents must cosign and guarantee payment for students who are over 18 and without steady income.
The measures are reasonable.
Aggressive expansion of the credit card market in recent years has led to a surge in defaults.
Data from the People's Bank of China shows that the number of credit cards in China has almost tripled in the last three years to 150 million by the end of March this year.
Meanwhile, credit card debt that is at least six months overdue rose 133 percent in the first quarter year on year to 4.97 billion yuan (US$727.7 million).
The default rate of students is 4 percent, while the general default rate for the population is 2-3 percent.
Many young people, lured by easy credit, have incurred enormous debts.
Wu Liwen, a senior at Jiangxi Normal University, told Jiangxi Daily this April that she has been continuously in debt ever since she got a credit card. The same is true for almost all students with plastic, she said.
In another case, a sophomore at Nanchang University bought a laptop for 6,000 yuan (US$878) with his credit card last year. Since he came from a very poor family, he could barely pay for daily necessities, to say nothing of credit payments. Now he is neck-deep in debt.
There are even more chilling cases.
Li Li, a shop assistant in a large Shanghai department store, had incurred debts of more than 1 million yuan over three years, according to the oriental Morning Post.
To settle her debts, her parents used all their savings, borrowed money from relatives and finally sold their flat downtown and moved to the suburbs.
Therefore limiting access to credit cards by big-spending young people is necessary.
Parents must cosign and guarantee payment for students who are over 18 and without steady income.
The measures are reasonable.
Aggressive expansion of the credit card market in recent years has led to a surge in defaults.
Data from the People's Bank of China shows that the number of credit cards in China has almost tripled in the last three years to 150 million by the end of March this year.
Meanwhile, credit card debt that is at least six months overdue rose 133 percent in the first quarter year on year to 4.97 billion yuan (US$727.7 million).
The default rate of students is 4 percent, while the general default rate for the population is 2-3 percent.
Many young people, lured by easy credit, have incurred enormous debts.
Wu Liwen, a senior at Jiangxi Normal University, told Jiangxi Daily this April that she has been continuously in debt ever since she got a credit card. The same is true for almost all students with plastic, she said.
In another case, a sophomore at Nanchang University bought a laptop for 6,000 yuan (US$878) with his credit card last year. Since he came from a very poor family, he could barely pay for daily necessities, to say nothing of credit payments. Now he is neck-deep in debt.
There are even more chilling cases.
Li Li, a shop assistant in a large Shanghai department store, had incurred debts of more than 1 million yuan over three years, according to the oriental Morning Post.
To settle her debts, her parents used all their savings, borrowed money from relatives and finally sold their flat downtown and moved to the suburbs.
Therefore limiting access to credit cards by big-spending young people is necessary.
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