Currently, the use of credit card to spend has many benefits for cardholders, as they can spend and buy interest free until 45 to 55 days, or some banks do not charge cash withdrawal, overdraft, and so on.
However, the popularity of credit card (especially domestic credit card) in consumers is still quite slow. The reason explained is cost limitations, when banks are charging high cash withdrawals from credit cards, up to four percent on a single withdrawal, while this is still the main transaction in Vietnam.
If the customer withdraws 10 million dong, he has to pay the withdrawal fee of 400,000 dong. Thus, although the customer is not charged interest within 45 days, the amount payable for the withdrawal fee is also very high, and this fee is understood as interest. The explanation of banks for this very high cost is to limit cash withdrawal, and the card is only used to pay for goods and services.
But with the condition of shopping in Vietnam, the payment is mainly in cash, making it difficult for customers to use card.
In addition to the annual fee of 200,000 dong to one million dong, depending on the bank and each card type. For international credit cards, cardholders will lose foreign currency conversion fees when using the card to pay for foreign currency transactions abroad. This foreign currency amount will be converted and shown in dong on the statement and you must pay the foreign currency conversion fee. This fee may be two percent or 3.5 percent on the amount of each transaction depending on the type of card.
At Vietnam International Commercial Joint Stock Bank (VIB), cardholders must pay the annual fee of VIB Classic Card of 299,000 dong, VIB Gold Card is 499,000 dong, VIB Platinum Card is 899,000 dong and VIB World Card is 999,000 dong. Foreign currency conversion fee at VIB is three percent to 3.5 percent, at Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) is 2.1 percent to 2.95 percent, etc. Sacombank currently has a special incentive programme for credit card holders, customers will not be charged for cash withdrawal at Sacombank. However, credit cards are not interest-free, meaning customers have to pay interest on the amount withdrawn from the card and the interest is calculated from 2.15 percent to 2.5 percent per month. Sacombank only exempt interest within 55 days with the following conditions: outstanding balance at the beginning of the period is zero, payment by card, not withdrawing cash in the period and paying all outstanding debts at the end of term.
Visa credit card of Viet Capital Commercial Joint Stock Bank (Viet Capital Bank) is the first credit card on the market using 3D technology with utilities 3.0: No annual fee during the validity period, no card issuance fee, no fee for most services, and discounts for cardholders with a reduction of up to 60 percent on shopping, entertainment, food, travel and health services.
Hoang Manh Duong (Tan Binh District, HCM City) said that the outstanding utility of the credit card is to use the amount of the card limit granted when there is a need for spending without having to do borrowing procedures like consumer loans. This is very convenient.
However, the interest rate charged for overdue loans is often very high. For example, you use a credit card to buy a laptop worth 50 million dong. If you do not pay the above amount for more than 45 days, although the bank will be flexible for you to pay at least three percent of the loan balance, it is equal to VND 1.5 million for each payment; the remaining interest must be up to 2.5 percent per month. Interest is calculated by day. This makes the cardholder hesitate.
Many banks now have three forms of card opening for customers. If a customer opens a credit card with a salary, it is necessary to have a confirmation of the company, or a payroll statement with red marks at the bank you receive payment. Thus, customer will be entitled to a maximum limit of five to 10 times the salary depending on each bank.
If customer opens a home mortgage credit card, the maximum limit is 10 percent (at Sacombank) of the property value but not more than 200 million dong provided that the customer’s home must be on the road and doing business.
If customer opens the card in the form of collateral or security with another account at the bank, the granted limit can be from 80 percent to 90 percent of the value of that account.
Wanting to break through in payment, must exploit potential
It should be affirmed that if banks can strongly develop the domestic credit card, it is truly a great success
This is reflected in the ideas: firstly, banks have popularised spending and shopping by cards for people; secondly, the promotion of consumer credit via cards will increase sharply.
A study by Visa showed that contactless payments via Visa cards in Vietnam increased by 44 percent per month from July 2017 to May 2018.
Therefore, it is no coincidence that banks are promoting advertising and incentives for credit cardholders. They are entitled to great incentive programmes, such as shopping for discounts from 20 percent to 60 percent at big brands, spending one million dong to be refunded by 100,000 dong, participating top premium clubs and services, enjoying the maximum discount.
A leader of Card Division of Vietcombank said that in recent years, the growth rate of credit cards at Vietcombank was up to 50 percent per year when the bank boosted the unsecured loan by credit card.
However, bad debt through credit cards was not rare when conditions of issuance were easy. The majority of cards issued in the form of unsecured loan, not much deposit forms.
This was easy to understand why the interest rate of using credit cards was often very high, over 20 percent per year to make up for possible risks.
According to a card centre director of a joint stock bank in HCM City, the card growth rate of this bank was about six percent per month recently. This shows that the card market was very potential, but the bank wanted to develop this market in terms of efficiency, not only achieving market share and profit. The development of this domestic credit card segment was also very focused by this bank, and currently the very competitive interest rate for credit cardholders was only 1.9 percent per month, equivalent to 22.98 percent per year.
According to the State Bank of Vietnam’s statistics, by the end of Q3/2018, the total number of bank cards issued cumulatively in the whole country reached 147.3 million. In particular, credit cards over 4.6 million cards, with a total transaction value of approximately VND 50,000 billion, up 50 percent over the same period. In particular, credit cards reached over 4.6 million, with a total transaction value of approximately 50 trillion dong, up 50 percent over the same period.
Although card issuance is more and more, the number of unused cards is also very high, making card issuance and usage efficiency not high. The key is to boost sales of card payments, which is the success of card issuance. This requires more effort on the convenient point of sale (POS) system anytime and anywhere. A large number of participating firms also need to accept card payment with appropriate interest rate to stimulate people’s spending habits through cards.
In addition, customers need to be consulted clearly about interest rates, calculations, fees, incentives, and security methods and so on to be able to use the card most effectively.
