Credit card issuers are planning to ask the Bank of Thailand to raise the maximum interest rate they can charge and to put off an increase in the monthly minimum payment rate.
The funding cost for credit card operators has increased in line with rising interest rates, according to the Credit Card Club, a unit of the Thai Bankers’ Association. As a result, the margin for the business has narrowed, given the current maximum interest rate at 16% per year under central bank regulations, said club chairman Atis Ruchirawat.
The club also wants to discuss postponing an increase in the minimum payment rate for credit cards. To help consumers cope with the economic impact of the pandemic, the Bank of Thailand earlier this year reduced the minimum payment to 5% of the monthly balance. The rate is scheduled to rise to 8% in 2024 before returning to the normal 10% in 2025.
“Customers’ incomes have not returned to normal levels yet, as reflected by weaker debt repayment abilities. As a result, we want to talk to the central bank about delaying the bump up to 10% for minimum payments for a while,” Mr Atis said.
He said the club was aware of the Bank of Thailand’s concerns about household debt, adding that business operators are ready to comply with measures under the central bank’s debt resolution plan.
Household debt in June reached 90.6% of gross domestic product (GDP), one of the highest rates in Asia. The central bank says a sustainable figure is below 80%.
But high interest rates and other factors are an increasing challenge for the credit-card business, which is why the club seeks to achieve more of an understanding with the regulator, said Mr Atis.
The club has 16 members, mostly credit card providers from commercial banks and large non-banks.
Mr Atis is also the managing director of General Card Services Ltd, a Bank of Ayudhya (Krungsri) affiliate that oversees the Central The 1 credit card, a co-branded card from Krungsri and Central Retail Corporation.
The card’s total loan portfolio reached 25 billion baht for the first half of this year, up 11% year-on-year. Over the same period, General Card Services issued 52,000 new Central The 1 cards, up by 35%. Total spending rose 19% to 52 billion baht.
The company expects total spending to increase to 100 billion baht by the end of this year, in line with the economic recovery.
The card’s market share increased from 3.5% in 2021 to 4.6% last year, and is currently at 4.8%, he said. The company expects to expand its market share over the long term through a digital marketing strategy, particularly QR code payments, said Mr Atis.