9 July 2018, Hong Kong | A recent research study conducted by TransUnion (NYSE: TRU) on credit card usage in Hong Kong has come up with some interesting findings. The study covered changes in the number of credit cards holders based on age group, their outstanding balances and payment delinquency in Hong Kong over the past two years. The results reveal there were substantial changes in the age group born post-1995. The number of credit card holders in this group reached 142,000, up 134 per cent. The total number of credit card they held increased from 102,000 to almost 260,000. And payment delinquency too went up from 1,200 to 2,800, highlighting the need for credit education.
According to the study, the total number of credit card holders increased to over 4.1 million, up from 4 million and the total number of payment delinquency jumped from HK$125 billion to HK$129 billion over eight quarters in 2016-17. However, there was little change on these two aspects in the group born in 1979 or before. While the number of credit card holders for those born between 1980 to 1994 increased by 6.8 per cent from 1.089 million to 1.164 million, delinquent payments rose 26.5 per cent from HK$26 billion to HK$32.9 billion. For those born post-1995, the number of credit card holders increased from about 60,000 to 142,000, a rise of 134 per cent. And total delinquent payments also increased from HK$0.24 billion to HK$0.79 billion, up 230 per cent in two years throughout the duration of research study.
With regard to the number of credit card holders, there was little change in the group born in or before 1979. Users born between 1980 to 1994, held 4.19 million cards in the last quarter of the study period, up from 3.87 million cards recorded at the beginning, a rise of 8.3 per cent. On an average, users in this group held 3.56 credit cards each. In the post-1995 age group, the total number of credit cards increased from 102,000 to 258,000, or they held 1.82 cards from 1.69 cards each.
As for payment delinquency, all age groups recorded significant reduction, despite the group post-1995s. There was a notable reduction in the number delinquent in payment for users born between 1946 to 1964; down from 28,000 in the first quarter of 2016 to 19,800 in the last quarter of 2017. The number of delinquents in the group born between 1965 to 1979 also dropped from 49,000 to 36,000. The group born between 1980 to 1994 also saw a dip in number of delinquents from 41,000 to 35,000. However, for those born post-1995 the number of delinquents who defaulted payment went up from 1,200 to 2,800.
The study underscores an urgent need for credit education for those born post-1995, especially on how to use credit cards wisely. Credit cards and mobile payment apps provide consumers with new and easy ways to pay for purchases. However, they may also lead to overconsumption or unbearable payment delinquency if consumers are not mature enough to handle them wisely. Sometimes, an unintentional mistake can lead to payment delinquency. For instance, users might overlook payment due date or neglect paying small amounts. According to TransUnion, settling the full amount can help, although the payment is made a little late. Punctual payment and in full amount shows the user’s correct financial attitude and management skills. Payment delayed for just one day or often settling the minimum payment due would impact the user’s credit scores and pose a long lasting effect on credit history. Such records could be kept on the database of TransUnion for almost five years.
Earning low credit scores would have a direct impact on user’s future lending rate. For example, ‘A-Grade’ consumers enjoy low annual percentage rate (APR) of 6 per cent or less, whereas those in ‘I- & J-Grade’ would have to pay interests at a much higher average rate of up to 55 per cent or more incurring an enormous interest expense. Therefore, managing credit usage well is essential to future life planning.
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