The interest rate competition between banks did not disappear, but moved its position.

In early April, most banks issued a notice saying that at the request of the headquarters, the annualized interest rate for credit consumer loans should be raised to no less than 3%, and the measure stopped the long-lasting consumer loan price war. Unexpectedly, just one month later, the "secret war" started in another way. Market news shows that many commercial banks have phased downgraded the annualized interest rates for credit card cash installments, and the word "lowest discount" is eye-catching.

Cash installment interest rate as low as 2 characters

If a customer wants to borrow from a bank, in addition to loan business, he can also apply for cash installments through a credit card.

Cash installment (also known as "cash withdrawal installment") refers to the business in which the cardholder applies for a credit card to convert the available amount into cash, transfers the money to a designated debit card, and then repays the principal and handling fees in installments as agreed. Industry insiders introduced that this service does not require mortgage or guarantee, but the purpose of funds must be selected when borrowing (limited to consumer fields, such as decoration, car purchase, etc.), and is prohibited from being used for investment or illegal activities.

"Usually, the annualized interest rate of credit card cash installment business is very high. In addition to the number of repayment periods of specific discounts, the annualized interest rate is usually above 10%. "The person told a reporter from Securities China.

However, recently, many banks have launched limited-time discounts, adjusting the cash installment interest rate for some periods as low as 3% to 4%, and even bank credit card cash installment interest rates as low as "2", closely following the consumer loan interest rate discount before the price adjustment.

Taking China Merchants Bank's "eZhuangdai" as an example, the reporter learned that the bank recently gave a "limited time 17% off" interest discount for cash installments of one year (i.e. 12 periods) and above. Many media have calculated that after the discount, the annualized interest rate for the product's 12 installment repayment can be as low as 2.76%, and the annualized interest rate for the 24 installment repayment can be as low as 2.79%.

The CITIC Bank Credit Card APP shows that the bank's "Cash Borrowing" (i.e., cash installment) business also launched a "limited-time 19% off" interest discount. For some cash installment customers who have been in cash installment for more than one year, the annualized interest rate for 12 installments is as low as 3.09%, and the minimum annualized interest rate for 24 installments is as low as 3.19%.

In addition to joint-stock banks, some city commercial banks have also joined cash installment marketing.

The official account of Guizhou Bank published an article titled "Don't have to wait for "loans" for consumption, and clever arrangements for cash installments" stating that for cardholders such as the bank's talent card, official card, platinum card (including Guizhou V card), etc., they can enjoy the bank's cash installment activities, with the lowest discounted annualized interest rate ranging from 4.31% to 4.77%.

"Overall, it is a promotional method of 'price for volume', attracting customers by reducing annualized interest rates or handling fees and expanding the scale of the business." Dong Ximiao, chief researcher of China Merchants and deputy director of Shanghai Financial and Development Laboratory, pointed out that cash installment business is a business with a large profit margin in the credit card business. In a low-interest rate environment, banks' phased reduction of interest rates on this business will help increase market share and increase revenue.

Wang Pengbo, senior analyst of the financial industry of Broadcom Consulting, said that bank cash installment business mainly increases fee income, "The growth of business volume in the short term may lead to an increase in overall revenue. Secondly, it can also improve credit card customer activity and stickiness, screen and accumulate high-quality customer groups."

Discounts are not "universal"

"E-Zhong Loan shows a 17% discount." Mr. Li showed the "e-Zhong Loan" page of his China Merchants Bank credit card to reporters. The information shows that if Mr. Li applies for loans through the bank's credit card, he can get a 17% discount. The annualized interest rate after the 12 installments is only 2.76%, and the annualized interest rate for the 18th and 24th installments is 2.79%.

However, not all users receive a 17% discount like Mr. Li. Another credit card holder of China Merchants Bank said that when applying for "e-bank loan", he showed a discount of 60% and the annualized interest rate after the 24th period was 9.86%.

A reporter from Securities China sorted out the credit card installment business of each bank and found that it is common to set different activity interest rates for different customer groups. Taking Guizhou Bank mentioned in the previous article as an example, the union cards, talent cards, and official card customer groups mentioned in the bank's activities are mostly employees of bank corporate customers and "most of them are users of 'whitelist' companies and have certain risk resistance." A staff member introduced.

"The final discount of cash installment will be calculated and evaluated through the system. The page promotion information is for reference only and is not applicable to all users." A bank customer service told reporters.

Wang Pengbo pointed out that corporate customers and talent customers are often high-quality customers that banks focus on and compete for. They usually have a more stable source of income and better credit status. The risk of default is relatively low. Providing preferential interest rates can also enhance the cooperative relationship between banks and these customers, improve customer satisfaction and loyalty, and bring more comprehensive business needs.

"At present, the proportion of cash installment business in credit card business is relatively small, and most banks are deeply involved in customer stratification and strict access, so the impact of phased reduction of interest rates to attract customer groups is temporarily controlled." Dong Ximiao emphasized that phased promotion methods are understandable, but financial institutions still need to adhere to a scientific and rational development attitude and abandon the "scale complex" and "speed complex". In credit card business, we adhere to the differentiated development strategy of credit card business, and establish a "customer-centered" risk monitoring system, match differentiated risk control measures, build an early warning model, improve the risk exit mechanism, and continuously iterate and upgrade according to actual operational effects.

Beware of rising risks in the retail sector

Previously, listed banks held intensive annual performance meetings in 2024, among which, the retail sector, especially the risk of credit cards, attracted market attention.

According to Wande data, among the 14 listed banks that announced the credit card non-performing rate in 2024, only three banks including Ping An Bank, Postal Savings Bank, and Industrial Bank had a year-on-year decrease. Except for the China Merchants Bank's indicators that were the same as the end of last year, the credit card non-performing indicators of the remaining 10 banks all rose.

Among them, as of the end of 2024, the non-performing loan rate of Changshu Bank's credit card was 4.14%, an increase of 2.74 percentage points from the end of the previous year; the non-performing loan rate of Chongqing Bank's credit card was 3.04%, an increase of 1.05 percentage points from the end of the previous year.

At the annual performance press conference, management of various banks also responded and looked forward to credit card business. Overall, the banking industry is adjusting credit card business from multiple aspects such as risk models, customer groups, channels, etc.

Fang Heying, chairman of CITIC Bank, said that he believes that the special actions to boost consumption and a series of supporting measures will greatly improve the fundamentals of the growth of personal loans and credit card loan assets since the beginning of this year. Fang Heying introduced that since the second quarter of last year, the bank has adopted a series of risk strategy optimization and control measures for personal loans and credit cards. Since the fourth quarter of last year, the improvement effect has been revealed. The scale of new credit card overdue entry has been declining quarter by quarter, with a decrease of 800 million yuan in the fourth quarter compared with the third quarter.

"First, optimize the risk management model; second, select customer groups to further optimize customer groups such as credit cards, small and micro loans, consumer credit; third, optimize areas, analyze which areas are high-risk areas and which areas are low-risk areas, and actively develop high-quality customers in low-risk areas; fourth, pay attention to risk mitigation, and small and micro loans and housing mortgage loans are businesses with sufficient mortgages." Wang Liang, president of China Merchants Bank, introduced when talking about retail credit risks.

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