China Everbright Bank last week launched China's first secured credit card, the Beijing-based bank announced in a statement. The issuer is marketing the dual debit/credit card to customers with lower income levels.

Called the “Sunny Card,” the magnetic stripe card accesses both a deposit account and a credit card account. Consumers follow the default settings, in which they use the debit function to deposit or withdraw money via the deposit account at ATMs and the credit function for shopping, according to the bank.

Anyone may apply for the card at an Everbright branch in China, through the bank's mobile-banking site through mobile phones or by calling the issuer's customer-service center, but applicants must wait at least 10 days for approval of their credit line, which can range from 3,000 yuan (US$440or 357 euros) to 50,000 yuan, according to the bank. Those receiving a credit line line pay an annual fee of 200 yuan, which the bank will waive when cardholders use their cards three times during the year, regardless of the amount.

Those not being approved for a credit line may use the card's debit function, according to the bank.

The bank automatically balances the credit account through funds transfers from the deposit account on the 15th day each month. The issuers charges a daily interest rate of 5% and a late fee of 5% of the outstanding loan when deposit accounts lack sufficient funds to cover the outstanding credit, according to the bank.

China needs a localized credit card to help boost the nation's credit card market, and the Sunny card serves this purpose for a market where annual incomes still are much lower than in developed countries, Dai Bin, Everbright general manager, said in the statement.

Residents in China's urban areas in 2009 earned on average annual disposable income of only 17,175 yuan, up 8.8% from 15,786 yuan in 2008, according to the National Bureau of Statistics.

Hao Hongrui, analyst at Beijing-based consulting firm Beijing DHD Consulting, also contends the Sunny card could open a new market. “So far, all banks are issuing the same credit cards to attract the same group, shutting out people with lower income, whom are exactly the target of the new card. So sooner or later, it will be popular in China,” she tells PaymentsSource.

Also, the card is designed to familiarize consumers with credit cards and to help them develop good credit habits, which eventually could help them get good credit scores, Hongrui says.

But since the card targets customers with lower incomes, a strict credit-line approval process is necessary to reduce risk. Technology investment is also required, Hongrui adds.

“The deposit-account platform and credit-account platform are two independent platforms, so banks need to integrate them perfectly, as any small mistake could cause a huge mess,” she says. 

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