Experts have warned about a global wave of consumer default that is underway, beginning in China. (Photo thebank.vn)Hanoi (VNS/VNA) - Expertshave warned that consumers may soon start defaulting on their credit cardpayments due to rising unemployment and salary cuts in many industries andsectors in the wake of the COVID-19 pandemic.
According to the latest reporton labour and employment amid the COVID-19 pandemic, the Ministry ofLabour, Invalids and Social Affairs said the number of peopleapplying for unemployment insurance as of February 2020 stood at 47,164,an increase of 70 percent over the same period last year.
Though the banking system hasnot recorded any cases of defaults related to credit cards, experts said banksshould be cautious due to COVID-19.
They took China as an example.In China, where the epidemic has taken many lives and caused heavy losses inproduction and business activities in the first months of 2020, overdue creditcard debt swelled in February by about 50 percent from a year earlier.
Qudian Inc, a Beijing-basedonline lender, said its delinquency ratio jumped to 20 percent in February from13 percent at the end of last year. China Merchants Bank, one of the country’sbiggest providers of consumer credit, said last month it “pressed the pausebutton” on its credit card business after a “significant” increase in overdueloans. An estimated 8 million people in China lost their jobs in February.
Experts have also warned abouta global wave of consumer defaults, beginning in China.
It is easy to get a creditcard in Vietnam, and a number of card holders, especially young people,are finding it difficult to repay their debts as their companiesscale down business due to the pandemic.
Like other young card holders,an employee in Hanoi, who declined to be named, borrowed money she thought shewould be able to repay. Then the COVID-19 pandemic changed everything.
She said now all she thinksabout is finding the money to repay the banks as she spent a lot on her threecards. All she had to do was swipe her cards to make a transaction so she didnot know how much money was left on them, so she didn't feel sorry. It wasnot until the payment deadline arrived that that she realised how much shehad spent.
To get a card, customers justneed to visit a bank where they are guided through instructionsand procedures, and they receive their card in a week.
Some banks even send staff outto help customers open credit card accounts.
Theoretically, the card limitwould depend on the customers’ work or solvency, but increasing the card limitis very simple. Therefore, the number of youngcustomers getting caught up in a spiral of spendingis increasing during the pandemic, make the risk of defaultinghigher.
According to data from theState Bank of Vietnam, there were 99 million credit cards in the country by theend of last year./.
VNA
