BOT Discusses Adjusting Credit Card Minimum Payment

[webfact]

Picture courtesy: NNT

 

The Bank of Thailand (BOT) is currently reviewing the minimum payment rate for credit card debt and is in discussions with credit card issuers.

 

The central bank is considering reducing the minimum payment rate from the planned 8% back to 5%, following a request from Prime Minister Srettha Thavisin. This change aims to alleviate the financial burden on consumers during challenging times.

 

The BOT plans to finalize the decision soon, recognizing the urgency of the matter. Chayawadee Chai-Anant, Assistant Governor of the BOT, emphasized that any changes will be implemented with sufficient time for financial institutions to adjust their systems, ensuring that debtors can manage repayments effectively.

 

This consideration comes amidst rising household debt in Thailand, expected to exceed 16.9 trillion baht by the end of 2024, accounting for over 91% of the country's GDP. The increase is attributed to a sluggish economic recovery and slow income growth, pushing many individuals toward debt, including informal lending sources.

 

This situation has raised concerns among economic analysts and policymakers about the potential long-term impacts on the economy, including the risk of an increasing number of non-performing loans (NPLs). The BOT is acutely aware of these risks and aims to strike a balance between easing consumer burdens and maintaining financial stability, reported NNT.

 

Financial institutions are preparing for the potential change, which could lower the immediate financial pressure on consumers but may extend the debt repayment period. This measure is seen as a temporary relief, with longer-term solutions needed to address the root causes of high household debt.

 

The decision by the BOT will be closely watched by market participants, economists, and the general public to see how effectively it can balance short-term relief with long-term financial health. The outcome will also serve as an indicator of the government's commitment to tackling economic challenges in a sustainable manner.

 

-- 2024-08-14

 

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[chiang mai]

Why not reduce the interest rate charge first, that would be more helpful.

[Tropicalevo]

Isn't this the third time in the last month that the BOT 'is reviewing'. 

[bkk_mike]

Personally. The current amount is far enough above the monthly interest that you're actually paying down the debt even if you're only making minimum payments.

That's better from the point of view of long term debt than in places like the UK where the minimum payments barely covers the interest.

[Wrwest]

For Western Newcomers ... Thai banks do not offer "Credit Cards" as we are used to in the West where bank cards extend credit based on your credit rating. Here, what they offer is rather secured loans via a bank card as you must have the amount equal to your credit limit extended via the card. Always caught me off guard when I first arrived over a decade ago. Others correct me if there are any Thai banks offering true "Credit Cards" like the three I still use from CapOne, AMEX, Fidelity.

[Upnotover]

5 minutes ago, Wrwest said:

For Western Newcomers ... Thai banks do not offer "Credit Cards" as we are used to in the West where bank cards extend credit based on your credit rating. Here, what they offer is rather secured loans via a bank card as you must have the amount equal to your credit limit extended via the card. Always caught me off guard when I first arrived over a decade ago. Others correct me if there are any Thai banks offering true "Credit Cards" like the three I still use from CapOne, AMEX, Fidelity.

No, they all offer credit cards but only (mainly) to those working in Thailand, i.e. those that can have a credit rating.  Tourists need not apply.

[chiang mai]

Banks are more amenable to issuing credit cards to long stay residents who have banked with them for several years and have a banking history. UOB offered me one after 8 years with them. It's a nice to have item but not essential, it also costs 4,500 baht per year but I get some of that back by way of rewards throughout the year. It's good for medical stuff, I recently charged 200k for an operation and everyone was very happy, including me.

[BritScot]

52 minutes ago, Wrwest said:

For Western Newcomers ... Thai banks do not offer "Credit Cards" as we are used to in the West where bank cards extend credit based on your credit rating. Here, what they offer is rather secured loans via a bank card as you must have the amount equal to your credit limit extended via the card. Always caught me off guard when I first arrived over a decade ago. Others correct me if there are any Thai banks offering true "Credit Cards" like the three I still use from CapOne, AMEX, Fidelity.

I looked at this some years ago and basically shocked me. I had a very good income and a "A" credit rating in Thailand (3 car loans and 3 motorbike loans) but the bank/credit card wanted me to give them 50,000baht and then would lend me my money and charge me interest on it! My reply was "you must be mad". So! We took a credit card out in my wifes name with zero income but married to me a foreigner and she got 50,000baht credit card. No wonder Thailand is in a banking mess. A banking system when I think back to 2002 my first thai bank account,  has regressed and not progressed.

[Caldera]

They shouldn't be allowed to charge interest rates as sky high as they do.

 

They shouldn't be allowed to extend insane amounts of credit to people whose salary barely covers their monthly living expenses.

 

Those two issues are obviously connected. The more people default on their credit card loans, the higher the interest rates need to be to make up for those losses.

[Wrwest]

21 hours ago, Upnotover said:

No, they all offer credit cards but only (mainly) to those working in Thailand, i.e. those that can have a credit rating.  Tourists need not apply.

Thank you, as a retiree here (better than 800 US credit rating), I did not know about the employment angle.

[sometimewoodworker]

8 hours ago, Caldera said:

They shouldn't be allowed to charge interest rates as sky high as they do.

Last time I looked a loan is a contract between 2 parties, nobody is forcing you to agree to the contract.

 

There is a free market (with upper limits on interest) so if the loan is a profitable one there will be another lender, if nobody is offering a loan with a better interest rate then it is clear that the rate is suitable.

 

If people are financially irresponsible it is not the lender’s job to lend at a low rate or educate them.