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A student’s eye view of credit cards in China and the U.S.

Editor’s note: Ruisha Qian is a student from Zhejiang Province, China, studying for a master’s degree in journalism at the University of Missouri-Columbia. She wrote this guest blog for CreditCards.com.

In my homeland of China, credit card usage is rising, but China remains a nation of savers. In the United States, I’m still getting used to being amid a nation of spenders.

I was one of the first college students to get a credit card when I was a freshman at Beijing Foreign Studies University. Five years ago, China Merchants Bank issued the first credit cards for college students. It was a breakthrough to offer credit cards to students, who usually didn’t have steady incomes. In China, most scholarships are barely enough to cover living expenses, and getting a part-time job is not common for China’s college students, who still largely rely on their parents’ support.

Before 2006, debit cards occupied the wallets of these students. But suddenly, after the first credit cards by the Merchants Bank, campuses all over the nation were filled with bank employees promoting their credit cards, often by offering small gifts such as a water bottle or an Olympic-themed deck of cards. And suddenly, many college students became owners of one or more credit cards.

These credit cards, often referred to as student cards, charged low annual fees and allowed a minimum monthly payment. They often had relatively low credit limits, 3,000 renminbi or so (about $475). Three years later, the buzz was over, as the China Banking Regulatory Commission prohibited banks from issuing credit cards to people younger than 18. This move was attributed to the high default rate among college students, which was not high at all compared to that of their American counterparts.

Compared to credit cards, “supplementary cards” are far more popular in China. They are like debit cards with parental controls. Students who have no steady income own supplementary cards, while their parents keep the main cards. Parents can view the billing history and are responsible for making deposits.

The limited success of credit cards also happens in the general population. According to statistics from China UnionPay, a financial institute for bank cards, Chinese people are 20 times more likely to carry a debit card than a credit card.

This has a lot to do with people’s perception of spending money. While over-consumption has made the U.S. almost a shopaholic country, China remains, as it has been for thousands of years, a saving nation. Frugality is regarded as a merit. Saving for a rainy day is rooted in every Chinese person’s mind. Some people say this is why China is now America’s biggest creditor.

After I got my credit card in China, I never spent more than the authorized line of credit for fear of the penalty fees. I found the biggest advantage was that I could finally securely buy stuff online. That was the same reason many of my friends applied for credit cards as well. I know for Americans, credit cards long became a commonly accepted way of payment, but Chinese people are still used to paying in cash.

Not every shop accepts plastic in China. Customers have cash wherever they go. Shop owners are good at calculation, and can return change in seconds. Although I’ve been in the U.S. for nine months, I still have this habit of withdrawing a certain amount of cash every now and then, and pay for some purchases with that. It’s just a habit. And 20 years in China made me scared that my card information might be leaked.

In China, credit card fraud happens, and sometimes the card owners have to take care of the liabilities. Every card, no matter credit or debit, must be guarded with a password to reduce risk. So when my friends and I first came to the U.S., we were surprised that some purchases could be made via phone by simply giving the card information; restaurant tips could also be paid by writing on the receipts. This is not common in China, because trust, a premise for using cards, is not granted easily.

In the U.S., there is a well-developed credit system. Back home, this system is greatly underdeveloped. After I had been using my first credit card for two years, the Merchant Bank rewarded me with a paper statement, saying that I made every payment on time. I was excited for a while, until I discovered that this statement wasn’t useful at all. Perhaps a personal income statement speaks much louder if one wants to borrow money from the bank.

I don’t have a credit card in the U.S. I have only a debit card, so that my parents can deposit money through a Chinese bank. I can easily apply for one, but I don’t see it necessary. I was told that my debit card is also secure, and I don’t have to worry about the liabilities. For someone who’s not staying in this country for a long time, perhaps a credit card is not a must-have. I noticed that credit cards are more than merely a means of payment in the U.S., but is a tool for personal finance management.

Although I have lots of Chinese friends who have credit cards here, few of them are informed of or are trying to explore all the benefits that their cards could offer.

I have a friend from China who has a credit card in the U.S., and she said she only uses it for purchases. “I know some media websites teach people how to use credit cards to manage personal wealth, but it’s too complicated for me,” she said.

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  • Scott

    It is interesting to see the differences with many countries. I know the trend here is a lot of people are spending, but you still find people who are savers.

  • re: credit card interest rates.

    No mention has been made in these blog’s about some of the horrifc interests rates some banks charge to obtain and use a credit card. For interest, there’s a bank in South Dakota that charges an a.p.r. of 36%. That’s charging the cardholder 36 cents for every dollar spent. But the best part is the cardholder has to pay this bank $95.00 upfront for an “activation fee” before they can even use the card. You might think that very few people would accept these types of terms. However, hundreds of thousands of American’s if not more hold this particular credit card. They even charge u $3.00 extra fee for making an online payment on their website. So why do so many American’s go for such an outrageous offer? Primarily there are a few reasons. First this particular bank takes on “high risk” applicant’s that most other instititions would’t ever think of issuing a card to them. Secondly the overwhelming majority of this Bank’s cardholder’s are either people with serious negaitve derrogatory info on their credit report’s that other bank’s or lender’s would never approve them. Many American’s are so desparte for a major credit card, ie: Visa, Mastercard that they are actually more than willing to pay these outlandish fee’s. The bank that issue’s these card’s make’s it clear that it’s a “fee” based card for people with either fair or bad credit to help re-establish their credit. I myself was shocked to learn how many people out there are so desperate for a card that they’d actually agree to these horrific terms and conditions, but in fact they do. Also there’s a monthly fee of another $6.00 per month whether you use the card or not. So even if you have a zero balance u still get charged again. They have actually sent me a card twice, which I’ve taken the scissor’s to. I have other card’s with far lower rates, and without all the ridculous fee’s that this other bank charges’s. However after having said all of the above it is an avenue to help people with bad credit, re-establish their credit, but is it really worth that kind of price? I don’t think so folk’s! But, to each his own. M. Steele, somewhere, Az.