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.