Cash advances on credit cards creeping up

‘Maxing out’ a credit card might seem a very Western phenomenon, but it seems more and more Thai credit card holders are using the expediency of cash advances to fund their lifestyles.

Krungthai Card (KTC), a subsidiary of Krungthai Bank, recently announced that credit card cash advances had grown by 10 percent to the end of May this year. KTC said this was in all likelihood due to liquidity problems caused by the slowing economy.

KTC said its outstanding cash advances amounted to 7.5 billion baht, which equated to 15 percent of total credit card spending for the first five months of this year. Although this was only one percent more than the same period in 2013, KTC management have expressed some concern at the numbers. It said loan officers were paying close attention to new approvals for credit cards, even though KTC has not altered its criteria for issuing a credit card. KTC offers credit lines that are five times lower than the monthly income recommendations issued by the Bank of Thailand for tough economic times.

This may well be the reason KTC currently has 1.63 million credit card holders. The bulk of these credit card holders earn between 15,000 to 40,000 baht a month. KTC’s loan approval levels sit at around 50 percent, a figure that has not changed since last year. KTC said it had only seen a marginal increase in delinquencies, up to 2.6 percent from 2.5 percent in 2013. Non-performing credit card loans remained stable at 2.2 percent.

KTC said it had a target of 138 billion baht for 2014 credit card spending, but in the first five months this had fallen five percent short. It blamed the lower spending on the political crisis which wracked the country until the 22 May coup.

Nonetheless, KTC believes it will crank out 400,000 new credit cards during 2014, with 110,000 already issued. They believe spending in the second half of the year will accelerate on the back of a more stable political environment, especially given the military’s desire to return to a functioning government by about October.

KTC hopes to see spending via credit cards up to between 10 and 15 percent for the year compared with just the four to five percent growth experienced in 2013.

Of course, this credit card spending will only take place within an overall stable political environment and where employees are confident their jobs are relatively secure and they can afford to pay back their loans over time.