Credit-card issuers plan to tap the growing interest in zero-interest instalment plans

Economy June 15, 2015 01:00


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AMID the current high level of household debt, credit cardholders who cannot afford to pay in full for every transaction have the choice of an instalment plan offering zero interest for up to three months, which they can arrange on demand over the telepho

Some banks, including Krungsri Consumer, are promoting such instalment plans among ‘smart’ consumers for small-ticket purchases. 
Krungsri Consumer, the country’s credit-card market leader, recently launched Krungsri First Choice Platinum, whose key feature is a zero-interest repayment plan available on demand.
Customers will be waived interest on their repayments for up to three months on transactions for which they opt to pay by instalment, simply by phoning the Krungsri First Choice call centre.
Krungsri First Choice aims to use this product to increase its customer base among people with a monthly income of at least Bt15,000. 
Its previous target was lower-income individuals bringing in less than Bt10,000 per month.
Thakorn Piyapan, managing director of Krungsri Consumer, said the bank’s overall credit-card spending year to date had grown by 7-8 per cent, which was below target, but instalment payments via credit cards had expanded by 15 per cent in the period.
During the current economic slowdown, the key driver of credit-card spending is instalment plans, he said, adding that Krungsri First Choice Platinum was designed to tap smart shoppers who feel the programme can help them manage their cash flow.
He believes credit-card issuers will become more active in offering instalment plans with zero interest for up to three months by phone, as they are an attractive tool for increasing spending and avoiding non-performing loans.
Pittaya Vorapanyasakul, executive vice president for credit-card business at Krungthai Card (KTC), said such instalment plans could reduce the repayment burden on cardholders.
KTC was among the first players to offer such a promotion, but the company itself has not had to promote it strongly, as it joined forces with merchant partners in offering instalment programmes at their stores.
KTC offers an instalment plan at zero interest for the first three months under what it calls a “flexi” arrangement.
It also offers a flexi arrangement to consumers who want to convert any purchase of products or services with a minimum value of Bt500 per transaction and a minimum accumulative value of Bt3,000, to an instalment plan offering an interest rate of 0.79-0.89 per cent per month, for three to 10 months, she explained.
“Sometimes, customers are unable to pay the full amount for each transaction, and they want to convert some items into an instalment programme for a short period. Each year, instalment plans via the flexi programme grow by 30 per cent,” she added.
So far this year, KTC’s flexi-programme has grown by 15 per cent due to the strong promotion of instalment payments at its merchant partners.
However, having new players offering instalment plans by telephone has affected the company’s market share, she said.
So far, So Good
TMB Bank is highlighting its own instalment plan, So Good, under which it offers TMB credit cardholders zero interest for the first three months on purchases made at any store.
Customers are required to spend Bt1,000 per sales slip at any outlet to benefit from the plan, which after the first three months entails a 0.89-per-cent interest rate for six- and 10-month instalment terms.
The arrangement is made by phone at the TMB call centre.
Siam Commercial Bank, meanwhile, offers its own zero-interest instalment with merchant partners, but does not highlight the product strongly as about 80 per cent of SCB credit cardholders prefer paying off the full amount of their outstanding balance, said executive vice president Tearavath Trirutdilokkul.
With SCB branches being the main channel for acquiring credit-card customers, the bulk of whom are depositors and wealthy clients, the bank is focused on joining with partners, and especially retailers, in offering attractive campaigns to enhance card-based spending, he said.
Credit-card spending at SCB so far this year has not grown as significantly as in the past because consumers are generally not confident about the economy, he added.
SCB projects double-digit growth in its cardholders’ spending this year, but if economic momentum is not achieved in the second half, it will be a challenge to meet that goal, said the executive.