A credit card is an important thing to have when globetrotting, not least because many forms of online reservation require credit rather than debit payment. For those anticipating a long stay in China, a credit card may seem like a good idea. In general, however, Chinese banks have been very unwilling to give credit cards to foreigners because of the risk of them leaving the country without having paid all of the bills. Despite this, there is now some indication that things may be changing. A total of 270 million domestic credit cards were issued by the end of the third quarter of last year, and this increase may spill into the ever-growing foreign market in China. It must be pointed out that the government’s desire to increase spending is balanced with a suspicion of the credit and loan-based issues behind the Western financial crisis of 2008. Nevertheless, foreigners who previously found it almost impossible to get hold of a domestic credit card may find new opportunities in the coming months and years.
What foreign credit cards can I currently use in China?
There are at present seven foreign credit cards available in China, including Visa, MasterCard, American Express, Diners Club, JCB, Federal and Million. These work best in urban areas. There are obvious benefits to having a domestic Chinese credit card rather than a foreign one, insofar as the money earned in China will go straight into your account without bypassing any change in currency or other costs which will lose value. Foreign credit and debit card use in China may result in unusually high commission fees by whichever Chinese bank you use to withdraw from.
Applying for a domestic credit card
As already alluded to, China currently makes it more or less as difficult as possible for foreigners to obtain a credit card.
Requirements
Requirements may range from owning a house (or other assets); to having or depositing a certain amount of funds in your account (one person quoted 500,000 RMB). With a typical teacher’s monthly salary of around 8,000 RMB, it is extremely difficult to successfully obtain a domestic credit card, and generally pointless, because your credit limit as a % of your salary will be extremely low.
Banks will generally look more favourably on those married to a Chinese person. If you are not married, you may be able to arrange a co-signer who will pay for any overdue bills should you abandon ship (and for this reason, they’d probably have to be a pretty good friend). Such procedures will greatly strengthen your application. The long and short of the matter involves having some kind of collateral in China that can be used should you default on a payment.
Obviously, your application will require demonstration of work permit, passport and contract; the longer your contract, the greater the likelihood that your application will be successful. In general, each bank will have a very similar approach, requiring some collateral or a huge initial deposit. In general, however, the China Merchant’s Bank is recommended, and has a reputation for taking on customers who have been rejected by CCB and BOC.
Nevertheless, in terms of foreign applications, there are few hard and fast rules: each application is taken on its own merits. It should be added that if you work for a Fortune 500 company, you will probably be accepted for a domestic credit card because of your company’s inevitably close relationship with Chinese finance (so they have a means of chasing the money should you forfeit on payments).
Benefits to a domestic credit card
Once you have the card, there are numerous benefits. Not only can you gain points per purchase that can be redeemed as gifts, but you can also use your card abroad, meaning that you can spend the money you earned in China at a much more favourable rate than if you had to transfer cash at a money exchange.
Travelling will generally become much easier for the same reason (consider that these cards are what Chinese abroad tend to use). Extra charges that apply to foreign credit cards do not apply, because no conversion of currency is required, and you are merely spending RMB rather than a foreign currency. Expenditures at most banks can be converted into air miles. Add to this the obvious benefit that you can make large purchases before you have the money in your account, which will save money in that you will be able to book tickets and other travel expenses earlier than usual. If you are a high-earner in China, and your money is being paid into a Chinese account, then a domestic credit card could potentially save you a large sum of money.
Charges and interest
Chinese credit card interest rates are government-set at 0.05% a day, and capped at 18.25% a year. Late fees tend to be 5% of the minimum overdue portion, being at least $1 or 5 RMB. If you miss two payments successively, Chinese law requires you to pay the full owed amount immediately. Failure to do so can lead to years of imprisonment. These laws are much more severe than Western equivalent, driven in part by fears of a parallel credit-driven financial crisis.
Only a small amount of credit-loans are defaulted on in China, compared to a large number in the US. In short, the benefits of potentially lower interest rates (that, again, vary from bank to bank) are offset by more severe punishment for defaulting. Then again, if you have the financial muscle to obtain a credit card (mass deposit, assets, etc.), defaulting is probably unlikely.
What foreign banks issue domestic credit cards in China?
Since early 2012, Citibank has become the first non-Asian financial institution to gain approval to offer credit cards in China. This event undoubtedly marks one of the most important shifts in modern Chinese financial history, opening up a currently largely untapped credit market. The process has been complicated, but the result is probably one of the most significant in modern China’s financial history.
Previously, Citibank could only offer credit and debit cards in partnership with Shanghai Pudong Development Bank (SPDB), and the customers would exclusively belong to the Chinese partner. After threats from the World Trade Organisation over the financial legality of UnionPay’s monopoly on the Chinese market, the Chinese government has finally relented and allowed Citibank to access a market of over a billion potential credit consumers.
Applications for a credit card with Citibank are likely to be considerably more straightforward than with Chinese counterparts, especially as the bank’s global status means they are considerably less threatened by people defaulting on payments. The scheme is not yet fully launched.
Can I link my existing international credit card to a Chinese account?
Yes. If you already have an international credit card, and open a bank account with any Chinese branch (China Merchant’s Bank, Bank of China, etc.), you will have the option to link the two accounts. If you leave the country with unpaid credit card bills, the amount will be withdrawn from your existing overseas account to which your credit card is linked. The benefits of this approach are obvious: you can earn RMB and then pay off credit-debt directly with this money. For many foreigners, this will probably be a preferable option to applying for a domestic credit card, which, as indicated above, can be an arduous process.
Related links
How To: Set Up an Online Bank Account in China
China's Banks Compared: Which Offer the Best Accounts for Foreigners?
Seal off the Leaks: How to Save Money in China
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Keywords: credit cards China money and banking expats China how to get a bank card China Citybank credit card China banks in China
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www d o t flyertalk.com/forum/credit-card-programs/1250450-usa-cards-no-foreign-transaction-fees.html -------------------- I rest my case.
May 23, 2013 12:35 Report Abuse
This article needs revision. I've had to go through this multiple times in multiple ways. There is one big fat gorilla in the room that nobody is talking about. The Chinese government likes to control the money supply and this includes credit card debt. The article said, "Foreign credit and debit card use in China may result in unusually high commission fees by whichever Chinese bank you use to withdraw from." Uh, I'm not certain but I'm pretty sure that all transaction fees on the Chinese side are strictly regulated by the Bank of China. You can call it what you want, but all "fees" for foreign currency transactions ARE a part of the FOREX market. That includes credit card purchases going both ways. Go to any Chinese banks website and you will read that all exchange rates in China are set by the BOC. Any unusually high transaction fees you might be paying are NOT coming from Chinese banks who have discretion to set their own fees. Those high fees are coming from your bank back home. As a matter of fact, it is always better for the consumer to exchange money in China than it is for you to do it back home. You will always get a better rate through a Chinese bank. Just to further clarify my point, my wife recently used a Chinese credit card to purchase plane tickets in EUROS. The Chinese bank does NOT automatically allow her to pay the bill back using RMB. She must either pay her credit card bill in EUROS or make a separate transaction to first convert RMB into EUROS, then pay the bill. Guess what? There are no unusually high fees for converting RMB into Euros! But it is two separate transactions. China has been accused of currency manipulation by the WTO on several occasions in the past. It seems like it would be a blunder for China to go through all that trouble and forget to regulate the credit market. Believe me, if it's one thing they're good at, its controlling the FOREX market. That's why there's a mound of paperwork you must fill out if you're exchanging money in China. A foreign bank may speed up the process and appear to have better customer service, but you're paying up the ass for it!
May 17, 2013 07:07 Report Abuse
"I'm pretty sure that all transaction fees on the Chinese side are strictly regulated by the Bank of China." ------Yes, but only to benefit these pirates and rape foeigners who decide to use their cards in China. I doubt it's highly regulated for the consumers benefit if at all.----- "Any unusually high transaction fees you might be paying are NOT coming from Chinese banks who have discretion to set their own fees. Those high fees are coming from your bank back home."----- Yes they are coming from Chinese banks, it's called DCC, and directly violates Visa/MC regulations (which are supposed to result in $10,000 penalties for each occurance, if enough people dispute these charges). Instead of offering a choice of currency to the foreign card user Chinese banks instead defiantly & blantently program their merchant POS machines to opt-out of this choice resulting in 2% - 7% fees embedded into the exhange rate. Chinese bank are not as rosey as they would like their image to be. They are tricksters
May 18, 2013 12:46 Report Abuse
Ha! 2-7% is minimal, it's peanuts compared to having a US bank exchange it! I just bought RMB using ABC bank the day before yesterday. ABC bank gave me their rate of 6.2 RMB to 1 USD. And that is what is regulated my friend. Do you know what Wells Fargo's rate is? 5.6 RMB to 1 USD. That's why I said you can call it what you want, a fee, DCC, exchange rate, interest, it doesn't matter. Try it yourself. Compare two banks. Just in case you didn't get the math part, you're losing 600 RMB for every 1000 USD you exchange, just for choosing a US bank. That is close to a 10% difference in just the exchange rates. I would love to give you a screen capture of the two rates! (Right NOW, BOC = 6.15 to 1, Wells Fargo = 5.6 to 1). That's a 9% difference! Even a DCC fee as high as 7% looks pretty good when you actually see the exchange rate your bank back home is giving you. The media is slanted in that it makes it seem like you would much rather have your bank do the conversion. But what the media is not telling you is that the "market rate" back home is the rate that for-profit banks offer to CONSUMERS. NOT the rate they are buying currency at. On the other hand, the BOC gives you a rate closer to what they themselves are buying currency at. This is because the BOC is more concerned with restricting the FOREX market. The BOC doesn't make nearly as much money from your petty little spending spree abroad as the country as a whole benefits from having an artificially low RMB. In short, the BOC has bigger issues. Think about what you are saying. I'm paraphrasing, "VISA/MC don't like Chinese banks controlling the rates." Duh! Offering you a choice of currency is how the banks back home rape you. Chinese banks restrict your ability to have banks back home do the exchange. But given the horrible rate those banks are offering, why would you want them to do the exchange? Look, every country has its own way of trying to balance trade deficits in order to favor domestic companies. Hence the reason for doing so. I agree with you that China's main drive is not to do it for consumers' sake. It's to keep China's RMB low to benefit exporters. It is another means of supporting domestic companies without directly raising tariffs and quotas on foreign imports. It's more effective too. Let's face it, there's a much larger demand world wide for cheap Chinese products than for foreign products in China. Tariffs and quotas may curb the buying habits of the Chinese citizens, but how does China stimulate purchases made by consumers abroad? Restrict the FOREX market. China doesn't give a sh*t about VISA/MC regulations.
May 19, 2013 07:48 Report Abuse
The above breakdown is convoluted. Here is a simplified version using the rates above. Let's say you purchase a tea set in China for 500 RMB. You use your foreign credit card. That means you're selling USD and buying RMB in order to make the purchase. In other words, the bank is loaning you RMB, which later you will pay back using USD. If China (BOC) does the conversion (6.15 to 1) but charges you a 7% DCC fee, then you would be charged 86.99 USD total for the tea set. If you allow Wells Fargo to do the conversion (5.6 to 1), then you would be charged 89.30 USD total for the tea set. This example doesn't include additional fees that Wells Fargo would charge you associated with foreign transactions. That is up to the bank. Notice how I am using a conservative approach. If there was no DCC fee it would be even MORE obvious which bank is better. BOC = 81.30 USD, compared to Wells Fargo = 89.30 USD. Either way, DCC or not, Bank of China is better with a savings of 2 to 9 percent. Wells Fargo hides your cost of purchasing in their crappy exchange rate.
May 19, 2013 10:24 Report Abuse
Wells Fargo nor any individual bank issuing the card has any say in the exchange rate for Visa/MC. I would not get a terrible conversion of 5.6 to 1 as you say on my credit card, but somewhere between 6.12 to 6.135 today. And I don't like BOC or any other Chinese bank just arbitrarily sneaking in their embedded rates despite them seemingly allowing me to "Check the currency of my choice" but later processing the transaction in their rate regardless of which currency I checked. It's not even supposed to work like that as the POS machine is supposed to check the selection. Instead they fraudulently bypass this and leave it blank, without educating their merchants how to change the currency selection while leading you to believe that you are being offered a choice. However, behind the program there is no other choice than the rate they've selected. Again a direct violation of the regulations of Visa/MC. They would do this with Amex too if they could but they can't. The rates for foreign exchanges on credit cards are as about as close as you can get to the bulk exchange rates, usually no worse than 0.5% lower. They are pretty much bulk bank rates prices. I get a cash advance on my Visa and Amex card in China at a rate of 6.13 per U.S. dollar right now without any extra fees except for immediate 10% APR upon posting (I pay it off upon posting). The same goes for multiples of other cards from various US issued banks on all purchases (with no foreign transaction fee from any of the cards). Yeah I lose a half of 1% over the bulk currency rate, but I can do this in most other countries without the deceptive DCC fee which Chinese banks are not willing to let go and aggressively promote. It should be expected that you would get a terrible rate at a US bank while in the US and exchanging USD to RMB. I'm surprised you got the better rate you did even at ABC. If I buy USD at a Chinese bank in China, I wouldn't expect to get Forex rates. I'm not in the U.S. anymore and I've never exchanged USD to RMB in America since it's much cheaper to just get a cash advance at ICBC and pay it off a few days later and a few pennies less in my U.S. bank account. ---------------------------------------------------------------------------------------- --------------------------------------------------------------------- Next day real experience addition; Just today I went to a major diagnostic center in my city. This place has an English speaking manager. I was told I could use my MasterCard, I knew what to expect and calculate that my 5000RMB bill Should come to about $814 with today's rate of 6.137. I was also 99% sure that the processor, BOC, would sneak in the auto-opt-out function and leave both RMB and USD blank and would state "Check currency of choice". Sure enough it did just that and instead of a conversion to $814, it was a 2.7% higher at $846. I told them to void the transaction. They don't even know how to do that. They seem to only issue a credit and want you to sign the sales draft for the charge. I gave some online instruction how to make the POS choice RMB but the instructions were too outdated for this newer POS and it charged another $846 (verified two charges upon getting home). I had them issue 2 credit for the $846, but when I got home my issuing bank is showing 2 x $5000.
May 20, 2013 00:54 Report Abuse
I agree with you that Visa/MC has its own exchange rate, but then it goes to the issuing bank. The issuing bank then tacks on ANOTHER rate on top of the Visa/MC rate, which chisels away at the conversion rate. Hence the crappy rate! I think Wells Fargo calls it a "Currency conversion rate/fee". Again, call it what you want, fee, exchange rate, DCC. These banks are all dirty because they like to classify things as fees. But the effect is the same. Let's call it what it is, exchange rate. (If they didn't add that in there, I speculate that there would be room for consumers to take advantage of arbitration on a micro level). The DCC rate isn't the best, I admit that, but it still does make a difference if you're making large purchases. I guess in the end, whether western banks do it or Chinese banks do it, Someone is still finding a way to rape you. I'm curious to ask and if you've done the research, Which issuing bank did you find in the West that doesn't tack on those additional rates? Because I'll switch. They usually have "foreign transaction" or "currency conversion" built into the name. BOC's POS systems may not tell you what they're doing, but it just seems like we can't really opt out of western banks' rates either. It's just a matter of when, at the POS or when you sign the disclosure agreement with your issuing bank back home. On a side note, for other readers, if you need to walk into a bank to convert money when coming to China, or you automatically transfer funds back home, if you can, do the conversion in mainland China. You'll save yourself near 10%.
May 21, 2013 05:21 Report Abuse
Some cards I have with no foreign transaction fee are Penfed (visa and amex), & Amex Prepaid Cards. Another with a small foreign transaction fee of $1/transaction and 1% of the amount is NationWide VisaBuxx. I always look for cards with no foreign transaction fee. I've never seen any cardholder agreement that states there is a separate currency exchange determined by the issuing bank of the card. Most of the credit cards will have a cash advance fee anywhere, but the 2 I mentioned above have no fees. I averaged my rate for the 3 different cards and it is actually under one third of 1% less than the Forex of that day. Amex however will take the lowest rate of that week. Despite this, I've notice negligable differences between Visa/Amex conversions. I would drop Wells Fargo if I were you because I think their conversion is unusual even for consumer credit cards. Do you know the best way to transfer money from RMB to USD? I'd like to find a similar system but in the reverse. Across the board, about all of my cards with no foreign transaction fee have been getting close to bulk bank rates without some hidden conversion, fee. This includes Chase, Citi, Amex. It's the DCC fee that is deliberately hidden to make you believe you are choosing local currency, but then changing it to USD that I have a problem with.
May 21, 2013 14:29 Report Abuse
Here are a few that I have found: Wellsfargo: “Foreign currency conversion fee = 3%...” Available from: (WellsfargoDOTcom /credit_cards/rewards/terms) Citibank : “Foreign Purchase Transaction fee = 3%...” Available from: (accountonlineDOTcom/ACQ/DisplayTerms?sc=4XKIWL827000ZZZZZZW&app=UNSOL&siteId=CB&langId=EN&BUS_TYP_CD=CONSUMER&DOWNSELL_LEVEL=0&BALCON_SC=&B=S&DOWNSELL_BRANDS=&t=&d=&uc=&AMEX_PID_AF_CODE=&AAPID=) USBank: “Foreign Transaction = 2% of each foreign purchase…USD. 3% of each foreign purchase…Foreign currency.” Available from: (applicationsDOTusbankDOTcom/oad/catalog/terms.controller?step=display&locationCode=8985&productId=05&sourceCode=51857) Notice the names. You might want to double check your disclosure statements more closely. I haven't found a US based issuing bank without the conversion fee! Even the Visa website admits to it by actually offering a portal where you can input your issuing banks conversion fee and it will then calculate your actual exchange rate for you. A couple of these banks also tack on those 4-5% foreign ATM fees too! USBank is particularly horrible because it is my understanding that they charge you 2% for foreign purchases even though the purchase is in USD. WTF? In addition, are they mutually exclusive or are the two added together? Now, I'm pretty sure you can't waive these fees, they're forced on you. A DCC of 2.5% is better (with the exception of US Bank which charges you an additional 2% fee for the foreign transaction anyway regardless). I feel really bad for anyone who uses a US Bank card to get a cash advance while traveling abroad. They raise your APR to 24%, charge you a 4% transaction fee, and a 3% currency conversion fee. If I remember correctly, Citibank is similar in that they charge you 4% for foreign ATM fees, currency conversion of 3% and another cash advance fee on top of that. With that, I rest my case. The fees are coming from your bank back home. Horrible!
May 23, 2013 06:09 Report Abuse
Bozo, it's because China tries to control the currency. Long story, but this affects your FOREX credit cards. And "Thomas" below is an idiot. Don't listen to his uneducated ass.
May 17, 2013 22:03 Report Abuse
you would have to apply for a credit card that can buy on internet and use abroad. this is not necessarily the standard in china though, so there is a need to explicitely ask for that features! i think you can still change that settings though!
May 19, 2013 16:33 Report Abuse
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