A Study On Credit Risk And Risk Assessment In Credit Cards

Credit card business's profit margin is much higher than other banking business because of its high interest rate. Well-run credit card business's return rate on net assets is higher than the double return rate of traditional business. At present, the traditional profit space that obtains from deposits and loans in commercial bank is getting smaller and smaller. China's credit card industry has experienced an age of "riding on a horse to enclose" during the past five years. The volume of card-issuing has been blowing out. According to the data just published by the central bank, China's credit card issuer has broken through 140 million at the end of 2008 while this figure was only 10million five years ago.People can not help being anxious about the credit card industry in our country because this explosive development. The outbreak of Korean credit card crisis in 2001 showed that the rapid development of credit card market will inevitably accompanied by high risk. If there are no adequate attention and timely management and control, China will also follow the way of this country probably. Therefore, an accurate identification, assessment, management and control of the risk credit card business may bring has become the most urgent task during the development of credit card business in China commercial banks.This article first analyzes the development model and characteristics of the credit card industry and introduces the seven risks faced by the credit card business which main risk is credit risk at this stage. Then it discusses the credit card and credit risk in detail, analyzes the elements that impact credit card's risk, the reason of credit risk from the view of economics and the credit risk's characteristics. On this basis, the author draws the conclusion that there are three characteristics belonging to credit card. Then this article describes the current assessment methods and models of credit card's credit risk and compares the different methods. With combination of China practical situation, the author chooses the Logistic regression analysis of the empirical analysis in this article. Finally, with the information of credit card customers in Weihai in 2007, the article makes a credit card default rate forecasting model in the use of Logistic regression analysis and verifies the accuracy and stability of the model. The conclusion is that the Logistic regression analysis can be applied to the decision-making process when customers apply for a credit card.