Study On The Factors That Result In The Default Risk Of The Commercial Bank’s Credit Card

At present,with the deepening of economic globalization and marketization of exchange rate and interest rate,the price of commerical bank ralated products is increasing determined by the market.Since China is strengthening the opening-up to the outside world,foreign banks have been doing an all-round business in China.Therefore,fierce competition among the commerical banks creates more and more innovations in credit products.A credit card,as a kind of payment tool for micro-credit,is issued by banks to the cardholders for spending now and paying later.It is originated in America and being introduced to China since 1985.Through thirty years development,credit card has become an important financial payment tool with most vatality in innovation.It creats wealth in retail banking margins due to the advantages of high risk,high profit,high growth and scale effect.With the high profit,the market rapid expansion can produce high risk,so the loss on bad debts highly reached 40.89% in the total cost.How to balance the income and risk of credit card business has become a problem for commerical banks.Because the default risk is the key of credit card’s risk management,research on the current management situation,affected factors and mangement strategy of the domestic commercial bank’s credit card is not only practically meaningful to the bank’s credit card business that I have been worked in,but also has referential significance to other commerical banks.With the sicentific analysis and review of foreign and domestic literature on the management of credit card’s default risk,this thesis makes a systematic analysis on the default risk management of credit card in aspects of finance and information economics.Meanwhile it applies case study method to explore the key factors that affecting the default risk of credit card,and proposes corresponding suggestions to reduce default risk.The main work and conclusion are as follows:1.Default risk is the main risk of credit card business.2.There are three reasons for the generation of default risk: the cardholder,inner managerment of the bank,and outer social factors.The customer,as the cardholder,which contains the willingness and ability of honoring the agreement,and the asymmetic information are the main factors to cause default risk.The bank’s inner management contains the organized management structure,evaluation mechanism and operating procedure.The outer social factors include macro economy,imperfect laws and regulations on credit card and backward constrution on credit and moral system.3.Through the case study,this thesis thinks that credit limit,time of cardholding andincome of the cardholder are three main factors for the effect of default risk.The three variable are highly significant in statistics.In addition,cardholder’s age,sex and registered residence have no relation with the degree of default risk.In conclusion,according to the research result and case study,this thesisproposes specific suggestions on the default risk management which also offers agreat practical guiding significance to redure the default risk of credit card.