Credit card default risks surge in first quarter

The risk of default on credit card loans rose significantly in the first quarter this year, driven by the central bank’s mandate for a higher minimum payment rate.

In the first quarter of 2024, special mention (SM) loans, defined as those overdue by 30-90 days, surged for credit cards to 12 billion baht, up 32.4% yearon-year and 20.6% quarter-on-quarter.

Roughly 190,000 cards defaulted, according to National Credit Bureau (NCB) data.

This increase in defaults can partly be attributed to the Bank of Thailand’s decision to raise the minimum payment requirement for credit cards from 5% to 8% at the start of the year, Surapol Opastien, chief executive of NCB, posted on his personal Facebook page.

Fragile economic growth, an uneven income recovery for individuals, and higher costs of living are expected to further strain the ability of credit cardholders to repay their debts, he said.

During the pandemic, the central bank temporarily reduced the minimum payment requirement to 5% to alleviate the debt burden on borrowers.

However, in January this year the central bank reinstated the minimum payment rate of 8%, with plans to return to the normal rate of 10% in 2025.

According to NCB data, as of March this year, total credit cards issued totalled around 24 million, with outstanding loans tallying roughly 550 billion baht, marking a 3.2% increase year-on-year.

Meanwhile, non-performing loans (NPLs) for credit cards amounted to 64 billion baht in the first quarter this year, representing a 14.6% increase year-on-year.

“With the notable surge in SMs for credit card loans, there is mounting pressure for higher NPLs in this

‘‘ This increase in defaults can partly be attributed to the central bank’s decision to raise the minimum payment requirement for credit cards from 5% to 8% this year.

SURAPOL OPASTIEN Chief executive, National Credit Bureau

economy,” said Mr Surapol.

“Concurrently, more young people are applying for credit cards over the past few years.”

NCB data revealed roughly 36,000 new credit cards were issued the last two years, with 23,000 held by millennials aged between 27 and 44.

Credit cards offered for more than two years but less than four years tallied 39,000, with 29,800 held by millennials and 9,200 by Gen X (aged 45-59).

Cards offered for more than four years but less than six years amounted to 45,000, with 33,000 held by millennials and 12,000 by Gen X.

According to a central bank statement, the regulator pledged to monitor the impact of the minimum payment increase, following a proposal from the Credit Card Club to postpone the rate hike based on concerns about the weakened ability of credit cardholders to repay their debts amidst an uneven economic recovery.