Thailand faces credit card default risk

The risk of default on credit card loans increased significantly in the first quarter of this year in Thailand, amid the Bank of Thailand (BoT) imposing higher minimum payment rates.

In the first quarter of 2024, special loans (SM), defined as loans 30-90 days overdue, to credit card holders increased to 12 billion baht ($325 million), up 32.4% year-on-year and 20.6% from the fourth quarter of 2023.

According to data from the National Credit Bureau (NCB), about 190,000 cards are in default.

Fragile economic growth, an uneven recovery in personal incomes and higher-than-expected living costs are making it more difficult for credit card holders to repay their debts, Mr. Surapol said.

During the COVID-19 pandemic, BoT temporarily reduced the minimum payment requirement to 5% to ease the debt burden on borrowers.

According to NCB data, as of March 2024, the total number of credit cards issued reached about 24 million cards, with outstanding loans reaching about 550 billion baht (US$14.8 billion), marking an increase of 3.2% over the same period last year.

Meanwhile, non-performing loans (NPLs) on credit cards amounted to 64 billion baht ($1.7 billion) in the first quarter of this year, up 14.6 percent year-on-year.

“With the significant increase in SM lending via credit cards, the risk of bad debt is increasing. At the same time, more and more young people have applied for credit cards in the past few years,” Mr. Surapol asserted.

NCB data shows that about 36,000 new credit cards were issued in the past two years, of which 23,000 were issued to Millennials, those aged 27-44.

In light of the above situation, BoT committed to monitor the impact of the increase in minimum payment, following the proposal of the Credit Card Club to delay the interest rate increase based on concerns about the weakening ability of credit card holders to repay their debts in the context of uneven economic recovery.