(Yicai Global) Aug. 12 -- Many Chinese banks have released recent statements to warn those purchasing stocks or housing using credit cards that these lenders will lower their limits or even lock their cards to deal with overdependence on use of this financial tool and its attendant risks that are piling up from investing through them, including growing default rates.

Individually-held credit cards can only be used for daily consumption by cardholders, the credit card centers of China Everbright Bank and China CITIC Bank noted in their statements, adding holders cannot use their credit lines for production, operation, or investment, including purchase of real estate, wealth management products and stocks, otherwise such transactions may fail.

The total delinquent debt of credit cards overdue for six months reached CNY91.9 billion (USD13.2 billion) by the end of March in a 23.7 percent surge from the end of last year, and accounted for about 1.3 percent of the outstanding balance of credit cards, growing by 0.29 percentage points from the end of 2019, show statistics from the People's Bank of China, the country's central bank. This period closely coincides with the eruption of the Covid-19 pandemic in the country and so a connection between the two phenomena may reasonably be inferred.

Ping An Bank, among others, is also strictly investigating the act of cashing in in addition to banning credit cards from the investment sector. Cardholders are barred from gaining funds, credit, rights, interests and awards or value-added services from the bank through illegal acts or fake consumption such cashing out card balances or fraud such as click farming, the Shenzhen-based lender said on July 10, adding it will lower credit limits, lock accounts, pause payments, set restrictions on merchants' transactions, regulate the act of cashing out and take other measures when it detects these illicit acts.

Credit cards serve mainly to satisfy users' daily, frequent and small-sum consumption and benefit their daily lives, the Financial Rights Protection Bureau under China Banking and Insurance Regulatory Commission said in a document it released on June 19, adding it urges consumers to use credit cards judiciously.

This is part of an upgrade in day-to-day policing and regulation, 21st Century Business Herald reported yesterday, citing a source within the credit card sector, who added regulators will continue to set their cross-hairs on abnormal credit card use such as purchases of real estate and stocks.

Editor: Ben Armour