How long does credit card debt double?

A shocking story has emerged about a customer who "swiped" their credit card with an initial debt of only 8.5 million dong but, through negligence, allowed it to escalate to nearly 9 billion dong after 11 years - serving as a wake-up call for credit card users not to underestimate credit card interest.


Sow “debt seeds” to reap “ancient trees”

In the past few days, the case of a customer using an Eximbank credit card with a debt of 8.5 million VND but “forgot” to pay and 11 years later, the credit balance notified by the bank increased by more than a thousand times, which surprised many people.

In the debt reminder letter from the Company Limited Liability Company for Debt Management and Asset Exploitation – Vietnam Export Import Commercial Joint Stock Bank (Eximbank AMC), the bank informed the customer with the name P.H.A in Quang Ninh about a credit card debt of nearly 8.84 billion VND, the surprising thing is that the principal debt is only 8.55 million VND but the interest debt is over 8.83 billion VND.

Regarding the content of the “Debt reminder letter overdue by Eximbank AMC sent to customers”, Eximbank stated that the customer P.H.A. opened a Master Card at Eximbank Quang Ninh Branch on March 23, 2013 with a credit limit of 10 million VND. After that, two payment transactions were made on April 23, 2013, and July 26, 2013 at an acceptance point.

Since September 14, 2013, the above credit card debt has turned into bad debt, overdue debt arising until the time the bank issued the above notification is nearly 11 years.

During nearly 11 years, Eximbank has repeatedly notified and worked directly with the customer, but the customer has not yet had a debt settlement plan“, said a representative of Eximbank to the press.

Regarding the interest calculation method, fees, Eximbank believes that “it is completely in line with the agreement between Eximbank and the customer based on the credit card opening dossier on March 15, 2013 with the customer’s full signature. The regulations on fees and interest are clearly defined in the issuance fee schedule, the use of the card has also been publicly posted on Eximbank’s website

As for customer P.H.A‘s exchange with the media, in 2013, when applying for a card, an Eximbank employee named G asked him to sign the credit card application form and receipt first, and then would announce the result later. However, when he received it, he was only given a domestic debit card and told he “is not eligible for a credit card”. Therefore, he stated that he did not receive, activate, or use this credit card.

In 2017, when applying for a loan at another bank, he was notified of the outstanding principal and interest of the credit card in 2013, which is over 100 million VND at Eximbank. During the period from 2013 to 2017, he said he did not receive any reminder notices from Eximbank, and he “didn’t get to spend and didn’t even know about the existence of this credit card”. Until now, after 11 years, the total debt balance has escalated to 8.84 billion VND.

Credit card interest is calculated according to the 8th wonder of the world

This story raises many questions about how the interest amount is calculated to reach such a “scary” figure.

According to a private customer specialist with nearly 7 years of experience at a branch of the “Big 4” bank, credit cards are a form of unsecured personal loans (loans without collateral), so the interest rate is higher than for mortgage loans (loans with collateral) to compensate for the risk for the bank. The credit card interest rate is not specifically regulated but must not exceed 100% per year to avoid being classified as high-interest loans.

The credit card interest is divided into 2 parts: the credit card loan interest rate (usually 20-40% per year) and the late payment penalty interest rate (4-6% of the debt, at least 80,000-100,000 VND). Both interest rates will be added to the principal and then interest will be calculated for the following months“, said the specialist.

Albert Einstein once said: “Compound interest is the 8th wonder of the world. Those who understand it, earn it; those who don’t, pay it.” This wonder is the secret formula that helps the assets of many billionaires grow exponentially, and in Buffett’s case, that number reaches hundreds of billions of USD.

Indeed, credit institutions have always used “compound interest” in their business activities to generate profits, and the most common application is in calculating credit card interest.

To demonstrate this “wonder”, the writer provides an illustration with the assumption that the customer’s credit card principal debt is 8 million VND, fixed credit card interest rate is 28.2% per year, and the late payment penalty interest rate is 4%, with a minimum of 80,000 VND (this amount is referred from Eximbank’s fee schedule).

The writer calculates

With the above example and the calculation method of credit interest according to compound interest, it can be seen that after only 13 months (over 1 year), the customer’s debt will double. In which, the interest amount is over 3.2 million VND and the late payment penalty amount is over 5.5 million VND.

With a longer duration, after nearly 2 years, the credit card debt will quadruple the principal debt, and after nearly 10 years, the credit card debt will be 1,117 times the principal debt.

Can you be criminally liable for not paying credit card debt?

According to the provisions of Clause 2, Article 17 of Circular No. 19/2016/TT-NHNN amended by Clause 9, Article 1 of Circular No. 17/2021/TT-NHNN on the principles of use: The cardholder must use the money for the correct purpose and pay in full and on time to the card-issuing organization, the loan amount and interest arising from the use of the card according to the signed contract with the card-issuing organization.

Currently, banks usually provide an interest-free period of about 45 days, including the interest-free period between payment cycles and the extended period.

If the full loan amount is not paid within this period, customers will have to pay additional interest to the bank. Therefore, not paying credit card debt also incurs overdue payment penalties.

Moreover, based on Article 175 of the 2015 Penal Code amended by Clause 35 of Article 1 of the 2017 Penal Code Amending Law on embezzlement of trust for purposes of stealing, the obligation to repay credit card debt is a civil liability. However, people who do not pay credit card debt will be criminally liable if there are signs of fleeing or deceiving to avoid repayment.

Specifically, the offender will be sentenced to up to 3 years imprisonment if embezzling an amount from 4 million VND to below 50 million VND or less than 4 million VND but has been fined for administrative violations of this act or has been convicted of intellectual property infringement offenses that have not been expunged.

In the case of embezzling an amount from 50 to 200 million VND, the punishment is 2-7 years imprisonment. 5-12 years imprisonment if embezzling an amount from 200-500 million VND. The maximum penalty is 12-20 years imprisonment if embezzling an amount of 500 million VND or more.

It’s fair to say that the benefits that credit cards bring to consumers cannot be denied when they not only provide convenience and promptness in payment but also help optimize costs for users with attractive promotions such as cashback, point redemption for gifts, discount vouchers… On the other hand, credit cards can become a double-edged sword that pushes users into a deadlock due to bad debts if they don’t know how to use them. To protect their personal finances, users need to strictly adhere to the rule of paying off the debt on time, or at least pay the minimum amount to avoid late payment penalties.

Khang Di

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