Sovcombank is going to attract new customers for its own installment card by free refinancing of credit card debt. According to the bank, this method of promoting a product will be cheaper than the classic attraction option. Until now, Russian banks, if they offered free refinancing, did so for much shorter periods and replaced someone else’s product with their own credit card, rather than an installment card. However, the conditions apply only if the citizen regularly repays the old debt.
Sovcombank (one of the top 10 banks by assets) told Kommersant that they plan to start free refinancing of credit cards of other market participants with the transfer of their clients to their Halva installment card. “Sovcombank will launch such a service on an ongoing basis across the entire network after analyzing the financial behavior of new clients,” they clarified. The credit institution has already carried out a pilot project, within the framework of which “about 8 thousand credit cards in other banks were closed in two months.”
Under the terms of refinancing, the client receives 24 months to repay the credit card debt if he makes timely payments and makes at least five purchases worth 10 thousand rubles. per month on the Halva card. The refinancing limit is 300 thousand rubles.
Almost all major players have refinancing programs. However, in Sberbank, PSB, GPB and Raiffeisenbank for consumer loans for refinancing, rates are 4.5–35% per annum (the maximum term of a new loan is up to seven years, depending on the bank). Alfa Bank, Tinkoff Bank and VTB have free refinancing, but for shorter periods - 100, 120 and 180 days, respectively. In all these cases, the debt is transferred from a credit card in one bank to a new credit card in another.
However, the first deputy chairman of the board of Sovcombank, Sergei Khotimsky, considers credit cards “a much less profitable banking product for clients.” He believes that through refinancing the bank is able to attract “hundreds of thousands of new customers every year.”
Now the active audience of Halva cards already amounts to more than 6 million people. “The share of income from the Halva card in the overall structure of retail income becomes smaller when rates rise, since there is no interest on it, and we cannot increase our commissions. Nevertheless, the installment card generates profit and helps to attract and retain customers,” notes Mr. Khotimsky.
According to the Central Bank, as of July 1, 2023, 50.5 million credit cards were opened in Russia. The number of borrowers with credit cards in hand was estimated at 23 million people. Over the past year, the number of users has grown by 3 million people, which is much more than, for example, the increase in the number of borrowers in the cash loan segment (1.6 million people). According to BKI, the average bill for credit cards is about 100 thousand rubles.
According to Denis Taradov, partner of the Unicon audit and consulting group, as a rule, clients refinancing loans are borrowers with average risk who have a long period of overdue payments; refinancing is usually not available. Moreover, this in itself is considered a deterioration in the borrower’s credit quality, implying a larger volume of reserves. “Naturally, borrowers who meet the grace period (without paying interest.— “Kommersant”), will not go to refinance to another bank,” the expert notes. “Using a grace period is standard practice. But as soon as a person goes beyond its limits, it ceases to be profitable and, in the full sense of the word, flows into a certain type of loan.”
In an environment of rising interest rates, the share of those interested in refinancing is decreasing. According to the managing director of the NKR rating agency, Mikhail Doronkin, refinancing a card loan makes sense when combining several debts into one to reduce the rate. For the bank, as Mr. Taradov explains, refinancing other people’s clients is a profitable process, since this gives additional card turnover, which constitutes the bank’s commission income.