THE People's Bank of China, the country's central bank, says that at the end of last year about 650 million bank cards were in circulation throughout the country, a rise of 24 per cent on the previous year.

This means that one in every two people in China has a card issued by one of China's banks.

In the 19 years since the country first issued bank cards, people, especially urban dwellers, seem to have become dependent on the use of debit or credit cards in their daily lives.

In order to attract more customers, the banks have racked their brains to come up with new ways to attract customers, such as finance management accounts which contain various services all lumped together.

Some smaller banks have even promoted a "Beauty's Card" targeting female consumers.

Cards also have different rankings, like golden or silver cards, depending on the minimum deposit required.

Those types of card have a network connection with fashion brand stores, gyms, beauty salons and high-end restaurants, so that card holders get discounts from those outlets where they frequently made purchases.

Meanwhile, with increasing numbers of Chinese travelling overseas, more are choosing to use cards when shopping in other countries and regions to avoid the trouble of currency exchange.

As chinanews.com reported, over 11 days during the Spring Festival this year a total of 27,000 transactions were completed by RMB credit cards in Hong Kong. It was only from January 18 that Hong Kong began to accept RMB credit cards.

In the coming week-long Labour Day holiday, the most popular stores in Hong Kong visited by mainland travellers have promised to give discounts to any pay-by-card tourist.

Yet, compared with developed countries, China is still lag-behind in terms of network set-up and people's habit of using cards.

Statistics show that among the 15 million stores around the country, only 2 per cent have installed POS (point-of-sale) machines, while the percentage in the US was 80 per cent. Chinese consumers use bank cards twice on average every three months but their American counterparts use them nearly 30 times.

Ma Weihua, head of the China Merchant Bank, said that since the country now has increasing numbers of foreigners visiting, the banks and stores need to be improved quickly to be able to accept more international cards, especially with the coming of the 2008 Olympic Games in Beijing and the 2010 World Expo in Shanghai.

Expensive card services

Because the banks charge department stores for card transactions, some store owners have been unwilling to allow customers to make purchases with a card.

Though the People's Bank of China has lowered the charge rate from 1 per cent to 0.8 per cent starting from last March 1, the pursuit of higher profits still kept merchants with POS machines from permitting their customers to shop by card.

The leading electronic appliance seller, Shanghai Yongle group, put notices in each of their stores last year saying that bank cards could not be used on Tuesdays.

A manager of Yongle told the Jiefang Daily that about 23 per cent of trading was by card with turnover reaching 1.4 billion yuan (US$169 million). That meant the banks would charge Yongle 14 million yuan (US$1.69 million).

And in the competitive electronic appliance market, the net profit for the sellers was just 1 per cent.

Even with the charge rate down to 0.8 per cent this year, the fee for Yongle may reach 32 million yuan (US$3.86 million) because of the growing number of card-holding consumers. This would be about one third of the group's total profit in Shanghai.

However, in other provinces, negotiations between stores and commercial banks have been made and they have agreed to reduce the charge rate to 0.5 per cent or even lower.

Other department stores would keep pay-by-card consumers away from some promotions and discount items.

Waiters in restaurants would suggest diners not use cards because it took too long to process and sometimes mistakes were made.

The stores said another reason why they didn't encourage pay-by-card customers was because electronic systems and networks used by the banks often broke down, especially on weekends.