Lunatic Finance
Interest Free Bank Loans in China, real or not?
I was going to make “Be your own loanshark” the next installment in Lunatic Finance, but something else just popped up. My lovely wife recently got a new credit card from a Chinese bank. A week or two later, someone from the bank called her and tried very hard to get her to accept one of their interest free bank loans.
The initial offer was for 50,000 RMB. If she took the loan and paid it off, she could turn around and borrow 100,000 RMB the next time. The sales person loan officer was very enthusiastic about extending this great and special privilege to my wife.
Wow! Zero percent interest. We could just shove the money into a savings account at the same bank, set up automatic payments, and pocket whatever percent the savings account paid. Playing the numbers right and using the correct type of savings account could generate several thousand RMB per year with zero initial investment and zero risk. It wouldn’t be a lot of money, but hey, it’s free! Who doesn’t love free money?
What a deal, right? It sounds too good to be true. Is it?
Interest Free Bank Loans? Trap or not?
Banks are in business to make money (yes, even in China). Sure, sometimes banks make mistakes and lose money on bad loans, but I’ve yet to see a bank go out of its way to try to effectively give money away to customers. I gently suggested to my wife that she ask for some further details on the exact terms and conditions behind this amazingly generous (too generous) offer.
As I suspected, this tempting piece of financial bait had been carefully wrapped around a viciously barbed hook. Although the interest rate was officially zero, it turns out that there was a tiny little “fee” for every 10,000 borrowed. It was only 75 RMB per 10,000. That didn’t seem like much. It’s only 0.75%. That’s not bad at all, until the small detail that it’s a monthly fee comes up. This makes the fee effectively the equivalent of a 9% per year interest rate. According to my finely tuned abacus, nine percent is significantly above zero percent.
Oh no! It’s a trap!
I’ve seen worse deals out there, but was a little surprised to see a major bank trying to trick a brand new client like this. Which bank was it? Other than mentioning that it wasn’t mine, I’m not going to say. If I tell you, you might feel safer at some other bank and let you guard down. If you are banking in China (or anywhere else), I want you to be on the lookout for this sort of great deal financial trap.
Beware of loan traps, and rat traps full of money. 🙂
If you really can swing some sort of real interest free bank loans, good for you. Just remember to check those terms very carefully or your free money could end up being very expensive.
Yes, I really did put all those rat traps on my fingers and took the pics myself. It hurt, but not as much as getting that so-called interest free bank loan would have hurt my wallet. I also bought a genuine Made-in-the-USA name brand rat trap on my last trip to the US just for that last picture. Taking photos while having rat traps on my fingers was an interesting experience. Don’t try this at home. I’m a professional Lunatic. 
No rats were harmed by any of these traps . . . yet. I’ll be deploying them to my rooftop garden soon to see if I can change that. 
I’m happy to report that although the rat traps did not lend me any money at zero interest, they did eventually kill some rats. 
