Credit Cards in Japan: Cracking the Code

March 14th, 2005

Credit cards in general are bit different in Japan than in our home countries, and foreigners often find it impossible or very difficult to qualify for a card without a guarantor or substantial time in the country.

Different Types of Cards Available

First, it is important to distinguish between the different types of cards available. First, there are traditional credit cards that include the five international brands: JCB (58 types of card), Visa (89), MasterCard (81), Diner’s Club (11), and American Express (3). You can get a credit card from one of these brands that is further “branded” by another bank, retailer, or entity; including the Post Office, department stores, airlines, etc. These cards are to be distinguished from your ATM card, a debit card (available through the post office and at limited retailers), and a “cashing card” that gets you high-interest loans at “consumer finance” firms.* What are consumer finance firms? They are called shohisha kinyu in Japanese, and I can guarantee you’ve seen the ads for them on TV: Acom, Promise, and Aiful are a few of the top brands. These companies are not banks or credit card companies per se: they operate in short-term, high interest (as high as 26-28%) no-collateral loans. They provide cash to their customers after a short interview at “ATM-like” loan centers, often located at stations. Has anyone else popped their bank card in these machines by mistake, trying to get cash out? I did that a few times too after first arriving. Most foreigners do not use this kind of financing as it requires an interview in Japanese, but I would recommend staying away. These kind of “cashing” loans are a very, very good way to build up high-interest consumer debt quickly, and these companies still have ties to the underworld of loan sharks and thuggish collectors despite their cute commercials!

Note that some consumer finance firms offer joint-branded credit cards too now (with a Visa or JCB brand). I believe their credit cards work similar to regular credit cards (i.e. no high-interest loans), but you would really want to read the fine print on this. Some credit card companies do offer a “cash advance” function as well.

Different Payment Methods

So what else is different about credit cards in Japan? Well, if you’re like me and have tried to use your American card in Japan, you undoubtedly got confused when the shop clerk asks “How many times do want to pay?” (Nankai barai desu ka?). Credit cards in Japan operate in several ways: one-time or full-payment (ikkatsu barai), multiple payment plans (bunkatsu barai), or “revolving credit” (ribo barai). One-time or full-payment is just that: if you charge 50,000 yen worth of things for that month, that much will come out of your account. No interest is charged, usually. Multiple payment plans will divide the total charge by the number of months you want to pay for it. If you charged 50,000 yen worth of goods and asked for a five month-payment plan, you would have 10,000 yen drawn out of your account for five months, plus interest. Revolving credit is the type of credit that US-type visa cards, shopping cards, and other branded cards use: you pay a set minimum monthly payment, and your total balance of credit is charged interest.

Benefits

Many cards in Japan charge an annual membership fee that can range up to 10,000 yen per year. For the membership fee, you obviously get various benefits, including cash-back programs seen at some department store, airline mileage points, discounts at hotels, restaurants, movies, and other features. You can also get travel insurance with your card. Some cards are geared at “members” only: for women only, students, etc. How to choose the card right for you? An interesting web site for this is: www.cardginza.com This web site allows you to search for a credit card you like, based on a variety of factors, like international brand, membership fee, category, and others. Choose “Kodowari kensaku” to search using this option. The web site will also allow you to send directly for information. (Again, this web site is in Japanese only.)

Why Get a Yen-Based Credit Card?

Well, now that we are more familiar with the nature of credit cards in Japan, the time comes to ask the big question: why you would want a yen-based card, and how can you get one? Well, the biggest reason I can think of is currency risk. If you are living in Japan and receive your salary in yen, but use your credit card from your home country, you could be harming yourself as the yen weakens against your home currency. Suppose you rack up $10,000 US in debt on a card, and the yen/dollar exchange rate surges from 110 to 120 yen/dollar as you pay down your debt! It now costs you 100,000 yen more to pay off your total debt (not including interest charges!). Those of you with student loans to pay off will undoubtedly worry about this too. Currency rates are determined by market forces beyond the average person’s control, and fluctuate quite a lot over the medium term (in my experience alone, from 87 yen/$1 in 1995 to 142 yen/$1 in 1998 after the Asian currency crisis). So having a yen credit card can help protect yourself from this. The credit costs of sending money home to pay your bill, regardless of how you do it, should also be considered.

So, How Do I Get a Card?

This is the major stumbling block. Most foreigners trying to apply for a card on their own have been rejected at least once or twice, regardless of their income levels. This has to do with an institutional bias against foreigners (thought to be credit risks as short-term residents), and conditions beyond our control. Major credit cards associated with banks, airline companies, and other “traditional” institutions seem to be the most resistant to giving out cards. Retailers or department stores seem more willing to give a card to a foreigner. Suffice it to say that companies are looking for stability and proof of payment before they approve a membership (as opposed to the US, where even dead people or children under the age of 12 routinely get credit card offers). If you have been in the same job for over a year, if your job is stable (i.e., with a large listed company or the government), or if you have a Japanese spouse, these factors seem to work in your favor for approval. People not in this situation would do best to talk directly with credit counselors (which can be found on the top floor of department stores or large retailers [like the Saison desk at Loft stores, etc.]) and see what might improve their chances of approval. If a Japanese boss, supervisor, or friend who meets certain criteria (usually over a certain age, of a certain income level, and in their jobs for more than a year) agrees to be a guarantor, then the foreigner can usually be approved without problem.

Managing Your Plastic

Here are a few brief tips to help you get a handle on your credit cards, which can be useful but widely abused tools.

If you are just starting out:
Choose one widely accepted, low-limit credit card as your card for use in emergencies, for car rentals, online shopping, and travel and hotel purchases. Religiously pay off the entire balance every month — and don’t get any new cards.

If you have several credit cards already, but have low/no balances:
Either cancel the unused accounts, or more practically, place the unused credit cards in a Ziploc bag in the freezer. I’ve got about four cards residing there now. They’re there in case I need them, but not in my wallet for me to use them. It’s a proven fact that you spend more with a credit card than with cash (usually around 30 percent).

Also, always write down your credit card purchases in your household accounts book, daily planner, or calendar, to both track your spending and avoid any unwelcome “surprises” on your bill.

If you have many credit cards and high balances on them: *Stop incurring new debt! If your bathtub was leaking, the last thing you would want to do would be to add more water. The first step in getting out of debt is changing your habits — so stop using the cards. Now begin aggressively paying off your debt.

© 2005 Wendy J. Imura.

6 Responses to “Credit Cards in Japan: Cracking the Code”

  1. Rosy Says:

    Dear Sir,

    My name is Rosy. I am Myanmar. I am applying Refugee visa. I extend my visa ( 3 months by 3 months ). I have MIZUHO Bank Card. But I don’t have Credit Card. I want to make Pay Pal or Americian Express Or Visa Card ( Credit Cards ) In Japan. I cannot speak Japanese and I don’t know where can I make credit card in Japan. Please help me ?

    I want to know can I make credit card or not.

    Thank you.

  2. Joy Says:

    Hi,

    I’m going to apply for a Visa Card soon but before doing so I’ve been doing a little research on CCs here in Japan.

    With regards to the payment options available are these set by the CC Company or by the Retailers. Take for example, if I pay for flight tickets and accommodation using my CC,and I have opted to pay using the revolving credit payment options with 50K as my monthly minimum payment. Does this mean, that if I rack up a bill of 150K:
    1) I will pay my CC company the monthly minimum payment, with interest, until I pay off the entire amount or
    2) I pay the travel agency the monthly minimum payment, with interest, and then also wait for whatever charges the CC company will levy on me?

    Thanks

  3. Christine Says:

    Thank you. This was very helpful!

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  5. Jayaprakash Says:

    I have been a cash man all years till now. I decided to have a credit card, but don’t know where to turn. This is how I reached here. Appreciate and thank you for the well written professional article on Credit cards. Good job!

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