Do not use a credit card's minimum payment, and do not open an installment plan or a consumer loan for spending. If you must borrow, turn the interest into an annual rate before you compare

The minimum payment is a loan that charges interest by the day, about 18% over a year, and using it cancels the interest-free period. An installment that says "0.6% fee per month" is about 13.8% a year, not 7.2%. The principal is being paid down each month, but the fee is still charged on the original amount. To see which loan costs more, look only at the annual rate, not the daily interest or the monthly fee rate.

Cost

No money. You need enough cash on hand to pay the statement in full before the due date. The hard part is holding off from spreading a large purchase into installments. When you must borrow, spend a few minutes asking the annual rate of each loan.

Benefit

Before 2020, credit-card overdraft interest had a ceiling and a floor. The ceiling was a daily rate of five per ten thousand. The floor was 0.7 times the ceiling. Five per ten thousand comes to 18.25% over a year. That is simple interest: counted at 18.25% a year, the interest is not rolled back into the principal. From 2021, the price is set by agreement between the card issuer and the cardholder. After you use the minimum payment, the unpaid principal is charged interest in full every day, and the interest-free period is cancelled at the same time. The central bank already requires card issuers to show the annualized rate (the rate restated over a full year) in an obvious way, and "must not show only the daily rate and the daily repayment amount." From 2021, every lending institution, in advertisements and in contracts, has to write the annualized rate in an obvious way. A daily rate and a monthly rate may be written alongside it, but they must not be more prominent than the annualized rate. The annualized rate has to include the interest and every fee that is directly tied to the loan. Where principal is repaid in installments, how much money you actually had the use of is counted on the principal left after each installment. The People's Bank of China gave a worked example: borrow 100,000 yuan, repay over 12 months, and pay 0.5% of the original principal each month as an installment fee. At the moment of borrowing you also pay a 1,000 yuan service fee. On simple interest, the annualized rate is about 12.80%. On compound interest (the internal-rate-of-return method), it is about 13.58%. Looking only at the fee rate, it looks like 0.5% × 12 + 1% = 7% a year. The real figure is about twice that, because the principal falls each month while the installment fee is still charged on 100,000 yuan. The same method, applied to a credit card in 12 installments at 0.6% fee per installment and no other fee, is nominally 7.2% a year. On compound interest it is about 13.8% a year, about 1.9 times the nominal figure. From 6 to 36 installments, the multiple stays between 1.8 and 2 times. If the person lending you the money is an individual or an ordinary company, it is private lending. If the agreed rate is more than 4 times the one-year LPR at the time the contract is signed, the court does not support the part above that. The one-year LPR on 20 August 2026 (2026-8-20) was 3.0%. Four times that is 12%. Interest taken out of the loan at the start is counted by the court on the money you actually received, and that received sum is the principal. This line does not reach banks, consumer-finance companies, and other licensed financial institutions. It also does not apply to seven types of local financial organizations, including small-loan companies, pawnshops, and financial leasing companies. So you cannot put 12% onto their loans. Look at the annualized rate written in the contract (China, 2020 and 2021).

Notes

18.25% is "five per ten thousand × 365" multiplied straight through, with no interest on interest. If it truly compounds month by month, it is higher still. A few banks give a discount. Use the annualized rate written on your own statement. When you really cannot turn the cash over, borrow first from a regular channel with a lower rate. Do not leave a minimum payment rolling interest. When you compare two loans, ask for the annualized rate on a compound basis. If what they give you is simple interest, the rules say they must label it "simple interest." Simple interest comes out a bit lower than compound interest. 13.8% and the 1.8 to 2 times are figures this book calculated with the People's Bank method. The method is written in the verification record. Do not touch usurious private loans. See also item 15 of section 7 (do not borrow at usurious rates). Money a shop charges on top when you take a loan to buy a car is in item 49 of this section (the financial-service fee at a 4S store).

Sources · 4

1. 中国人民银行 (2020). 关于推进信用卡透支利率市场化改革的通知（银发〔2020〕327 号）. xining.pbc.gov.cn/zhengwugongkai/4081330/4406…
2. 中国人民银行 (2021). 中国人民银行公告〔2021〕第 3 号（第一、三、四条，附件《采用内部收益率法计算贷款年化利率示例》第三例）. gov.cn/zhengce/zhengceku/2021-03/31/content_5…
3. 最高人民法院 (2020 年第二次修正). 关于审理民间借贷案件适用法律若干问题的规定（第一、二十五、二十六条）. gongbao.court.gov.cn/Details/94b6623974526df7…（最高人民法院公报）；最高人民法院 (2020). 关于新民间借贷司法解释适用范围问题的批复（法释〔2020〕27 号）. court.gov.cn/fabu/xiangqing/285171.html
4. 全国银行间同业拆借中心受中国人民银行授权 (2026). 2026 年 8 月 20 日贷款市场报价利率（LPR）公告. chinamoney.com.cn/chinese/rdgz/20260820/33998…