10 Things You Need To Know About China Sourcing

Looking to make your first order from a Chinese factory?

Or maybe you’re currently doing it and still crossing your fingers that it is going along well.

We know how nerve racking it is, and hope to help you today.

Here are some 10 tips we have learned over the years from our own experiences and talking to experts in the field.

Make Clear Specifications

If you want to avoid problems with a Chinese factory, then look professional from the beginning. If you come to them looking like an amateur, then they will underestimate you.

What can you do?

Be prepared!

So do as much upfront research and work on your product as possible before approaching a factory. Is it a pre-existing product, an enhancement, or a brand new innovative product? Each one of them requires different level of specifications, but the more homework you do the better. And the ideal is to have a sample of the product in your hands and sending it to the factory, they can look at it and give a full and complete estimate.

But please be careful and make sure this factory is trustworthy before sending over your hard work.

Don’t Focus on Price Alone

If a factory can tell you are looking at price and price alone, then in my experience the good factories will step away and the lower quality, more desperate factories will step forward. I’m sure you want the best quality product with a top supplier, so don’t show them that you are a cheap buyer.

If you want a cheaper price, they can go as low as you want to go.

But don’t expect a nice and shiny new toy…

I can speak from firsthand experience, in my early days in China I kept pushing down the price of a wine corkscrew, and the factory finally “broke” and agreed to my price. Unfortunately for me, the metal was a cheaper one that would rust quicker and I had many returns on my e-commerce website for the next year or so.

Be Patient

If it’s your first time to buy from China, don’t rush it. And this article isn’t going to make you an expert, sorry to say. Give it at least six months I’d say to do your first order.

Think about it.

Between:

* Finding the supplier
* Shipping samples back and forth
* Negotiations
* Making a sales contract
* Sending a deposit payment
* Quality inspection
* Shipment to your facility

Just listing these out I’m thinking this is longer than six months!

Always Get a Sample – Production Sample!

This is where people get impatient and rush. They get one sample that is “kind of close” to what they want. They are based in USA and Europe and tired of spending the 80 US dollars for UPS to ship the samples back and forth each time, so the factory convinces them this is a “basic idea and they will change X, Y, and Z” to make it the way you want.

So then get them to make that sample and send it back!

Yes, it is exhausting but if you cut corners at the beginning, it will cause bigger headaches later on.

Do a Test Order

Buy from a couple factories a lower quantity.

The best time to get to know a factory (or anyone in life or in business) is to do a practice run with them. This is when their true colors come out, as often during the sales process all the promises in the world are made, now is the time to see if they can execute.

It’s Sometimes OK to Use a Trading Company

Many people always talk about going “factory direct” and “cutting out the middleman”, and yes, while you may keep more of the money yourself, there are sometimes extra value add services they can do.

Another reason to use a trading company, they have a network of factories, so you can do a lower quantity across multiple product categories, while a factory has higher minimum order requirements and then you’d need to coordinate with all of the factories yourself.

Use Third Party Services

Similar to potentially using trading company, there are a wide range of third party service providers out there. From quality control, CAD design, sourcing, to logistics, the more of these you use yourself the better control of the entire process you will have. Normally the factory will tell you not to worry about these things – as they have their own partners they work with or they don’t do these services at all! But of course if you pick your own third party vendors you can rest assured they will help you more ensure the factory is doing things in your best interest.

Location Matters

I remember when I was first searching for a factory while home in USA. I had no idea where these factories were located and I thought they were all in the same vicinity. Yup, I didn’t comprehend at the time China is a massive place, and various “clusters” of factories form in certain cities – for example Ningbo is where a lot of gifts and home decor is made, Shantou for toys, Shenzhen for electronics. Learn where these clusters are, and then determine if you can source all your various products and components in that area. Why? This will reduce headaches long term when consolidating shipments and doing just in time (JIT) scrambles for unexpected situations.

It’s Better To Lose / Waste Money At The Beginning Than At The End

Many people look at R&D and they think, yes, this is a worthwhile cost to design a new product. But I think they don’t classify things correctly – I put a ton of various costs as R&D – flying to the factory, sample shipments, buying samples from various potential factories. We can’t cut corners on these upfront investments, and we need to look at them like this – investments – not expenses. As like any investment, the value increases over time, and the knowledge, awareness, and correct suppliers you find at the beginning will save you countless hours and dollars in the long term.

Sadly, when we make the right decisions it isn’t as easy to see as when we make the wrong ones. But if you’re not having headaches in the years ahead, count your blessing and thank yourself for making the right investments and decisions at the early stages

Make a Contract in English and Chinese

This one I wish I knew when I first started buying from Chinese factories. And you can’t just find one on a Google search and tweak it, this is something that will be with you for years to come. Find a qualified lawyer, on my podcast we have Mike Bellamy sharing some of his legal contacts there to use. Or go through recommendations in your own network. While if you’re a smaller buyer, a contract may be hard to enforce, at the minimum it sets the rules of engagement from the beginning and reduces miscommunication later.

Conclusion

So I hope today’s rather brief article helped and got your brain flowing here. It’s a daunting task, sourcing from China, but we need to stay motivated and do it step by step. If you’re currently buying from wholesalers in your home country (like I was) take it one product at a time until you’re confident and comfortable to expand.

This was a guest post I wrote originally on JumpStart Magazine.

This article is originally found here: https://www.globalfromasia.com/sourcinginchina/

Should You Live in Shanghai or Shenzhen?

This article is originally found here: https://www.globalfromasia.com/shanghaiorshenzhen/

So you’re thinking to move to China? Or maybe come to a visit – and 2 cities are sticking out for you – that is Shanghai and Shenzhen.

Which one should you choose?

It’s such a heated debate with expats over beers, I thought today I’d take a crack at writing it up a bit! Let’s just go through each factor and see who is the “winner”! Though the winner will depend on which of these points are more important for you!

Cost of Living

Shenzhen is cheaper than Shanghai. Costs have been skyrocketing across China, with rents doubling or tripling in the years I’ve been here. Yet I think for the same living standard and central location in Shenzhen, you’d pay much more in Shanghai.

Of course this main cost is rent. Let’s just say for a 2 bedroom in Shanghai the cost is about 10,000 CNY and that same place and location in Shenzhen would be 7,000 to 8,000. Of course this is going up and up as the economy gets hotter. Yet as a general rule of thumb from my experience housing is about 30% more in Shanghai.

Borders with China

For those entrepreneurs and other hustlers who come to China on a longer term stay and don’t have the proper work permit / residence visa, I feel your pain! You will need to leave China most likely every 30 days, or if you have a good visa, every 90 days.

This adds up quick in travel costs and travel time.

If you’re based in Shanghai, this will require a flight somewhere. Maybe you can come down to Hong Kong (or some come to Shenzhen for the cheaper flight then take a bus to Hong Kong), while others fly to Korea or Philippines, etc. Its up to you- but you need to take that exit stamp on your passport to not overstay your Chinese visa.

Overstay your China visa? Just a fine per day for each day you’re late, but then the second time it is more serious. Customs may ban you from entering China going forward, which I can say has happened to a few people I know. So don’t risk overstaying your visa, it can cost more than just fines.

So back to the comparison of SZ and SH. Shenzhen has over 7 border entry points to Hong Kong, and going across any of them counts as exiting China for your visa. I won’t get into the political reason of “but isn’t Hong Kong the same as China” argument – it is a different “region” (SAR). So this will count as exiting China.

A ton of expat entrepreneurs I know, myself included for a couple years, got by this way. Just crossing into hong Kong every 30 days. Not a bad thing at all, go shopping, maybe do some banking or other Hong Kong company related business. Maybe a customer too, can stay overnight. You can also file for a new China visa from Hong Kong, and do an express one that you can get back the next day.

Do You Like Snow or Sweating?

Here is a decision you need to make – what weather do you like? There is a ton of hot days in Shenzhen and it never snows, ever. I’m typing this up in December so it is a bit chilly today and I have a sweatshirt on – but you’ll never have snow or ice.

Shanghai doesn’t have a ton of snow, but it will get chilly and there will be snowfall in the wintertime. Not like a risk of an avalanche or blizzard but it will pile up a bit.

Yet here’s a plus for the cold times in Shanghai – apartments have heating systems installed! Shenzhen, none! So you will need a space heater for a couple months in the year here in SZ or extra thick blankets.

Both cities have pretty hot summers, well Shenzhen has EXTREMELY hot summers. And humid, you’ll be sweating and maybe changing your outfit once or twice a day.

So not sure which weather you prefer, some like the different seasons and then others like the warmer climate.

Selling Into China

Shanghai is the place to be if you want to do China market entry. Not exactly sure how that came to be, but it is known as the “cosmopolitan” center of China. Everything comes in there for marketing and design. Its full of creative marketers. They can help you do everything from creating the marketing campaign to customer service to e-commerce building and distribution.

Tons of people ask me if I know people in Shenzhen who can help them sell in China – but most of these full service agencies are up in Shanghai.

Maybe that means there is opportunity for Shenzhen. Shenzhen is more known for hardware and electronics. As well as export e-commerce, which we’ll hit in the next point.

Electronics + Export E-commerce (B2C)

Shenzhen is the king of electronics. Apple via Foxconn has been making iPhones here for years and there has become a complete front to back industry here. From marketplaces to manufacturers to prototyping, Shenzhen has it all. Anything is possible here in Shenzhen for your hardware project.

I meet a lot of Kickstarter campaign entrepreneurs coming here for their manufacturing. They will be coming here often. Some who take it to the next level even open their own office here.

On top of the electronics and hardware, there is the exporting via B2C (business to consumer) e-commerce. Because there is a ton of e-commerce via electronics, the hubs for e-commerce has now spawned into Shenzhen. When people buy iPhone cases and backup batteries, via eBay or wherever, a ton of the time they will ship it direct from Shenzhen. Right out of the electronics market, most likely Hua Qiang Bei.

Learning Chinese

I have to admit, my Chinese language skills aren’t too great. My excuse maybe is because I’ve been down in Shenzhen. Because this is a melting pot, there are tons of Chinese dialects, especially Cantonese. And a lot of immigrants that don’t know how to speak Mandarin well, or correct. I have had friends from north China come down and say how hard it is for them to communicate. Yes! Even though they speak decent mandarin, the taxi drivers or shop owners don’t hear it well and don’t speak it well.

So if you’re looking to study Chinese, sure you can study down here in Shenzhen. You will most likely enroll at Shenzhen University, but I’d recommend going up north. So Shanghai could be a good place, there are tons of chinese learning centers there.

Another side note, for whatever reason, Chinese in Shenzhen have been shy to try to speak Chinese to me. They immediately think I don’t speak Chinese and speak in English. Or they just don’t even make any attempt at all – without me even opening my mouth. When I am in Shanghai or other north china cities, the “general public” speaks Chinese with me straight away.

Why?

I’m thinking because more foreigners speak Chinese there. Maybe here in South China because people do a lot of manufacturing here. Foreigners just come for short trips to visit factories. So over and over again the Chinese public sees the foreigner can’t speak any Chinese. So they become accustomed to just making that assumption.

Pretty frustrating for me who is trying to learn Chinese,so take that into account when deciding which city to live in.

Shanghai is a City Your Friends Back Home Know

Even though Shenzhen is a city with around 17 million people, my friends back home don’t know the city when I tell them. I have to say it’s across the border from Hong Kong. Then they get it.

Shanghai is so famous around the world. And it has that big city image. People know it is a hustle and bustle city with tons of opportunities.

Maybe this is something you could care less about – but Shanghai definitely has more “sexy appeal”. When telling people where you live and work, they seem to show more awe and interest.

Fashion Center is Shanghai

If you’re doing fashion or design, you deal with Shanghai. There are all kinds of events with models and designers on a regular basis there. Not a bad gig right? Shanghai has been building that reputation up for generations. It is well established as a global fashion center.

It is also known as a pretty classy place. Even foreigners there can’t get away with being in tshirt and jeans at bars and clubs. I always notice the difference when traveling. In Shenzhen everyone seems more casual attire and in Shanghai people dress to impress, from morning till night.

Not sure which one is more appealing to you – but image is important in Shanghai when you go to business meetings.

Shanghai Closer to Beijing + Rest of china

Shenzhen is down south. South China is just, how do you say, different from the rest of china. It was Canton, it has Cantonese. There is Hong Kong, and Southeast Asia nearby.

You’re just not in the center of action. Just like an earlier point about selling into China – a lot of that you will do in Shanghai. The distribution is more engrained there.

Plus in Shanghai you can take a fast train up to Beijing no problem, so if you have a meeting there the next day – it’s possible. Whereas in Shenzhen, sure you can get to Hong Kong or Guangzhou quick but it’s more for product based business. The real action for domestic Chinese business is up in Shanghai and Beijing.

My wife moved down to Shenzhen for example, and she still had to always go up to Shanghai and Beijing for business trips. You do things face to face in China, and if you’re selling local -you then need to do a decent amount of travel.

More Expensive, But More Money

While shanghai may be more expensive, you can also earn more money. Salaries are higher, and consulting projects have bigger budgets.

So while the costs are higher, the chances to make more money, local is where it’s at.

Compare that with Shenzhen, and you make most of the money from the export market. So that means a lot of e-commerce, online B2B directories. You won’t get as much sales as an agency or consultant in Shenzhen.

But, Hong Kong is just across the border, and there are a lot of chances to get bigger contracts there.

Less “Guanxi” Requirements in Shenzhen

Was a thing I liked a lot about Shenzhen when I came here. My Chinese friend Huck said it too. He said, there isn’t this “relationship” requirements like in other Chinese cities. It is a melting pot in Shenzhen, and everyone is new – the city is only 30 years old.

So you don’t have these multiple generation family business conglomerates. “Normal class people” need to dig through every time to get some bigger project done. But in Shenzhen, no one knows anyone else. So they have to put down these traditions and get back into finding genuine business relationships based on price and the ability to deliver.

A bit of a stretch here and hard for me to explain, but does that make sense? Sure, it isn’t everywhere in Shanghai or other established cities, but of course there is more “roots” from being there for so long.

Shanghai Nightlife is World Class

Shanghai has the most amazing clubs and bars in the world. It was Lady Gaga who said she loved that city when she visited, and it is a center of party mayhem.

Shenzhen is catching up, with more and more clubs and bars, for the most part in Coco Park area. But Shanghai has them everywhere, every district, you can find amazing clubs and bars.

Not just nightlife, there is more culture too. More history for being around through so many different phases of Chinese history and culture.

Shenzhen being so new doesn’t have this nightlife built up nor the long history and places to visit. They are working hard at it though.

Thoughts? Which City Do you Prefer – Shenzhen or Shanghai?

Have you been to one or the other, or both? What do you think?

I’d love to see your comment below! It can also help give some other readers some perspectives besides mine alone!

Was I too biased on one side or the other? I have no real interest in swaying you on either side, so I didn’t mean to – both have their good and bad, just like anything in life! But if you think I was out of line, please let me know by also commenting below! Cheers!

Using Hong Kong For Your Import/Export Company

Looking for the right place to establish your import and export company? Hong Kong definitely should be one of your top choices! Let’s dig into why, what you’ll need, and how to put in place your business.

What Actions You Do For An Import and Export Company

First, what do you do with a trading company, or an import and export company. Breaking it down today into functions so that you can best find where to establish the corporation.

You will be:

  • Buying (Sourcing) products

    Sourcing is the common word here. You’ll be hunting through B2B directories like Alibaba and Global Sources. You will be going to trade shows and visiting factories. Building up a network of relationships with quality suppliers for you to buy in volume from. This will be for mass production. They will be doing production in at least 1,000 pieces (MOQ, minimum order quantity). You will order and pay an initial deposit so that they can get the materials and start the process. Most likely the countries you will be buying from are Mainland China and Southeast Asia. Maybe some India in there too.

  • Selling These Sourced Products

    Most likely you won’t be the one taking the end shipment. Instead you will immediately sell these products you sourced and then made your commission or your cut. You will be in charge of finding the quality suppliers. The big key is ensuring the manufacturing goes smooth and the products are of acceptable quality. Arrange the shipment to port and you’re paid. Most of the time your buyers are in the West like USA and Europe.

  • Office and sourcing staff

    You will employ, full-time or part time staff to help you manage the business. They could be in your customer’s market such as USA or Europe. They also could be on the ground in China working with the suppliers and logistics. If you are just starting out you may have freelancers helping out here plug holes. Soon you will get your volumes up big enough to have your own in-house team.

  • Travel and conference expenses

    You will be investing a lot of money in traveling and trade shows. You will need to often visit suppliers in China, and buyers in your target market. It is key to keeping your business stable and the main selling point and differentiator is your relationships.

Am I missing something?

Benefits of Hong Kong

A trading company and hong Kong are like 2 peas in a pod. With the rise of China, so has Hong Kong risen. And many companies, both in China and around the world, establish trading companies here to bridge China to the world.

Why?

  • It has English on all corporate and banking documentation. It leverages the British influence it learned as a British settlement.
  •  Foreign currencies – no problem! Having a multi currency bank account is normal. No need to have to force exchanges of all your incoming remittances to USD or Chinese Yuan. You’re free to operate in the currency(ies) that make you comfortable.
  • Chinese suppliers also have hong Kong companies and banks. A big one here is that a lot of times you can save big headaches by just transferring from your HSBC Hong Kong bank to their HSBC HK bank account. Same day, no fee, almost instantaneous. (See related post on Chinese suppliers also like HK companies)
  • Can operate in Chinese Yuan (RMB). Only Mainland china and Hong Kong have permission to hold this restricted currency. Pay your factories direct in the currency the operate in and hedge the foreign currency risk of USD/CNY

There are plenty more, but I’m sure you’re aware. These are the specific benefits for an import and export company.

Main Features You’ll Use

So what do you need to operate an import and export company via Hong Kong? Here we go:

  •  Bank Account

    Yup, you don’t have a business without a bank account. Unfortunately it has been getting harder to get a bank account (read related post). But once you have it, this is where you’ll be doing you’re buying and selling from. Most likely you’ll use HSBC – and most of your factories will have it too.

  •  Paypal

    I don’t recommend using Paypal to buy and sell from factories. Yet you may use it for purchasing small things online and paying freelancers. See our related post on Paypal Hong Kong guide.

  •  Accounting Software

    Well every business needs it. I’m a Quickbooks Pro Advisor in HK, and I do feel it stands out here as it integrated with HSBC online banking – see full post . You should also use this software to create purchase orders for suppliers and invoices for buyers. Keep track of all income and outcome here to manage your P & L (profit and loss).

  •  Credit Card

    You’ll want a business credit card to separate your business purchases from your personal. While it may be hard to get a “true” credit card, you’ll need to put up a security deposit. You’ll use this to book your travel expenses and other online tools and systems.

I think that is it! A trading company is pretty straight forward. You find your suppliers, line up your buyers, make sure the production goes good. Then the magic of getting paid, and keeping the profit and paying out to the supplier. Some Paypal too, but try not to get paid in Paypal as you’ll lose a lot of money on the exchange rate.

Keep Your Books Simple & Up To Date

Keep all your invoices together. Use a system. And then when your audit comes up, things will be straightforward. A B2B (business to business) trading company won’t have a ton of transactions. So the auditor shouldn’t charge too much.

Also, run monthly reports to check your profits. Many times when I did sourcing I wasn’t watching my expenses and only looking at my profit margins. Things creep up and by staying on top of your expenses and other fixed costs, you will know your monthly break even.

Hong Kong is your Top Choice For Trading Businesses

This to me is a no brainer. If you’re buying and selling between China and the world – Hong Kong is your number one choice. Check with your suppliers, and see what banks they are using. Then you have a company with a bank account doing your deals. You may still keep a company open in your home country for local operations there (staff, office, local salary). Keep a trading company over in HK for the B2B deal flow and quicker wire transfer turnaround time.

What do you think ? I’d love to hear your comments and feedback in the comment section below!

Why You Need a Hong Kong Company Credit Card

This article is originally found at here.

Company or thinking about registering one? Do you buy things online too? For your company, not personal. Right.

Then you’ll need to get a business credit card.

First, There Aren’t Debit Cards, Just EPS/ATM Cards

In Hong Kong, they don’t have what we know of as “debit cards”. It would make life a whole lot easier for us though, and I may not even need to make today’s guide post.

A debit card is a card that has the Visa / Mastercard logo on it, and you can buy things online just like a credit card. The difference is it takes that cash out of your bank account that the debit card associated with it.

Nope, not available in Hong Kong, for what reason, I’m not sure.

So you will get a “card” when you get your bank account, but it won’t have a Visa / Mastercard logo on it. Instead it will have no “credit card” logo on the front.

What logos are on it? If you flip it over, you’ll see:

  • EPS
  • Unionpay

Now, EPS is electronic payment system. This you can use to buy things at merchants who accept EPS. This I have only found at shops inside of Hong Kong borders. You then swipe this card and enter your ATM PIN code and they directly debit the cash from your bank account.

UnionPay, this one is a Chinese version of Visa / MasterCard. But in the case of the bank account card you get with the new account, you can’t use this as a “credit card”. Instead, this means you have to find an ATM network that has the UnionPay logo. There is where you can use the ATM to withdraw cash from your bank.

Unionpay network is expanding everywhere, but please keep this in mind and look for ATMs that have it. Also, make sure you turn on the overseas ATM limit, so you can withdraw cash when outside HK. And also make sure you have HKD (Hong Kong dollars) in the checking or savings account. This is because you can’t take cash out of other currencies at the ATM, anywhere in the world. It will always take out from the HKD account (yes, even if you’re in Thailand and have Thai Baht in the account).

OK, well we’re getting in a bit deeper than I planned for the “default” card explanation. Just remember you get this when you open your bank account in Hong Kong, but you can’t use it to buy things online.

Get a Credit Card So You Can Buy Things Online

Yes, so if you open a Hong Kong company and live overseas, you’ll notice later that you can’t buy things online with your bank card. As we just covered, it will not have the Visa / MasterCard logo on it.

Next you will then apply for the credit card, so you can buy things online – in your business name. I’ve met many blog readers and podcast listeners who get the bank account opened, fly back to Thailand, get approved. Which is great. But then they realize a couple weeks later they can’t use the card to do online business.

So if you’re doing business around the world, you’ll need to find a Hong Kong based credit card for our business – as 99.9% likely you’ll need to buy things online.

Related – we have a podcast about getting credit cards for your HK company with Chris Gormley.

The other option. If you have a company overseas for your operations there, you can keep your expenses in that company and on that company credit card. Then keep the Hong Kong company as a trading company, only for bank transfers.

Try To Keep Your Business Expenses Separate From Personal

Another reason you’ll want a Hong Kong credit card is that you have a personal credit card for your own life. Yes, you have a life and aren’t a walking company. That would be weird.

Bookkeepers and accountants hate it when you mix up your personal and business expenses. Governments hate it even more. If you do ever get an inquiry from the Hong Kong IRD (Internal Revenue Department), let’s just hope you don’t. If talking about your business expenses and start whipping out personal credit card statements – watch out. That can be the beginning of a long, long back and forth discussion.

This is another reason why you should get a business credit card. At least, have a separate credit card for your personal expenses and another credit card dedicated only for your business expenses.

The Credit Card Will be in Hong Kong Dollars (HKD)

Whether you like it or not, Hong Kong works in Hong Kong Dollar currency. Sure, the government locks the HKD to USD at about 7.78 HKD/ 1 USD. But when you buy something, you’ll see it on your credit card statement as a HKD amount. Well it will show the USD amount (or whichever foreign currency) on the left column, and on the right it will show the HKD amount.

So yes, you’ll pay in HKD, and then if you have USD in your bank, you’ll need to convert that to HKD to pay the bill. That means you can do 2 foreign exchanges for 1 transaction, the first for buying the goods in USD, and the other for converting to HKD to pay the HKD denominated bill.

While this sounds like a lot of FX exchanges (and spreads to pay banks), this will still help you keep all your income and expenses in 1 company account. Will make accounting and bookkeeping much easier, and keep all business activity in one company.

The other option is, have a credit card in another country and wire money over to pay it. Or have multiple companies in multiple countries and pay the bills from one company to another, etc etc. You get what I mean, that is another overhead and expense.

There Is An Annual Fee, But Can Get It Waived

There is an annual fee for the HSBC card. It’s about 125 USD. Yes, you can get a refund if you call and ask. Just put a reminder to do so!

Points and Benefits

There are points added to the account but nothing like US credit cards. I got like a wallet one time or something. The big benefit I use is the free airport lounge pass at HK airport – take a shower, get buffet, grab a nap. Not sure how often you come through HK international airport?

Main Benefit

What’s the benefit of picking up the card? I’m assuming I’ll get a debit card with the bank, do you use the CC for expenditures to make it easy on accounting? or rack up some nice points for anything?

The benefit of the card is to keep your company expenses in the company accounts. The points aren’t as good as in USA and other countries, but you do get to go to the HK airport lounge free when traveling. There are points but not so great.

Need a Security Deposit

The credit card we recommend is a secured credit card. That means that you need to put a deposit of the matching amount the balance is. The lowest amount if 10,000 HKD (about $1,200 USD). If you want to have a higher balance, you need to have a higher security deposit.

If accepted, they will mail it to your correspondence address 3 weeks after they approve your bank account.

the credit card security deposit: Is that locked into the credit card and I only get it back when / if we close the account? Or does this deposit somehow become ‘available funds’?

The security deposit cannot be for operations. You can get the deposit back by closing the card. After requesting to close the credit card, it will take 60 days to release the security deposit. Which will then post to your HSBC HK HKD account. So keep that bank account open!

The “security deposit” on the credit card itself… I’m not familiar with the mechanics of this. Does this mean it’s a card that you “load up” with cash and have access to the cash you’ve “loaded”? I.E. You put 10k on the card, and can spend that 10k. Or, is the security deposit permanently “held”?

The security deposit will not be able to be used for operations. It is essentially locked in a time security deposit account accruing something like 0.0001% interest. You can get the deposit back by closing the card. After requesting to close the credit card, it will take 60 days to release the security deposit, which will then be posted to your HSBC HK HKD account.

Unsecured Credit Card Is Possible

Don’t want to lock up your cash in a time security deposit? Yea, we understand.

The banks do offer unsecured credit cards – but that application process is a bit more stringent.

First, what’s an unsecured credit card? It is a credit card that most people are familiar with! Its where you apply, and then get a credit line for X amount of money. Say its only $1,000USD. This means that the client can spend a thousand bucks and not pay it back. Sure, it will hurt their credit score and they won’t get approved for another card – but it is possible the bank could not get that money back.

So its unsecured, they don’t have your house, or cash, or other assets to claim (take) if you don’t pay it back.

So in Hong Kong, this is riskier – it’s not USA and they don’t look at your American credit score. They don’t know who you are and if you don’t pay it back, maybe you’ll just never come back to Hong Kong and they’ll have no way to even “mark your account” in a credit system.

This is why it’s more difficult, in general, to get credit in Asia. There aren’t these credit bureaus with established systems like in America.

So you can try to get an unsecured card in Hong Kong – but you should have some kind of track record in Hong Kong. And almost 100% sure you will need a Hong Kong residential address. They just feel safer if you live in the Hong Kong boundaries.

Cancelling Your Secured Credit Card

So, it’s always good to think ahead, to think with the end in mind. So what happens when you want to close the account? I hope you’re not starving and waiting for this security deposit to come back.

It will take 60 days to credit back to your account. Yup – 2 months. So there are ways to speed it up a bit, pay some fines and get it in a month. But still a long time. So you’ll need some patience.

Best to just not expect to be able to use this security deposit for quite some time.

Hope This Helped! Consider Letting Us Help You?

We hope this guide helped you out today. These are questions our banking clients always ask us, so why not share it with everyone.

If you want us to work alongside you through this credit card application process, we have a service just for you! Check it out.

Also, have you applied yet for a credit card? Any issues or questions, we’d love to hear from you in the comments. Let others learn from some of the issues you’ve had!

Tap & Go Prepaid Credit Card in Hong Kong

This is the site:
http://tapngo.com.hk/chi/index.html

In terms of shopping or paying, there is no greater thing than a cashless transaction – it is fast, easy, and accurate in terms of paying the exact amount; it has made online shopping easier, and it is safer. Since Hong Kong banks do not offer debit cards, and you may find credit cards a little too complicated, there’s another option called Tap & Go.

Tap & Go is basically an e-wallet / prepaid mobile MasterCard that can be accessed at your fingertips through your smartphone.

Application for Tap & Go offers 3 plans with different eligibility requirements and features

TYPE A B C
Age All ages 11 years old or above 18 years old or above
Supporting Documentation & Information None valid Hong Kong/Macau identity card or Macau/PRC passport or Exit-entry Permit for Travelling to and from Hong Kong and Macau (a) A copy of your valid Hong Kong/Macau identity card or Macau/PRC passport or Exit-entry Permit for Travelling to and from Hong Kong and Macau; and (b) A copy of your permanent residential address
Account Balance Limit HK$3,000 HK$38,000 (HK$3,000 if aged between 11 and 17) HK$38,000
Daily Aggregated Total Deposit HK$25,000 HK$38,000 (HK$25,000 if aged between 11 and 17) HK$38,000
Annual Aggregated Total Deposit HK$25,000 HK$100,000 (HK$25,000 if aged between 11 and 17) Unlimited
Maximum Account Opening One (1) per Hong Kong/ Macau/ PRC mobile number 1 5

(Source)

How to Use Tap & Go

To use Tap & Go with your mobile phone, your operating system must be iOS 7 / Android 4.2 or higher for you to be able to download the app either from Google Play or App Store.

Once you have downloaded the app, you have to purchase a Tap & Go Card through a designated branch or retailer. The easiest way to acquire a card is at 7-Eleven, which is basically available on almost every corner in Hong Kong.

To activate your account, you will have to link the card with your mobile app. In this step, you will have to submit/upload an identification card using your phone’s camera.

Here are links to more detailed tutorials on how to use Tap & Go:

1. Pay with Tap & Go
2. Top Up / Bank Transfer
3. Withdrawal
4. Paybuddy (Peer-to-Peer transfer)

Tap & Go Advantages

  1. No annual fee
  2. Can be used in 7-Eleven, 1010, csl, etc.
  3. The card is customizeable; they have a limited promo called Selfie-a-Card wherein you can choose any photo to use as the design of your card — it could be a selfie. Cool, right?
  4. Peer-to-peer fund transfer
  5. Discounts at selected stores
  6. It enables you to settle payment anywhere worldwide or online via MasterCard® contactless technology embedded in the SIM or Tap & Go Card

Tap & Go Disadvantages

  1. Fees – $300 cancellation fee if you wish to close your account within 1 year from date of activation, and the refund for the remaining balance takes a maximum of 3 months to arrive. Moreover, if you do not use the card within 6 consecutive months, your account becomes dormant; hence, you will be charged a HK$10 maintenance fee every month.
  2. Unlike a debit card, there is no interest payable on the account
  3. Not many rewards

Tap & Go for Foreigners?

Based on their website, it says that as long as you are aged 11 and above and possess a Hong Kong/Macau identity card, you may be able to open and activate a Tap & Go card. Unfortunately, as per Tap & Go’s terms and conditions, a US citizen may not be qualified to open an account. See below for reference:

1. WHO CAN APPLY FOR TAP & GO

1.1 By activating for Tap & Go, you confirm and declare that you are not a US Person as defined in US Tax legislation or a U.S. taxpayer for any other reason, in particular, (i) you are not a U.S. citizen, U.S. resident or U.S. green card holder; (ii) you do not fulfill the “substantial presence test” in the U.S.; (iii) you are not born in the U.S.; and (iv) you do not have a mailing address or contact details in the U.S

If Tap & Go does not allow Americans to open an account, then that’s another addition to its disadvantages. Overall, it’s far less complicated than applying for a credit card in Hong Kong, so to me, Tap & Go could be a great alternative for cashless and online transactions.