Although it is certainly not impossible to receive a credit card as a foreigner living in Japan, chances are that unless you’re working for a major Japanese company that is prepared to provide you with a family card, you’re probably going to be rejected far more often than you might be at home.

“I’ve heard anecdotes of card companies actually just categorically denying credit cards to foreigners,” said Daniel Lintz, director of corporate communications for Visa International, Japan.

One of the factors making it tough for foreigners in Japan is their lack of credit history, as privacy regulations implemented in countries such as the U.S and U.K. make it impossible to obtain a foreign customer’s credit rating in their home country.

Rejection is by no means the rule, however, and many foreign residents in Japan have applied for and been issued credit cards from Japanese card companies.

According to Lintz, one of the best places to start is the bank where you have an operational bank account, preferably one which has been open for at least a year. He also suggested applying for a co-branded card from a company you use regularly.

For example, if you are a frequent flier on JAL, apply for their card, then call and complain if your application is rejected.

Finally, he suggests trying for a debit visa card from the Postal Savings Bank. This card’s limit is determined by your bank account balance.

“Debit cards are just as good as credit cards. You can use them at all the same locations, so if you can get a debit card that’s another way to get a Visa card in Japan,” he says.

Getting a card is only the first step, though. Finding places which accept cards and understanding how the card works is another issue. With no information regarding how to use your card in English, one shouldn’t be fooled into thinking that they work the same way as they do back home.

You might just wake up one morning to an empty bank account and find your cash service suspended, as one unlucky foreign resident did.

“Thinking the card worked on the same principle as my one back home, I went on a spending spree,” she explains.

“I didn’t realize that unless I specified at the time of purchase how many times I wanted to divide the payment, I would have to payback everything the following month.”

This kind of credit card is based on the installment payment system and is termed “bunkatsubari” in Japanese.

Another popular form of payment is the revolving credit system, where you can determine how much you want to pay and then let the rest ride until the next month.

The system used by each card, however, is not determined by the card company issuing the card but by the Ministry of Economy, Trade and Industry, which has the discretion to decide what types of companies can offer what types of payment options.

According to Ryuichi Kobayashi, from Mitsui Sumitomo Cards Services, most Japanese use their card as a charge card and make the full payment the next month.

This is more of a behavioral thing, as until recently banks were not allowed to offer revolving credit and installment payments.

In a country where banks were forbidden to own more than a 5 percent share of credit cards until April 1 of last year, it’s not surprising that the laws and payment systems seem to be so unfathomable.

Until after the war, when the system was dismantled, the Japanese economy was controlled by “zaibutsu,” large conglomerates of industrial groups with the bank as a controller.

According to Lintz, “that’s why postwar legislation forbids banks from doing anything other than banking business and has very strictly segmented the banking business into trust banking, securities and insurances.”

However, many aspects of the credit card industry are now moving forward and the number of places accepting credit cards is increasing, with convenience stores and taxis being new additions.

It’s still better to beware though, as outside Greater Tokyo, Osaka, Fukuoka and Sapporo the number of merchants who accept credit cards can be limited.

“This can be attributed to the cost of the Merchant Service Fee, which is higher in Japan, especially in rural areas at low volume retailers, than in the U.S. and most of Europe,” says Lintz.

In Japan, until about five years ago, the standard rate for a restaurant was 7 percent. This has come down recently but in no way can it compete with the average rates for the U.S. of between 1-2 percent.

On top of this is the issue of payment, which in Japan is similar to the credit card cycle, most merchants typically don’t get paid for 14 days, unlike in the U.S. where payments can be credited to their accounts the next day.

“So the merchant kind of has a double whammy. They have to pay a higher fee and they have to wait longer to get their money,” explained Mr. Lintz.

While the Merchants Fee is high in Japan, customers aren’t so disadvantaged with interest rates equaling those of the U.S. and averaging around 12-15 percent.

Unlike the U.S., however, there is no risk-based pricing, as unless your credit history is clean you’re unlikely to get a card anyway.

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A mixed credit rating

Vanessa Mitchell tried her luck with some of Japan’s biggest credit card providers:

After applying for a credit card with all the major banks in Japan, the most trouble-free application process came for the Tokyo Mitsubishi IC Premium Gold Card, which was issued promptly, despite my only opening a bank account at the time of application. This card offers a low interest rate, the option of biometric recognition and overseas travel insurance. It does, however, require you to have a “hanko” and personally write the application in Japanese.

I was rejected for the Mitsui Sumitomo Visa Card on first application but received it on my second. This card doesn’t require a “hanko” and includes travel insurance.

UFJ Bank rejected me twice, despite that fact that I had held a bank account with them for over five years. Meanwhile, Mizuho’s application form is difficult to understand and was returned to me on two separate counts on points that none of the other card companies had an issue with.

There was some delay before Resona Bank got back to me. When they eventually did, they asked if there was anyone Japanese at my house that they could speak to. I explained that I lived by myself, so they asked me to tell them a time when someone Japanese would be there. As there was no communication or language problem, I asked why a Japanese person needed to be there. They replied that they wanted to ask a Japanese person to verify how long I was planning to stay in Japan.

I suggested that this wasn’t entirely necessary but recommended they call my company if they wanted to speak to someone Japanese about my residency. However, they wouldn’t negotiate on this. I withdrew my application.

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