High interest rate on credit cards not reasonable

THE New Nation reported that Bangladesh Bank bowed to the pressure from commercial banks to raise interest rates on credit cards. From now on, the commercial banks can charge its borrowers around 25 percent interest against their loans through credit cards instead of existing 20 percent interest on such loans. Using credit cards has become fashionable and hassle free to professionals and businesses for its ready-to-cash and other facilities, but imposition of high taxes on borrowing against credit cards will discourage many from using the facility. The bankers have argued in a meeting with the Central Bank that as operation cost is high for credit facilities they have to raise the interest rate for the borrowing, but without protecting consumers’ interest increase of interest for loans is the breaching of an earlier commitment made with the credit card holders — the ordinary people.

Earlier, banks could charge maximum 20 percent interest on the cardholders in line with the guidelines issued on May 11, but they have to bear operating cost of at least eight percent against the loans disbursed through the credit cards. The banks have to run call centers and offer different types of incentives to the clients from time to time which push their operating costs. It should come into account while taking any new decision. The banks will be able to increase the interest rate on credit card up to five percentage points but card users expressed their dismay over the new decision as the charges go up by than 40 percent due to banks charging service charges and other incidentals.

Commercial banks are now charging around 9 percent against other commercial loans. If they can make profit with this interest rate then why will they incur losses if charge around 20 percent against credit cards? It is really surprising that the Central Bank finally has given in to the bank’s demand. Many banks are charging 30 percent to 36 percent rate of interest on credit cards while they are imposing 9 percent to 10 percent rate of interest on their other consumer loan products. In the circular the Central Bank instructed the commercial banks to make the credit card transaction secured by providing biometric safety and pin code.

Using credit card of most private banks has been popular, but imposition of 25 percent interest would discomfort the consumers. So, the banks should lower the interest rate for its customers.