Credit cards to get costlier than planned

Dhaka,  Thu,  24 August 2017
Published : 04 Aug 2017, 10:38:31

Credit card users to pay more than planned as Bangladesh Bank alters guidelines

Credit card users are likely to pay more interest than planned as new guidelines of the Bangladesh Bank go into effect from next year.

In line with the previous guidelines, the interest rate on credit cards cannot be more than 5 percentage points from the rates on consumer loans given by a bank.

In a new circular on Thursday, the central bank altered the guidelines saying the rate cannot be more than 5 percentage points from the highest interest rate on any loan offered by the bank. 

Here is an illustrative example: if the City Bank sets 19 per cent as the benchmark, it means the new rate on credit cards will be 24 per cent in line with the new guidelines. According to the previous guidelines, it would be 16 per cent as the City Bank’s interest rate on consumer credit is 11 per cent.

Currently, the City Bank charges a 34.5 per cent interest rate on credit cards, highest among all banks, according to data from Bangladesh Bank.

The latest decision has its upside: the new rate will be lower than the existing rate.

As the reason for the changed decision, the central bank cited problems to be faced by the banks in execution and technology, according to

The Bangladesh Bank set the ceiling two months ago, saying those would be effective immediately.

Following pressure from the banks, now the central bank has also extended the time for implementation of the guidelines.

City Bank, BRAC Bank, Eastern Bank and Standard Chartered Bank objected to the rate in a meeting with Bangladesh Bank on June 20.

Now, the central bank appears to have bowed to their demand.

Amid huge numbers of complaints over high interest rates on credit cards, Bangladesh Bank published the guidelines on credit card operations in May, setting the ceiling for the interest rate.

There are allegations that the banks were levying high interest rates on credit cards in the absence of central bank guidelines.

Customers prefer credit cards to loans because it is easier to draw money or purchase products.

Interest is charged on the unpaid balance after the payment is due.

The banks also calculate interest on the entire credit taken through the card, not on the amount left after paying instalments.

The guidelines say the banks will have to take out the amount paid in instalments while calculating interest. 

Editor : A.H.M Moazzem Hossain
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