FE Today Logo

Interest rate on credit cards capped at 20pc

New order comes into force from October 01


FE REPORT | September 25, 2020 00:00:00


The central bank on Thursday set a maximum of interest or profit at 20 per cent on credit cards in order to protect the interests of customers.

The rate will be effective from October 01, the Bangladesh Bank said in a notice.

Referring to its policy guidelines on credit cards dated August 3, 2017, the central bank said the interest rate on credit cards must not go 5.0 per cent above the highest interest charged on other loans offered by a bank.

The interest rate will only be levied on any outstanding amount.

According to the central bank's policy, up to 50 per cent of the credit card limit can be withdrawn in cash by a customer. But no unsolicited loans or other facilities can be offered based on the credit card.

However, many of the banks have been issuing loans to their customers against credit cards at a flat rate of interest.

The BB noted the issuance of such loans at high interest rate as irrational and detrimental to the interests of customers and the banking sector.

The Bangladesh Bank said that the interest rate could be imposed on unpaid bills from the next day of the last date for the payment of credit card bills.

Banks were asked not to impose interest from the date of transaction, it added.

The central bank said "late fee" can only be charged in case of delayed payment.

"It has been noticed recently that some banks are defying the policy and providing loans under different names which can be drawn in cash. This increases the credit risk for the bank while charging an unreasonably high interest at a flat rate is also against the interests of the customers."

The central bank also noted that some banks have been charging interest on unpaid credit card bills from the date of transaction and charging late fees at progressive rates against the unpaid bills.

Under the circumstances, Bangladesh Bank has decided to cap the interest rate on credit card bills at 20 per cent while barring banks from levying interest on unpaid credit card bills from the date of a transaction.

Meanwhile, the central bank issued some instructions on the uses of international cards for travels outside Bangladesh, including barring online purchase of air tickets for destinations through international cards before proceeding abroad.

The travellers can only purchase tickets, book hotels, etc after getting visas, if needed, the BB said.

bdmsile@gmail.com


Share if you like