Credit card users are likely to pay more interest than planned as new guidelines of the Bangladesh Bank go into effect from next year.
As per the guidelines on credit card operations, the interest rates on cards cannot be more than 5 percentage points from the rates on consumer loans given by a bank.
In a circular on Thursday, the central bank changed the guidelines saying the rate cannot be more than 5 percentage points from the highest interest rate on any loans offered by the bank.
The central bank changed the guidelines citing problems of the banks in execution and technology as the reason behind the decision.
"The interest/profit rate on the outstanding amount of Credit Card shall not exceed 5% of the highest interest rate offered in any Credits of the respective Bank," according to the circular.
Currently, the banks offer consumer loans with 12 to 15 percent interest. The credit card interest rate would not exceed 20 percent if the guidelines were kept unchanged.
Interest rates on other types of credit are as high as 20 percent, which means the credit card interest rate will be 25 percent once the new guidelines are implemented next year.
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 in the circular.
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 card due to the absence of a central bank guideline.
Customers prefer credit card to loans because it is easier to draw money or purchase products.
Interest is charged on the unpaid balance after the payment is due.
Many banks are charging 30 to 36 percent interest on credit card now.
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.
