Wednesday, February 4, 2009

Interest rate on credit cards to increase to 49%

Banks can now charge an annual interest rate of up to 49% from credit card customers for late payment (revolving credit). Earlier it was capped at 30% by a consumer court order, which the Supreme Court has put on stay on pleas from banks such as HSBC, Standard Chartered, Citibank, American Express etc.

Citibank, in its petition, says,
The facility of credit cards is availed of without any interest for a certain stipulated period and it is only after the expiry of that period that interest is levied on a credit card account for non-payment or late payment of dues. It is also relevant to note that credit card transactions de-facto constitute unsecured credit availed of.
But the question is, how much return (or interest rate charged) would a bank want for unsecured credit through credit cards? Also, the so called ‘stipulated period’ varies with respect to one's date of purchase and payment due date, and can be as less as one day as well.

Banks would have ‘n’ reasons to justify this, but people, bit cautious on your credit card spending from now!

More details here.

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