Bangladesh Bank caps credit card interest rates

Amid huge complaints over high interest rates on credit cards, Bangladesh Bank has set the ceiling for the rates.

As per the guidelines on credit card operations issued by the central bank, the interest rates on cards cannot be more than 5 percentage points from the interest rates on consumer loans given by a bank from now. 

There were allegations that the banks were levying high interest rates on credit card due to the absence of a central bank guideline.

The central bank's General Manager at Banking Regulation and Policy Department Abu Farha Mohammad Naser told bdnews24.com that a directive on the guidelines was sent to the scheduled banks on Thursday.

"The guidelines have been issued for the first time to bring (credit card operations) under regulations," he said.

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.

Naser said, "We have put a bar on the interest rates this time."

Referring to the guidelines, he said credit card interest rate cannot exceed 5 percentage points more than the rate charged by a bank for consumer loans.

According to him, 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 new guidelines say the banks will have to cut the amount paid in instalments while calculating interest.

They will also have to provide updated data on credit card to the customers every month.