Easy solution for busy life

Nowadays, a mobile phone has become an integral part of life for meeting various needs and I realised it when I lost my mobile phone last August. I lost the phone at a time when buying a new phone was very difficult for me as I did not have enough cash.

Then, my credit card came to me as a saviour because I could solve my problem through it instead of seeking loans from colleagues, friends or family members. I bought a smartphone using my credit card and made payments through three monthly EMI without any interest.

Not only buying a smartphone, nowadays credit cards can also solve any cash crisis for making any kind of payment. From kitchen items to any official needs, you can buy through your credit card. Digital payment is very essential to make a less-cash society like western countries.

Like developed countries, credit cards have become popular in our country nowadays as modern and conscious people use them to make any kind of payment. The country’s banks and financial institutions day by day are also introducing various credit card products to attract clients. The users of credit cards and the transactions are increasing day by day. Now, 36 among 60 Banks in Bangladesh are issuing credit cards to their customers.

The country’s banks issued 17,77,677 credit cards as of July this year, up from 15,97,748 in the same month of last year, according to data from the Bangladesh Bank. It means, the Covid-19 pandemic pushed up the credit card users.

Besides, the volume of credit card transactions increased to Tk 14.86 billion, up from Tk 12.52 billion in the last year. Amid the pandemic, e-commerce transaction through card has increased notably because clients avoided public gathering due to fear of the deadly virus and bought their essential needs through e-commerce using cards. 

Despite various facilities offered by plastic cards, there are common allegations of high interest rates and various hidden charges against credit cards. Banks and financial institutions are imposing the highest 20 per cent interest in credit cards while other loans are available only at 9 per cent interest.

However, If you pay the credit card bill on due time, lenders would not impose any interest on you. They would impose interest on you only if you are not paying the bill on due time.

There are six ways we can use a credit card wisely and lower the interest burden. These are - pay the credit card outstanding amount on the due date, no interest-free period on new purchases, go for balance transfer and convert to EMI, deposit cash withdrawals back at the earliest and avoid using credit cards abroad.

Why is the interest so high for such loan products? 

The operational cost of credit cards goes very high because lenders offer various discounts, buy-one-get-one offers and lounge facilities at airports to attract and retain customers.  

However, to control the interest rate on credit cards, the central bank in September last year instructed banks not to impose more than 5 per cent on top of the highest interest rate of a consumer loan for the amount of the outstanding loan of a credit card.  

Banks would not be permitted to levy a maximum of 14 per cent interest on credit cards as the central bank in 2019 imposed the interest rate ceiling of 9 per cent for all loan products except the credit cards.

The writer is Head of Communication Division at NRBC Bank Ltd