UAE Central Bank to cap credit card rate at 18%

posted on 31/01/2012: 130 views

The UAE Central Bank (CB) has completed all the new regulations and legislation related to credit cards, a high-level banking source has revealed.

The source affirmed that the UAE Central Bank would fix the interests on credit cards at less than 18 per cent following the example of the countries of the region and would not increase any fees on such cards after being given to customers.

Banks currently impose interests between 2.25 per cent to 2.99 per cent on credit cards per month which is equal to 27 per cent to 36 per cent annually.

All details as regards the new controls are expected to be announced in February, the source said, adding that these controls would regulate electronic payment methods and would help reduce the bad consumer debts though they would affect the revenues of active banks and hence the volume of their profits.

The source clarified that the interests imposed on credit cards are classified by banks in such a manner that 6 per cent of these interests are classified as ‘hazard' while the rest are classified as revenues of interests and fees.

Bankers demanded that the role of the federal credit information authority be streamlined before these regulations are enacted. Based on the information provided by this federal authority, the banks will reduce the hazard percentage to 1 per cent to 2 per cent and will consequently add 4 per cent to their revenues.

As many as 3.7 million credit cards have been issued by the banks operating in the UAE. Earlier, the UAE Central Bank had requested the banks to provide it with data on the fees and interests they impose on the credit cards issued to customers.

On January 12, the UAE Central Bank inquired about the rates of monthly interest on credit cards as at 01/01/2012 including the interest rates on the unsettled balance of the credit card, the interest rates on cash withdrawal, the fees imposed on exceeding the top limit of the balance of credit cards and the fees imposed on the delay in settling due payments. – The Gulf Today

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