The increase in EMIs on housing loans have given pain to homeowners especially the ones who had borrowed when the interest rate were generous. On top of that most of the cardholders are not paying the credit card bills in full which has also become costlier though with far less visibility.
In the past few months the credit card companies have hiked interest rates towards which cardholder are not paying attention. Over the past 2-3 months most of the major card issuers including ICICI Bank, SBI Credit Card and other leading players have hiked interest rates by 3-5%.
The procedure of charging the interest on credit cards is the interest is charged when a customer carry forward credit beyond the payment cycle. The monthly rate can range between 1% and 3.4%, translating to 12-42% on an annual basis. However there has been hike in overall interest rates therefore, card companies have also affected a hike.
ICICI Bank, is the largest issuer of credit cards with over 7.5 million live cards, has increased interest rates from 2.9% to 3.15%. Thus there is an annual increase of almost 3%.
Sachin Khandelwal, head of ICICI Bank’s cards portfolio said, “We have increased the interest rates on credit cards last month, which will be effective for the billing from August. Impact on the consumers will be known only in September. The hike is a consequence of the general tightening of interest rates and most big players have already done it. ICICI was in fact the last to do it.”
On the other hand SBI Cards, joint venture between SBI and GE Money is the second-largest issuer of cards in India, has also increased rates. Though, the company has defined the rates on parameters like spending and payment behavior. The charges have gone up from 2.99% to 3.1%.
“SBI Cards charges interest rates ranging from 0.99-3.1% depending on the spending pattern and payment behavior of the consumer,” SBI Cards & Payment Services CEO Roopam Ashthana said.
Experts expressing their views said other major credit card issuers have also hiked rates in line with leading players. But some companies do not mention the interest rate charged on the monthly statements sent out to customers, therefore these rate hikes often go unnoticed by consumers. However, some companies do send out reports regarding this.
“All applicants are advised of the maximum interest rate chargeable at the time of application, at the time of card issuance and thereafter every month in their credit card statement,” Mr Ashthana said.
He added provision for a change in interest rates is mentioned in the terms and conditions given to a consumer at the time of issue of card.