Friday, February 13, 2009
Banks lower interest rates and penalty for late payment
Friday February 13, 2009
Banks lower interest rates and penalty for late payment
By FLORENCE A. SAMY and NURBAITI HAMDAN
PETALING JAYA: Credit card interest rates and penalty fees are going down.
Cardholders who pay at least the minimum amount promptly over 12 consecutive months (Tier-1) will pay 13.5% in annual interest from March 31, from the present 15%.
For those who pay promptly for at least 10 consecutive months (Tier-II), the interest rate will be 16%, down from 17%.
For those who do not fall into both these categories (Tier-III), the interest rate will be 17.5%, a minimal 0.5% reduction from 18%.
The present minimum late payment fee of RM10, or 1% of the total outstanding balance will also be reduced to RM5, and the RM100 maximum fee cut to RM75.
ABM chairman Datuk Seri Abdul Hamidy Abdul Hafiz, who announced the changes in a statement yesterday, said banks “have listened” to encourage good repayment habits and instil financial discipline.
“Existing local credit card charges are already among the lowest in Asia, which range from 18% to 42% elsewhere in the region. “We hope the latest measures will motivate credit card holders to diligently make at least the monthly minimum payment of 5% of their total outstanding balance promptly,’’ he added.
Sunday Star front-paged consumers rallying for credit card interest rates to be reduced to help them get out of debt.
There are 10.3 million cardholders in the country with total debt standing at RM22.8bil as of December last year.
“The reductions in interest rates should give rise to savings for all credit cardholders to better enable them to make the minimum payment.
“It is also envisaged that more Tier-I cardholders can now afford to plan to settle their outstanding amount in full every month,” Abdul Hamidy added.
He said the different incremental reduction in interest rates of 1.5% between Tier-III and Tier-II and 2.5% between Tier-II and Tier-I would also encourage prudent repayment habits and instil strong personal finance management.
“The revisions not only demonstrate a reasonable, responsive and dynamic Malaysian financial system but are also in line with the underpinning principle of the tiered interest rate scheme introduced last year, that is to encourage good repayment habits and financial discipline,” he added.
Credit risk costs, he added, was expected to climb in a worsening economic environment, but banks would be closely monitoring the situation in the months ahead.
“The public must still exercise great caution and control over personal spending and live within one’s means,” he advised.
Fomca secretary-general Muhammad Sha’ani Abdullah said although the reduced interest rates would help cardholders who had outstanding balances, “the numbers are still toosmall.”
“Muhammad Sha’ani suggested that banks allow cardholders to reschedule loans by converting their credit card balances to term loans with a 10% interest rate.
