Friday July 11, 2008

Cards group: 20-day interest-free grace period stays

Local credit card charges at the maximum 18% are the lowest in the region

KUALA LUMPUR: The 20-day interest-free grace period will remain for credit cardholders who continue to pay the full amount while those who pay at least the minimum 5% on their outstanding amounts for 12 months continuously will enjoy a 15% interest rate per annum on the remaining amount owed.

National Cards Group (NCG) chairman Gan Kheng Chai said the three-tier credit card interest payment structure was announced in June last year while the 12-month period to determine where cardholders were in the structure began on July 1, 2007 with implementation by the banks from July 1 this year.

The NCG represents all banks that issue credit cards in the country.

Gan said the banks on an individual basis would review the 12-month determination period as well as the 20-day grace period regularly.

“There is a possibility the 12-month determination period may be shortened,” he told a media briefing to clarify details on the three-tier credit card structure yesterday.

He said under the structure, users who defaulted would have to bear the costs, with 18% for those who defaulted more than once and 17% once, in a 12-month period.

This was to ensure prudent spending and management of personal finances on the part of the customers, he said, while banks would see lower bad debts and non-performing loans (NPLs), which were the funding cost to the credit card issuing bank.

According to Bank Negara director of payment system policy Cheah Kim Ling, as at May this year, credit card NPLs were 2.2% of total credit card outstanding debt, accounting for 1.3% of NPLs in the banking system.

She said local credit card charges at the maximum 18% were the lowest in the region, where it ranged from 20% to 36%. “The 20-day grace period is also not available elsewhere.”

As at last month, Cheah said there were 2.7 million cardholders and 10.3 million credit cards, including supplementary cards, issued.