Credit cards

Deirdre · 10-11-2007, 01:33 PM

Can banks decide what interest rates to charge on their credit cards or do they have to be withing a certain percentage ?

My credit card accumulates €150 minimum per month on Interest I have contacted my bank to check that this is correct and they say it is, my husband has the same amount owing on his credit card and his card is with a different bank and his Interest is €50 per month. It is a big difference and I can not understand it.

Are banks allowed to charge this amount ? I can not change my credit card because I am not in full time employment so what else can I do but pay it ?

styxx · 10-11-2007, 05:43 PM

Interest rates charged by different banks and different credit card providers are more or less the same. A credit card service provider with a higher interest rate may not be attractive to consumers. The disparity in the interest rate mentioned could be on the transactions made. Note that a cash advance transaction has a higher interest rate than the normal transaction.

Deirdre · 10-12-2007, 04:38 AM

Thank you for your reply, I do understand that taking cash advances can make the interest a lot higher, we both have done this. I was checking through our statements and my interest percentage is a lot higher than my husbands, my credit card is through a bank where as his is directly through a credit card company.

I would love to avail of these cards that have 0% interest however I can not because I am not in full time employment.

darryl · 04-30-2009, 06:13 AM

Credit card interest is the principal way in which card issuers generate revenue. A card issuer is a bank that gives a consumer (the cardholder) a card or account number that can be used with various payees to make payments and borrow money from the bank simultaneously. The bank pays the payee and then charges the cardholder interest over the time the money remains borrowed. Banks suffer losses when cardholders do not pay back the borrowed money as agreed. As a result, optimal calculation of interest based on any information they have about the cardholder's credit risk is key to a card issuer's profitability. Banks check national, and international if applicable, credit bureau reports that identify the borrowing history of the card holder applicant with other banks, or take detailed interviews and documentation of the applicant's finances, before determining what interest rate to offer.

Balance Transfer is a facility wherein customer can avail of interest holiday for short term on his existing Card outstanding.
Repay his/her existing high rate debt (typically 3.1% pm) at a lesser rate in a phased manner at favorable rates.

In this manner customer can avoid being charged high finance charges (interest) on his existing debt.