Central Bank Raises Ceiling Of Credit Card Interest Rate To 20%

[george]

Central bank raises ceiling of credit card interest rate to 20 per cent

BANGKOK: -- The Bank of Thailand has decided to raise a ceiling of a credit card interest rate to no more than 20 per cent a year in accordance with changing costs, effective on December 1.

Krirk Vanikkul, BoT assistant governor in charge of supervising the financial institutions policy, said the central bank had announced an increase in the maximum credit card interest rate by 2 per cent to 20 per cent from 18 per cent a year at current.

The decision was made upon a request by the Credit Card Business Club and to ensure the interest rate is adjusted in harmony with changing financial costs.

As of the end of the third quarter, he said, the policy interest rate stayed at 5 per cent, minimum lending rate at 7.75 per cent and three-month fixed deposit rate at 3.5 per cent.

For clients with debts incurred from spending via credit cards or withdrawal of advance cashes before December 1, he said, they would be subject to the interest rate of 18 per cent a year until June 2007 so that they would have around seven months to adjust themselves.

On the club’s proposal to reduce a minimum payment in each installment period to five from seven per cent, he said the central bank did not agreed to endorse it.

“Actually, the club seeks to raise the interest rate ceiling to more than 2 per cent. But the central bank deems it to be no more than 20 per cent to ensure the interest hike meets the changing financial costs and consumers are equally treated.

“Some commercial banks and non-bank institutions may not raise the interest rate to the ceiling to maintain their competitiveness. An interest rate ceiling overseas is set at around 24-36 per cent,” he said.

--TNA 2006-11-29