Banks peddle Eid smart cards

Is the unavailability of ready cash dampening the Eid celebrations of the inhabitants of Dhaka? Are liquidity issues on the back of everyone's minds? Or, are people swiping the power of plastic in their shopping frenzies, bringing back the glitz and glamour of 'yester-Eid' to today?

With hardly any festival loan products on offer, banks are now presenting tempting credit card packages, designed to meet the needs of varied clients and to help bridge the gap between consumers' purchasing power and the additional costs during this time of the year.

Banks turn it up a notch as they are offering annual charge waivers, quality services and flexibility in the utilisation of credit cards.

Will such moves help bring back the cheer in Eid, the largest festival for Muslims in Bangladesh? The issues lie on how well consumers adopt buying on credit, a concept that is a deviation from traditional mindsets.

Standard Chartered Bank (SCB), a foreign bank operating in Bangladesh, has customised a special package for Eid shoppers using the bank's credit cards. They are offering a 50 percent waiver on the annual fees on credit cards that are issued in the month of Ramadan. There will also be cash back facilities for the big spenders.

“Our credit card sales have increased by about 50 percent after the launch of the new offer,” Gitanka Datta, business head of the Credit Card Division of SCB, said.

SCB has around 200,000 credit cards currently in the market and the number continues to grow as 3000 more cards, on average, are added to the list every month, according to the official.

“Upon introduction of the Ramadan offer, we have sold an additional 1,500 cards this month,” the SCB official said.

The bank's maximum credit ceiling stands at Tk three lakh for golden cardholders and up to Tk 90,000 for silver cardholders.

On the other hand, Eastern Bank Limited (EBL), a local private commercial bank, offers a 25 percent discount on the annual issuance fees, for those who are acquiring and using the bank's credit card this month.

The credit card is a technology driven product, more popularly known as plastic money. Private and foreign banks are leading the way in this category.

Generally, small and medium businessmen, and government and private sector employees are the main users of the credit cards in Bangladesh. It is now quite fashionable to use the credit card, especially as banks and other financial institutions, allure clients with special benefits to net new customers.

According to Bangladesh Bank (BB) data, payments and transactions made through credit cards by private banks rose to Tk 4.31 billion on December 31, 2007 from Tk 1.92 billion in June of the same year. During the same period, payments and transactions through debit cards and automated teller machines (ATMs) reached Tk 24.95 billion and Tk 24.80 billion, respectively from Tk 11.74 billion and 11.62 billion.

The growth rate for credit cards was a staggering 124 percent, 112 percent for debit cards and 95 percent for ATMs, between June and December 2007, BB statistics show.

The credit card was first introduced in Bangladesh in the year 1997-98 by SCB. Currently, there are about four lakh credit card users, of which SCB has the highest numbers. Contenders include BRAC Bank with 55,000 cardholders, United Commercial Bank with 17,000 cardholders, National Bank Limited with 14,000 cardholders and EBL with 10,000 cardholders.

Other notable banks that provide credit card services are Prime Bank, Dhaka Bank, Premier Bank, The City Bank, etc.

“Credit card utilisation rate goes up significantly in this month (Ramadan),” said Abedur Rahman Sikder, head of marketing and corporate affairs of BRAC Bank.

Sikder said the use of personal loan products, in addition to credit cards, also go up prior to Eid.

“There will be no annual charge if a customer uses his/her card over 18 times a year,” said Nazim Ahmed Chowdhury, head of marketing and corporate affairs of EBL.

SCB has also offered the same facility to allure the customers focusing on Eid.

However, consumers blame that the banks' interest rates are too high for the credit cards and other personal loan products.

“I have to pay about 30 percent interest rate when I use SCB's credit card. There is no way out for me as I have to bank on my credit card to meet the additional expenses during Eid,”said Aminur Rahman, an employee of a private firm in Motijheel.

Rahman charged Tk 50,000 using his SCB credit card and he has to repay the amount through equated monthly instalments.

SCB charges 2.5 percent monthly interest rate for its credit card, Gitanka Datta said.

Customers also blame the banks for not protecting their interests. They said many shop owners charge extra if they use their credit cards, which is unlawful. Jewellery and electronics shops are mainly to blame, as they publicly commit such crimes. The practice seems to have gone up during the buying spree on Eid.