BI will cut credit card interest rate

JAKARTA. Credit card transaction will be more convenient, since Bank Indonesia (the Central Bank) plans to cut capping of credit card transaction’s interest rate.

In the future, BI will set the maximum of credit card interest at maximum rate of 2.25% per month or 26.95% per year. To date, the capping of credit card transaction’s interest rate stands at 2.95% per month or 35.4% per year. In other words, BI will decrease the capping of credit card interest rate by 70 basis points (bps) per month.

Deputy Governor of BI said that BI’s Board of Directors has agreed the plan.  It is expected that the policy will increase the amount of non-cash payment.

This is a good news for credit card customers. However, banks are unlikely to welcome the new policy.

Director of Bank Central Asia (BCA) Santoso Liem said that the plan may become a burdensome policy for banking sector. Santoso estimates that the policy may increase credit potential risk amid the slow business development, as well as decrease banks’ income from credit card. “The income may decrease by 30%”, said Santoso.

According to Santoso, the decrease in capping of credit card rate is unlikely to raise the volume of credit card transaction due to the sluggish economy. To date, BCA sets 2.95% of interest rate for credit card under international principal, and 2.75% for credit card under the label of BCA Card.   

Santoso added that the policy will affect the most to the segment of revolver credit card. Recently, 60%-65% of credit card holders are the customers of revolver credit card, while others hold transactor or freeloader credit cards.

Director for Consumer Affairs of CIMB Niaga Lani Darmawan said that the policy may decrease the banks income by 20%, on the grounds that the decrease in credit interest rate is not equal with the cost of funds.

Senior Vice President for Loan Consumer Affairs at Bank Mandiri Herry Gale said that the bank will increase the merchant in order to prevent the decrease in income as the result of the policy.

Meanwhile, Senior Corporate Executive Consumer Banking of Bank OCBC NISP Ka Jit said that the policy will definitely affect to the banks’ income.

(MUHAMMAD FARID/Translator)