I think that the interest rates and fees being charged on credit cards by banks in Barbados are excessive and not at all reasonable. In fact, the present rates are at or around 21.5 per cent on purchases and 24 per cent on cash advances.
Based on some research I did within the last year, banks here charge more than twice the interest charged by their headquarters in international markets. The rates we pay here are similar to those the banks in international markets charge defaulting customers and those with a poor credit rating.
Banks in Barbados seem reluctant to reduce interest rates even when customers manage their accounts well, preferring instead to increase the credit limit as a reward.
They charge the higher interest rate (24 per cent, as for cash advances) even when cheques issued against your credit card are used for purchases.
I don’t have all the answers. I would like Barbadians to speak out more, not only on credit card issues but on other matters.
Generally, Barbadians seem reluctant to speak publicly about national issues. I get the impression that some people feel fearful about real or imagined repercussions against them or family, this society being small.
I believe that if Barbadians would speak out more and try to safeguard our rights, we would get better results – not only with banks, but in other areas. Some people are so grateful for the loan or credit card that they overlook the burden of the repayment.
How many people approach banks from the point of view that the banks also need our business for their own survival? How well would the banks survive without our loans, mortgages and debentures? Â
In addition, the average customer might not be aware of the structure of the cost components associated with the credit card, the actual cost of transactions, or the method that banks use to assign the repayments.
The present structure could keep you spinning in mud, in a debt trap, for a very long time, especially if you only make the minimum monthly payment.
I think that banks can genuinely do a lot better with the interest rates and other charges, especially in these difficult economic times.
It is within their control to create a win-win situation whereby they increase their earnings by attracting a higher volume of transactions while reducing the debt burden on customers.
The present excessive interest rates and charges are clearly what the banks have calculated that the local market will carry, given the limited competition and options for funding, compared to what is available to customers in the international markets.
I do not accept the argument that interest rates on credit cards or other loan facilities are higher in Barbados because there is a more narrow spread of the risk. The spread of the risk is in proportion to the number of transactions and the overall value of the outlay of capital by the banks.
Further, compared to their respective headquarters, banks here are far more conservative in approving loan facilities, including credit cards, to justify the claim of greater risk.
I would be happy if the Central Bank of Barbados, Fair Trading Commission or Government would intervene and set some further guidelines for banks, along the lines taken by a former Governor of the Central Bank. I remember that as a consequence of one of his guidelines, I was able to have at least one account on which I could get interest on a daily basis.
• Grace McCaskie is an attorney-at-law and MBA graduate.
