Use of credit cards on the rise

By Lalin FERNANDOPULLE

The use of credit cards in Sri Lanka has increased due to rapid lifestyles changes and the soaring cost of living, bank sources said. The demand for credit cards and the number of transactions has increased said a Commercial Bank official.

He said that the demand for cards was mainly from the Western Province and added that there is a sizeable community who use credit cards in Kurunegala, Galle, Kandy and Anuradhapura.

The Central Bank permitted banks to increase interest rates on credit cards to 28 percent in May this year. The Bank placed a ceiling of 24 percent interest on credit cards.Banking experts said that there would be a slight dip in the demand for cards in the future due to the rise in the interest rate.

A spokesman for HSBC said that the number of customers applying for credit cards has increased, mainly due to the unique value proposition the bank offers.

“HSBC credit cards are sought after as the cards are well accepted locally and overseas for its safety and security features.

The every day and lifestyle benefits offered are unparalleled to any other”, he said HSBC has the market leadership with over 45 percent of cards are used in the market and we have seen a healthy growth over last year.

“Interest rates are regulated by the Central Bank and our products are at 28 percent per annum”, he said.

“We have seen a higher literacy on financial management and our customers are keen to keep their credit card payments regular and updated”, he said.

The introduction of CRIB has helped to discipline borrowers and it also helps lenders to make a better assessment of the borrowers repayment capacity before granting any new facilities.

Sri Lanka’s credit card usage and the outstanding credit card balance during 2011 had increased, according to the 2011 Annual Report of the Central Bank.The number of credit cards used rose 10.8 percent to 862,340 last year compared to 778, 549 used in 2010, Central Bank statistics revealed.

The number of cards accepted locally increased by 4.3 percent to 61, 320 last year compared to 58,771 cards used in the previous year.

The number of globally accepted cards shot up by 11.3 percent to 801, 020 compared to 719,778 in 2010, Bank data revealed.The outstanding credit at end-year increased by 23.7 percent to Rs. 38,544m compared to Rs. 31,168 m in 2010.Interest rates charged for cash increased from between 21.96 and 36.08 percent in 2010 to 24 percent last year.

Interest rates for credit rose from 21.96- 26.60 percent in 2010 to 24 percent in 2011. Outstanding credit balances borrowed via locally active credit cards increased to over Rs. 1b by end December 2011, from Rs. 840m in end December 2010.

The outstanding credit card balances purchased via globally active credit cards has risen to Rs.36.53b by end 2011, compared to a balance of Rs. 30.77b one year ago.