Susan Gordon, Staff ReporterWHEN CHOOSING a credit card, it is wise to examine how much you will be charged should you ever become late with your payments, exceed your limit or fail to pay all your debt on the due date.
These charges commonly termed as 'penalty fees' which also attract general consumption tax (GCT), can inflate your debt in frightening proportions.
Based on the variation in charges among the institutions, it is still unclear how the commercial banks calculate their charges. The explanation offered by bankers is that it is intended to cover the cost incurred from delinquency in credit payment.
At present, among the top four local commercial banks, the least pain you will feel is at RBTT Bank Jamaica which imposes a flat rate of $172 for late payment. However, you will incur a 46 per cent annual interest charge on your credit limit if you don't pay the full amount you owe on the due date.
LATE FEE CHARGE
Next, FirstCaribbean Inter-national Bank (FCIB) will impose the second lowest rate of $864 late fee charge and an interest rate of 45.25 per cent.
The National Commercial Bank (NCB) charges you a flat rate of $900 if you are late in paying up your debt and 49 per cent (annual) interest on your credit limit while the leading commercial bank, Scotiabank (BNS), imposes $1,025 for late payment and 46 per cent in interest charges.
Simply calculated, with GCT on the service charge, a $30,000 debt could become $31,194, $31,048, $31,006 or $30,200 depending on where you hold your card if you do not pay the debt in full. But this is not all.
PENALTY FEES
"Late payments are computed based on what it means for the bank and the collection unit, " said senior vice president of electronic banking, at BNS Audrey Tugwell. "There's a cost around that, and penalty fees are set as a disincentive to pay late," she added.
The other penalty for credit card is the over the limit fees which generally command a flat rate.
Undoubtedly, credit card is becoming far more popular in Jamaica. The two leading commercial banks - Scotiabank and NCB -- have attracted well over 150,000 users of plastic. The Bank of Jamaica (BOJ) statistics point to total credit card receivables of $9.2 billion for March 2006, a 28 per cent increase over the comparative period last year.
In spite of seemingly increased interest in credit cards, Sunday Business understands that the Consumer Affairs Commission (CAC) has never received complaints from the public about the credit card fees banks charge. However, even if it did, there are no local regulatory body which monitor the charges levied by banks.
OUT OF OUR JURISDICTION
When Sunday Business contacted the BoJ, CAC, the Fair Trading Commission (FTC) and the Financial Services Commission (FSC), they all said the issue was out of their jurisdiction.
In defense bankers argue that credit card comes with significant unsecured risks and such they have to price in potential write-offs of debt.
Ms. Tugwell said banks incur expenses when credit card fees are late. "It depends on what the delinquent situation does to our cost," she explained. She said the other monitoring institution such as the FSC and FTC do not have the details of what it costs organizations to deliver the service.
REAL PRICE
"We don't charge the real price because the flat rate can't make up for it," emphasized Ms. Tugwell. However, unlike the recent position taken by the Office of Fair Trading in the United Kingdom to impose a £12 limit on late payment and other credit card charges because it felt charges had got too excessive for consumers, Ms. Tugwell believes the local prices on credit card penalties are very standard as banks such as Scotia Bank are offering the products and services being offered on the international markets.
