Do shoppers know the interests charged on their credit cards?

63% unaware about the interest rate charged according to Sparkwinn Survey 

People are increasingly using credit cards to regularly shop at supermarkets, restaurants, clothing outlets, etc. A definite increase in card spending is noted within high-end pockets of Colombo and suburban areas – as consumers are actively on the lookout for alternative payment methods. 

Almost 41% of the card users surveyed by Sparkwinn Research stated credit cards, as the most ideal payment choice. With the increase in credit spend, managing finance charges is more vital. However, it is noted that people are spending freely but not wisely. 

Lack of awareness on interests charged

Almost 6 out of 10 card users say they are not aware of the interests charged on their outstanding balance. 

More men than women admit to being poorly informed on interest rates. Even among those who claim to be aware about the interest rate, nearly one-third recalls that the interest rate is between 15% and 18%. 

When probed more regarding their lack of ability to recall the interest rate charged, many remarked that the interest rates charged are not communicated in a transparent manner.

Interest rate cap effective from 1 November

Card interest rates typically range from 28-30%, but commercial banks had increased the annual interest rate on credit cards up to 32% recently. However, the Central Bank had intervened and imposed an interest rate cap. It should be noted that it will be in effect from 1 November onwards, where the maximum interest rate applicable on credit card advances will be charged 28% per annum.

Card users find it difficult to settle dues on time

Only 20% of respondents settled their dues on time. Nearly one-third of the card users find it difficult to settle the balance on time and are uncertain about their ability to meet financial commitments. Accuracy of billing, SMS alerts, and the security/safety of cards are at satisfying levels according to the survey. Lack of transparency on the interest rates charged and late payment fee deducted is a cause for concern.

Sparkwinn Research is an independent research agency based in Colombo and studies consumer and social issues to provide data-centric insights. Sparkwinn recently conducted a category understanding study among credit card users. The study explores customer awareness, engagement, and experience with regard to their credit card usage. 200 face to face interviews were conducted among credit card users in the Colombo district. The full report can be downloaded at www.sparkwinn.com.