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Bank interest rates ‘too high’

Bank interest rates ‘too high’

Kipp readers believe banks are charging too much interest on credit cards, loans and mortgages, according to a recent poll.

January 31, 2010 11:12 by

Banks are charging too much interest on credit cards, loans and mortgages, according to a survey of Kippreport readers.

Two-thirds of readers believe bank interest rates are “too high”, with only 19 percent saying that rates are “about right”, and 15 percent of respondents saying that charges are “on the low side”.

The news comes on the back of a Kipp survey which found that UAE credit card customers pay twice as much interest compared with their UK counterparts. According to the survey, global credit card providers charge UAE consumers an average monthly interest rate of 2.382 percent – more than double the average rate in the UK.

Some banks plan to increase rates further. HSBC, for example, will increase the rate on its Premier Credit Card from 1.85 percent to 2.25 percent on February 1st, according to information published on its website.

Kipp readers reacted angrily to the findings. One calls for a change in legislation to curb “excessive” charges. “Banks are grossly overcharging for credit cards and have been doing so for years. It is simply another example of the sheer greed shown by the banks and it is about time that legislation was brought in to curb their excesses,” wrote the reader.

One reader doubts whether the situation could ever change, alleging that there are too many conflicts of interest among officials. “When the government officials, regulators and business sponsors are one in the same people… what do you expect?” asked the reader.

Another reader points the finger at Islamic lenders, which they claim are “even worse than the conventional banks as they are able to hide behind the ‘we don’t charge interest’ claim and instead charge extortionate ‘profit’ rates”.

The interest rate issue was highlighted in the recent claim by a group of Mashreqbank mortgage holders, who have complained to the UAE Central Bank over increased interest charges. The action came after Mashreqbank switched its base for calculating variable mortgage rates from the Emirates interbank offered rate (EIBOR) to an internally set rate. Under the new terms, customers’ could typically be paying more than 2 percentage points extra on their mortgage payments, which – according to a report in The National newspaper – says could cost an additional “tens of thousands of dirhams a year, and even more in some cases.”

Do you think UAE banks are overcharging? Have your say by submitting a comment below.

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  1. Rajesh Jagasia on January 31, 2010 1:33 pm

    Dear Sir,
    I agree that the interest charged by banks are RIP OFF. In some cases where there is late payment..charges made to pay are to the extent of 10%. No law is being passed to control the internal functioning of the bank. BANK is a PUBLIC institution and people at large should question and put a stop to this RIP OFF in times of recession and financial crisis

  2. Imar Ranstin on February 1, 2010 8:17 am

    Mashreq Bank are a mess. They are attempting to illegally take extra money from their customers in a clear breach of their agreements. Mashreq bank is supposed to be the “people’s bank” – if I were one of the unfortunate Mashreq customers I would take the first chance I could get to make them pay for what they are trying to do. Banks and creditors here can do absolutely nothing if an expat leaves an unpaid mortgage behind and exits the country. Do it and leave them with a mess to clean up, you owe them nothing if they treat you like this. Just make sure you never come back to the UAE again and you’ll have got one up on this disgusting so-called “bank”.

  3. Tim on February 2, 2010 7:34 am

    Of course, they overcharge. Why? Because they can. They’re offering us the privilege of borrowing their money, after all.

    Plus, at this point in time, let’s face it, the banks now need to claw back as much as they can to pay the bonuses they need to in order to keep thheir staff happy – and to overpay their management. It’s the way of the world.

    And Rajesh’s comments are quite right. Banks are public institutions with a responsiblity to their customers…as well as a business. They’d do well to rermember that and to at least try to strike a balance between making money and treating customers appropriately.

    There is no consumer interest bureau, or similar, in this region, so until that happens and consumer rights are taken notice this will not change.

    One day, I hope, they’ll learn that a decent service for a decent price will win long term happy, spending customers.But we’re years away from that and I doubt I’ll live to see it.

  4. Telvis Henry Albuquerque on February 6, 2012 3:33 pm

    Overcharge, They fleece the customers and force them into different schemes beneficial only to them. FGB does not waive interest even if your making a one time big payment like other banks do. They convert huge outstanding amounts into installment plans at a very high rate and block the card so you cannot do a balance transfer or take a loan from another bank to clear off.


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