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The great interest rate ripoff

The great interest rate ripoff

A Kipp survey has found that UAE credit card customers pay twice as much interest compared with their UK counterparts. With the row over Mashreqbank’s mortgage rates escalating, we ask whether the big banks are overcharging.

January 22, 2010 12:44 by

Credit card users in the UAE pay twice as much interest compared with their UK counterparts, a Kippreport survey has found.

Global credit card providers charge UAE consumers an average monthly interest rate of 2.382 percent – more than double the rate in the UK.

On top of this, UAE consumers often pay hefty annual fees to use credit cards: HSBC, for example, charges AED600 per annum for its Visa Platium card.

Five major card providers were surveyed: HSBC, Lloyds TSB, Barclaycard, Royal Bank of Scotland and American Express. All were either unable to comment or were not reachable when contacted by Kipp.

The news comes as a row over mortgage interest rates charged by Mashreqbank escalates. According to a report in The National, the bank switched its base for calculating variable mortgage rates from the Emirates interbank offered rate (EIBOR) to an internally set rate.

This means that Mashreqbank customers could typically be charged an extra 2 percentage points on top of their regular mortgage interest rate, which The National report says could cost an additional “tens of thousands of dirhams a year, and even more in some cases.” A group of Mashreqbank customers has written to the UAE Central Bank to complain about the matter, according to the report in The National.

Mashreqbank declined to comment when contacted via its public relations agency.

It is unclear whether other banks will follow Mashreqbank’s move in switching the way they calculate interest.

HSBC Bank Middle East says that it offers both EIBOR-linked and variable rate mortgage products in the UAE. “The former is directly linked with 3 Months EIBOR with a fixed spread for the life of the loan. This is adjusted every quarter,” the bank told Kipp. “The variable rate mortgage product is a bank discretionary rate. As of 1st Jan 2010 our variable rate remained unchanged.”

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  1. Mike English on January 22, 2010 9:18 am

    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

  2. SL on January 22, 2010 6:55 pm

    In every country, the regulator plays the role to protect the interest of the individuals. Contracts with “small print” which permit an institution to ‘never lose’ are unfair and the regulator must not allow these to be used to take consumers for a ride.
    When the terms of pricing are agreed at the initiation of a contract, these should b upheld until maturity or termination by the client wilfully. Institutions are entitled to make a profit for their shareholders but the business risks & gains cannot be one sided.

  3. DC on January 24, 2010 11:39 am

    Islamic lenders 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 – Tamweel have been charging TEN percent on mortgages for over a year now where conventional banks are charging 7-8% and getting criticised (rightfully so) for making unfair profits given how little it is costing them to borrow because of the low EIBOR rate. Its time someone did an expose on the Islamic lenders……..

  4. Huda on January 24, 2010 12:33 pm

    Its much more tham that there were an article in Saneou Al Hadath the Arabic business magazine with proves that Standard Chartered bank Cahrged somebody (interest plus delay plus different names) over 100% of the amount drawn from his card, yes beleive it or not

  5. Craig on January 25, 2010 2:09 pm

    i have bee trying to find out who to complain to for many months about my Tamweel mortgage rate, anybody help with this? 10% is crazy, especially when the UK for example is about 2% at the moment for example.

    It’s disgraceful that the rates have gone up in the last 12 months, especailly when EIBOR has reduced and so short sighted by Tamweel. It’s like they’re trying to make it even harder for people to pay their mortgages and therefore default – what they’ll be left with is a house worth less than the loan in my case…

    I think the Dubai government needs to step in with these banks – they are completely holding back the healing process of Dubai and it was most of their fault that we’re in this situation in the first place – they make it like they are always on the winning side and it’s time they stopped taking advantage of the public to ensure their profits stay in the billions…

  6. Andrew on January 26, 2010 10:49 am

    When the government officials, regulators and business sponsors are one in the same people … what do you expect?

  7. DHP on May 25, 2010 7:17 am

    I am settling my mortgage as we speak and am horrified to find out that my payment amount each month was calculated at 5.99% when the bank prevailing rate at the time was 9.1%! This means I was underpaying a huge amount every month. Apparently the reason this was done was to get round lending criteria internally a smaller amount was easier to push through! Does anyone know anyone at The Central Bank to contact, is there an ombudsman? Wishful thinking?

  8. tariq sheshani on September 5, 2010 8:12 pm

    world would be better place without banks , banks are evil


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