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 Ben Flanagan
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.”