By Jevans Nyabiage
Nairobi,Kenya:Rates: Despite some banks scrapping joining fees, annual maintenance charges and heavy penalties
have resulted in a slow uptake of the cards
Many consumers shy away from credit cards due to punitive penalties and the fear of hidden costs. This has seen the uptake of the cards stagnate for years.
According to estimates, there are only 250,000 credit cards in the market, compared to 8.6 million debit cards.
A survey conducted by Think Business on the charges levied by various banks on issuance and maintenance of credit cards shows that a banks have placed several entry barriers for potential customers.
Cash advance
Some banks charge as much as 10 per cent more for late payments in addition to having high joining fees, annual fees, cash advance fees and monthly interest rates.
A scan through the survey shows institutions such as Barclays Bank of Kenya, Commercial Bank of Africa, Co-operative Bank of Kenya, Fidelity Bank, National Bank of Kenya and Paramount Universal Bank have scrapped joining fees. But there is a catch. CBA, Fidelity and Paramount banks levy a 10 per cent penalty for late payments, while Barclays charges 3.5 per cent for the same.
Further, for one to obtain and maintain a credit card at Standard Chartered Bank, there is a Sh3,000 joining fee, Sh6,000 annual fee and Sh1,500 late payment charge. One will also be charged a five per cent cash advance fee and 3.5 per cent in monthly interest.
It costs Sh5,500 at Imperial Bank to obtain and maintain a credit card, Sh5,000 at I&M Bank and Sh4,500 at Equatorial Commercial Bank.
Other institutions with charges are Prime Bank (Sh4,000), Paramount Bank (Sh3,000), National Bank of Kenya (Sh2,500), Kenya Commercial Bank (Sh2,500) and Barclays Bank (Sh2,000).
The Think Business survey, which was conducted between January and April this year, also analysed personal loan terms and found that Co-operative Bank of Kenya, Consolidated Bank of Kenya, Barclays Bank, Equity Bank and Family Bank charge 24 per cent interest on unsecured loans.
National Industrial Credit Bank and Gulf African Bank charge 22 per cent while KCB charges 21.5 per cent. Jamii Bora Bank and Transnational Bank charge 21 per cent.
UBA Kenya Bank charges 19.5 per cent, Standard Chartered Bank 18.9 per cent, Prime Bank 18 per cent, Bank of Baroda 18 per cent and Habib AG Zurich 17.58 per cent.
Interest rates have remained high, even though the Central Bank has been cutting its benchmark lending rate since July last year, lowering it to 8.5 per cent last Tuesday from a high of 18 per cent in 2011.
Banks, however, have been slow to transfer the reduction to customers, saying they are still holding expensive fixed deposits.
This has since seen the interest margin — the difference between lending and deposit rates — grow to double digits, assuring banks of a windfall.
Banks increased their lending rates to above 24 per cent last year, compared to an average of 14 per cent in 2011, giving them higher returns on new and old loans that were re-priced upwards.
