As prudent businessmen, we manage our cash carefully. This means that even though we use Standard Chartered credit cards to finance our purchase, but we also make sure that we don’t carry forward our credit card balance to the next billing cycle because we know that how exorbitant the credit card interest rate is.
For those who don’t know, the interest rate, measured in terms of Annual Percentage Rate( APR) is typically between 15% to 18%, and on top of that, the credit card companies will also gladly charge you for late payment penalties. By comparison, fix deposit, in the current economy climate, only earns you 2% a year at most. Current account pays almost no interest. So one should just avoid late payment in order to avoid paying credit card interest fees.
But we are human, and human errs. Even though we are paying regularly– typically twice a month– there are some instances whereby we might not pay the full balance. There are instances whereby we leave a small balance forward, not because we can’t afford to, but because we just err in our calculation.
The small balance is typically small (
We called the bank, and were made to understand that it was because of the interest charge due to late payment. But surely it couldn’t be that high, as our balance is small? We enquired. The Standard Chartered representatives then dropped a bombshell:
It turns out that the interest charge is on the total monthly spending, and not on the average daily balance.
This is so mind boggling that it deserves repeating: In defiance of the norm of how credit card interest rate is being calculated around the world, which is calculated on the average daily balance, Standard Chartered charged me on total monthly spending.
We were so shell-shocked at this point that we called the customer care representatives a second time a few days later, and we got back the same answer.
But regardless of whether the interest rate should be charged on total monthly spending or daily balance, I received my second, bigger bomb-shell when I did an interest rate calculation ( you can easily do a back-of-envelope calculation based on the formula): I found out that the bank was charging me 10 times more than what was possible.
The bank was charging me 10 times more than what was possible
Yes, overcharging me 10 times more than what was possible. The bank charged about RM 400 interest on one of my cards, and I was late only 2 days in clearing off the debts. Assuming that the APR is 18%, this would mean that my average daily balance is around RM 400K.
And that was just one card. I had a total of two cards with the bank. I don’t think that we were rich enough to deserve that much credits from Standard Chartered.
So this clearly can only be a con. And it’s performed by a bank on its customer. What good is a bank if it’s no longer trustworthy?!
No wonder a lot of people are forever mired in credit card debts! A lot of people are already struggling and can only afford to pay the minimum payment, and if the bank is compounding their problems by surreptitiously charging them many times over on the interest rates, of course they can’t climb out of the debt cycle!
We pointed out how ridiculous the whole situation is to the customer representatives, and they promised to look into matter and see whether their higher ups can consider reversing the charge, as if they were doing us a favor by not overcharging us. Just a promise, nothing concrete yet.
And even if the charges were really reversed, should the bank be left off the hook? Shouldn’t there be some lawsuits and penalties ( I’m asking you, Bank Negara)? Isn’t this daylight robbery?!
Any suggestion?