The demand for new credit cards fell sharply in 2020 because of a decline in individual consumption with the lingering covid-19 pandemic.
Bangladesh Bank (BB) latest data showed the growth of new credit card in 11months came down to 95,000 in November2020, down from 201,000 in 2019. It means the demand of new credit cards fallen by53 percent in this period. In November 2020, there were 16, 51,518 credit cards issued by banks. But bankers said the number of active cards is less than 15, 00,000. The number shows that more than 1.5 lakh credit cards users have closed their cards or stopped operation for long period.
BB data also show that per month transaction through credit cards remained stagnant at around Tk 11.50 billion for the last two years.
The transaction volume, however, was Tk 12,692 crore as of November 2020 against Tk 13,432 crore in 2019.
Bankers also said the credit card market is very small in Bangladesh compared to its economy, population and the number of banks. The number is not growing despite its advantage, such as purchases by borrowed money and around 40 days of grace period.
On the other hand, the number of default rate has shot up to over 20 percent in December 2020 which was between 9 to 10 percent on an average in pre-pandemic period in 2019.
A senior official of Dutch-Bangla Bank said because of Bangladesh Bank’s moratorium on loan repayments, many cardholders did not pay installments, which pushed up the default loans on credit cards during the pandemic.“The major segment of credit card users is from services sector, which faced major dent last year due to the pandemic. People lost their jobs or experienced pay cuts that pushed down their affordability,” he said.
Until October last year the average industry interest rate for credit card was ranging between 25 percent and 27 percent. In October last year the central bank fixed the interest of credit cards at 20 percent.
Ahsanullah Chowdhury, head of card operations of Eastern Bank, said, like all other borrowers, card users also got moratorium till December 31, 2020 and that is why banks could not calculate the default rate.
“Definitely, the default rate has increased, but we will get actual scenario by March,” said Chowdhury.