UAE’s Central Bank Caps Card Interest Rates

Credit cardholders across the United Arab Emirates received some relief Jan. 31 when the country’s central bank announced a cap on the annual interest rates card issuers in that country can charge.

Under new rules that become enforceable this week, issuers may charge no more than 18% per year or 1.5% per month in interest on unpaid balances, a source at the Central Bank of the UAE tells PaymentsSource.

The new rules also bar the banks in the country from unilaterally hiking the fees after a credit card is issued to a cardholder, he says, noting the central bank also expects the rules to help the banks control their spiraling bad debt.

PaymentsSource had reported on Jan. 20 that the UAE’s central bank was looking to cap annual interest rates and fees (see story). The central bank on Jan. 12 sent a notice to the 23 domestic and 28 foreign banks that issue credit cards in the country asking they submit a report on the interest rates and fees they impose.

UAE banks charge a Middle Eastern high of 27% to 36% in credit card interest rates, which compares with an 18% average rate in such countries as Qatar and Kuwait.

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