Just take a look at the list of finance charges of top card issuers such as ICICI Bank, SBI, HDFC Bank, Citibank or Standard Chartered Bank. The interest on extended credit and cash advances ranges from over 12 per cent an annum to 49 per cent, depending on the type of card and the issuing bank.
Most banks say there is no direct link between the cost of funds and the rate of interest they charge on the card. Credit cards outstanding are unsecured loans and interest rates are typically higher for such loans. For select customers, these banks do offer lower interest rates of up to 2.49 per cent per month.
As there is no guarantee for payment, the attitude has been to recover as much as possible through high rates to get back the principal amount. The high rates, thus, cushion defaults besides keeping a normal card-holder serious about repayment.
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