Beware of extra credit charges, warns consumer group

The Consumer’s Association has warned bank customers to be wary of credit card charges after Bank of Cyprus said it will charge an extra 34.8% in the event credit card debt is not paid off.

The Association warns these charges have spiked against clients who are not consistent with their payment obligations.

It acknowledges that “some consumers for various reasons are unable to meet their financial obligations or think their card limit is a means of borrowing and not as a means of facilitating transactions”.

It said a credit card holder with a EUR 1,000 limit who delays installment for a period of one year will face additional charges of 34.8%.

“This should always be avoided. Specifically, additional charges due to late payments for a EUR 1,000 credit amount will be EUR 348,” said the Association.

As they explained this will be on top of an interest rate of 10.5% (1000 x 10.5%) amounting to EUR 105 and delays of 2% per month (1000 x 2% x 12 months), adding another EUR 243.

These costs are in addition to the usual bank charges, which include other expenses such as management fees of 3%.

The Consumers Association also refers to the bank’s higher fees for services that will apply to Bank of Cyprus customers as of August 1. The increased charges concern unlimited account management fees, third party and provident fund opening fees and an increase in the annual rent for safe deposit boxes. created after the demise and the Co-op – chopped up and sold to Hellenic.

Liquidity that channelled towards the Bank of Cyprus created by the recent bank-run at the Co-op and Hellenic’s existing liquidity helped to lower the deposit rates.

While an increase in deposit rates would be expected to win over ex Co-op customers, liquidity reserves seem to have driven the banks in the opposite direction.

According to the latest data from the Central Bank, banks’ deposit stock - deposits minus loans - amounted to EUR 3.5 bln in June against EUR 2.2 bln in May. In June 2017 there was a negative gap of EUR 5.8 bln.

Bank of Cyprus announced on Friday that it has decided to reduce its deposit rates by 0.20 percentage points. For a 12-month deposit, BoC now offers around 0.6-0.8% from 0.8%-1%. A year ago, banks were offering rates of 2%.

Deposit rates of up to 0.7% are offered by Hellenic Bank for deposits with a duration of one month to 12 months. As of September, ex Co-op clients are to see their deposit interest rates fall to harmonise with those of HB clients.