Scotiabank Jamaica says it will be increasing interest rates on credit cards by a percentage point, effective February 6, 2023, in response to ongoing rate increases in the market over the past year.
The new rates will be applied on all seven credit cards under the Mastercard local and US currency line, as well as three credit cards under the Scotia Visa line. No new fees will be added to Scotialine nor the Scotialine Gold cards, the bank said.
Currently, Scotiabank has the lowest annual interest rate on the US dollar Scotiabank Mastercard, running between 18 per cent and 21.99 per cent; and 19.56 per cent to 24.35 per cent as the effective annual interest rate.
Those rates will jump to a range of 19 per cent to 22.99 per cent, and 20.75 per cent to 25.57 per cent, respectively, come February.
Rates on the Jamaican dollar Scotia Visa Classic, its most expensive credit card, will change from an effective annual rate of between 63.19 per cent and 66.35 per cent, to between 64.77 per cent and 67.96 per cent, the bank said in an updated document posted on its website.
The increase in credit card rates comes just months after Scotiabank updated the rates it charges for some banking services. The bank, which is Jamaica’s second largest behind National Commercial Bank Jamaica, NCB, had planned to increase fees for the automated teller machines, or ATMs, and at point-of-sale, or POS, devices, on February 1, 2022, but was forced to delay those increases to August after public backlash.
The public was, however, more accepting of rate and fee adjustments in June, when NCB along with JN Bank, Sagicor Bank, First Global Bank and VMBS announced that they would increase interest rates on existing personal and SME loans customers had with the banks, as well as new loans being issued, in accordance with market changes.
The slew of announcements around fees and rate hikes followed on decisions by the central bank to tack on another half-point to the interest it offered to banking or deposit-taking institutions on overnight placements in June.
The Bank of Jamaica, BOJ, has since increased rates to 7.0 per cent, spurring demand from investors for higher returns on investments and sending borrowing costs higher.
Scotiabank is the most recent bank to announce a pending rise in interest rates on credit cards. The cost of bank loans is also expected to trend higher as the later policy rate adjustments are priced into the credit issued to borrowers.
Over the past two weeks, NCB has been sending reminders to customers about the adjustments in their variable loan interest rate set to take effect on February 1. First Global Bank has also been reminding customers of the increase in interest rates by up to two percentage points on all loans; that takes effect in January.
“If you currently pay by salary deduction, to comply with these new terms, you are required to complete the attached pre-authorisation form on or before January 31, 2023. This will ensure that your loan does not fall into arrears,” NCB said an email advisory to a customer with an existing automobile loan.
Earlier this year, the banks came under heavy criticism from both Prime Minister Andrew Holness and Finance Minister Nigel Clarke on their rate hike decisions. The hope, however, is that fees will keep steady over the next few months in keeping with the BOJ’s decision to hold rates steady at 7.0 per cent in its latest decision issued prior to Christmas.
The central bank’s rate increases are meant to cool inflation, which is running well ahead of its 4 to 6 per cent target range.
Explaining its most recent decision, BOJ said that while annual inflation in November had climbed to 10.3 per cent, it was within its forecast range of 9.5 per cent to 10.5 per cent. Additionally, BOJ said core inflation, which excludes food and fuel, had declined from 9.0 per cent in October to 8.8 per cent in November.