IDFC First Bank Ltd. created a flutter recently as it announced that it would offer credit cards with interest rates as low as 9%. The limited nature of the offer, however, means that the lender is unlikely to shake up the credit card market as it seeks to enter a crowded segment.
While launching its offering, IDFC First said interest rates on credit card debt will range between 9% to 36% on an annual basis, based on an individual’s credit behaviour. However, the overdue interest—charged if a customer fails to pay the minimum amount by the payment due date—will still be as high as 48% per annum.
What caught the market’s attention is the 9% interest rate being offered by the lender, which is much lower than the lowest 24% charged by others.
V. Vaidyanathan, chief executive of IDFC First Bank, told BloombergQuint that the offer would help expand the currently underserved credit card market in the country “as customers with high credit scores will find it more viable to bank with us.”
The 9% rate is reserved only for those customers with high credit scores and an existing relationship with the bank.
“Our existing customers will definitely have a greater advantage, as their chances of getting a lower interest rate would be higher compared to the new-to-bank customers,” said Vaidyanathan, without providing any further details on the grading of interest rate based on credit scores and the percentage of existing customers to whom the 9% interest rate will be offered.