The banks are likely to follow the example of credit card companies Israel Credit Cards (ICC-Cal) and Leumi Card in raising their interest rates on credit transactions, banking sources said today.
ICC-Cal today announced an average increase of 0.5% in the interest it charged on credit transactions conducted using the credit cards that it issues directly, instead of through the banks. These transactions are paid for through credit cards, and interest is charged on the payments. Interest is not charged for credit transactions at the major retail chains.
Leumi Card, which also clears Visa cards, announced two weeks ago that it would raise its interest rate, but has not yet disclosed the exact figure.
The interest rate hike by the two credit card companies is a result of the instruction to the credit card companies by Bank of Israel Deputy Supervisor of Banks Mordechai Fein regarding their NIS 0.43 charge for each payment in a credit transaction. Fein demanded that the credit card companies inform their customers about the effective interest rate reflected by the charges. The companies were unable to fulfill this directive, since the calculation could not be made at the time of the purchase. In response, the companies decided to add the charge to their interest rates.
ICC-Cal’s interest rate hike becomes effective at the beginning of June. The hike will bring the company’s annual interest rate to 8.15% on Platinum credit card transactions, to 11.35% on Visa Gold card transactions, and to 12.65% on ordinary Visa card transactions.
The Isracard concern has canceled its charge for credit card transactions, making the issue irrelevant to the company. It, too, however, may raise the interest rate it charges on credit transactions for its customers.
In response, Antitrust Authority director general Dror Strum told “Globes”, “The higher interest rates charged by ICC-Cal and Leumi Card will be examined in the context of the bank charges inquiry by the Antitrust Authority. Strum qualified his statement by saying, “A distinction must be made between conduct in response to the supervisory authorities, and coordinated and initiated behavior, which puts the authorities on the alert.”
Published by Globes [online] - www.globes.co.il - on May 23, 2004