NCB uses credit scores to introduce tiered interest rate for credit card customers

Some customers with poor credit ratings will now face higher credit card rates as National Commercial Bank of Jamaica (NCB) will be applying a tiered interest rate structure to credit card account holders of the banking institution effective May 5.

In a notice to account holders, NCB advised that in an effort to promote better credit management, it will be introducing a tiered interest-rate structure under which credit card rates will be determined in accordance with each customer’s internal credit score.

It means that the bank will use the payment history of account holders to determine the interest rate that each customer pays.

Currently, NCB’s Jamaican dollar credit cards - Classic Keycard, Lovebird Keycard, Gold Keycard, Visa Keycard - attract an interest rate of 49 per cent across the board.

With the new structure, customers with a good repayment history could see their interest rate being reduced to 46.99 per cent; while others may see a 2.9 percage point increase in their interest rate charge to 51.9 per cent.

Concurrently, holders of the US dollar credit cards — Mastercard and Travelmaster — will see new interest rates ranging from the current rate of 18 per cent up to 21.9 per cent.

“This change will be applied to credit card accounts effective May 5, 2016,” NCB stated. “Please note that if you pay your balances in full on or before the due date you will not incur interest charges on your purchases.”

NCB continues to seek new measures to increase the likelihood of customer repayments, while minimising its risks, the bank said.

NCB closed its 2015 financial year with a $25 million or 0.2 per cent decline in net profit over the previous financial year at $12.3 billion.

The bank blamed its decrease in profitability on “reduced share of profits of associates and the non-recurrence of one-off gains from negative goodwill on the acquisition of a subsidiary and gains from the disposal of an associated company, which were realised in the previous financial year”.

However, NCB saw marginal increases in credit card receivables of $13.29 billion last year, over the $13.2 billion it collected a year earlier. It represented roughly eight per cent of the company’s loan portfolio, which saw a five per cent increase to $165.4 billion at September 2015.

The increase was primarily due to the Retail & SME portfolio which grew by six per cent to $87.6billion, and Corporate Banking net loans which grew by three per cent to $63.4 billion.

The Retail and SME segment accounted for 53 per cent of the total loan portfolio at September 2015, with over half the portfolio being consumer loans.