The newspaper Người Lao Động recently reported a case where a customer of Eximbank in Quảng Ninh opened a credit card and accumulated a debt of more than 8.5 million VND without repayment. 11 years later, this debt has risen to over 8.8 billion VND.
This information has shocked many people due to the amount of interest that the man in Quảng Ninh has to pay. Most of the opinions questioned how the interest is calculated to reach such a huge number?
According to the investigation by Người Lao Động, a credit card is a financial solution provided by the bank to the customer, where they can spend first and then pay later. The maximum amount of spending is within the credit limit. The cardholder enjoys an average interest-free period of 45-55 days.
There are different types of interest rates when using a credit card, and cardholders need to be aware to avoid incurring overdue debt.
After the interest-free period ends, the cardholder has 2 options for monthly payment (equivalent to each statement period): minimum payment or full payment.
In the case that the cardholder chooses the minimum payment (around 5% of the total amount spent in the statement period), no late payment fee will be charged. However, the remaining debt will still incur an interest rate of up to 20% – 40% per year (depending on the bank) and will be added to the next payment period.
In the case that the cardholder does not pay the minimum debt in one statement period as mentioned by the bank, interest will be charged based on the entire outstanding amount plus the late payment fee.
Specifically, customers will incur a late payment fee of about 5% of the total debt (minimum of 100,000 VND, depending on the bank’s regulations) and a late interest rate of 20 – 40% per year, with the amount depending on the number of overdue days.
In cases of long-term late payment of credit card bills, the accrued amount can be understood as follows: The interest and principal payment for this period will be calculated based on the principal and interest paid in the previous period (not based on the outstanding principal).
Other interest rates when using a credit card
Interest rate for cash withdrawal: When using the cash withdrawal feature at ATMs, customers will be subject to a fee based on the amount withdrawn, ranging from 3% – 5% depending on the bank’s regulations.
Foreign currency conversion interest rate: When customers use the bank’s credit card in countries other than Vietnam, they will be charged a fee for each foreign currency conversion transaction. This fee ranges from 2% – 4% depending on the bank’s regulations.
Installment conversion interest rate: When customers use the bank’s credit card for installment purchases, the card is subject to an installment conversion interest rate. The interest rate fee may vary depending on each bank’s regulations. Therefore, customers need to be aware of the fee schedule before making transactions or contact the issuing bank for detailed advice. Currently, the installment conversion interest rate for credit cards ranges from 0.8% – 1.3% per year.
