Pan Asia Bank Credit Card – An effective tool to manage personal finances prudently

Pan Asia Bank Deputy General Manager for Marketing and Personal Banking Nalaka Wijayawardana 

Credit cards have become a tool that those who don’t have fancy having and those who already have want to come out of it but are unable to do so as they are virtually trapped in it. Over time a credit card has become a near indispensable tool in one’s life and it has also made it quite challenging for consumers to resist the temptation of enjoying all those eye popping discounts and offers that carry with it. Needless to say a credit card comes in handy in a financial emergency but indulgence in it can also trap oneself in a vicious debt cycle which is often hard to come out of. In this context, Pan Asia Bank’s Deputy General Manager for Marketing and Personal Banking Nalaka Wijayawardana speaks on how their credit card can become a true personal financial management assistant which in fact can ease off one’s debt burden than bury you in a quicksand of debt. Here are the excerpts of the interview:

Q: Credit card are often viewed as an incentive to live beyond one’s means. This is not a healthy situation because there won’t be an end to one’s debt as he/she will be trapped in a personal debt pile. This is what we often see in every market where a credit card is used irresponsibly by the card holder. In this context, how does Pan Asia Bank inculcate a culture of responsible spending by the card holder?

A: As with any other tool, credit card use also depends on the user. One can use it wisely as a convenient, cost effective and secure payment tool or simply as a tool to go overboard with indulgence and end up under a mountain of debt. So, as a responsible organisation, we make it a point to not to promote our cards to entice oneself to live beyond one’s means. On the contrary, what we have always done was to give the knowledge and tools to customers to manage their personal budgets and cash flows in a responsible manner. 

For example, even if cardholder has to incur a necessary yet unexpected expense, such as a hospital bill, we have provided the option to convert such transaction into an instalment payment plan (IPP) thereby giving them a tool to manage their monthly cash flows. Had such an option not been available, such customers might have had to resort to expensive short term borrowing methods which could unwittingly get them trapped in a vicious debt cycle. 

In other words, we provide the necessary financial tools for the card holder to meet the emergency financial requirement without taking away their peace of mind.

Similarly even through our Balance Transfer (BT) services we have enabled customers to switch their existing Credit Card debt under a much lower interest rate and pay it off in monthly instalments.

Q: Can you elaborate how a Pan Asia Bank cardholder could better manage his/her finances through its Balance Transfer (BT) facility and easy instalment schemes? 

A: Our BT and the IPP facilities help the user in numerous ways. Firstly, cardholders can drastically lower their interest cost by transferring existing credit card balances to Pan Asia Bank Credit Card. For example these days the average credit card interest rate hovers around 28% per annum while our Balance Transfer interest rates are starting from as low as 16% per annum. While the interest rates are higher for longer tenures, even the 48 month BT instalment plans are offered at relatively lower interest rate of 18.5%.

In addition to lowering the interest cost, our BT instalment plans empower cardholders to get rid of their credit card debt within a specific time period as their monthly instalment is designed to pay off the capital as well. 

Our instalment payment plans, for which we charge a handling fee, enable customers to incur substantial expenses with minimal impact to their monthly budgets since they can pay off such transactions over a longer period. Take the case of an unexpected hospitalisation of a loved one. Nowadays, private hospital bills can run into many hundreds of thousands or sometimes millions. With our instalment payment plans one can meet that expense immediately and stretch the repayment period up to four years. Could there be better financial support one could have in an emergency? So, what we offer is a more prudent personal financial management solution to put you in full control of your finances. 

Q: Up to how many months or years can a card holder stretch repayment of transferred credit card outstanding and what interest rate brackets are available?

A: We have introduced a range of options starting from 6 months to 48 months to suit one’s budget and requirements. 

The interest rate starts from as low as 16% and goes only up 18.50% even at the longest tenure. 

If you feel squeezed from heavy monthly credit card settlement which has no end in sight, this is the best solution to get rid of your debt once and for all at the least cost in town. 

Q: You call it a ‘personal financial management tool’ but one can also argue that what you try to do is clandestinely stretch the repayment period up to four years keeping the card holder in debt for longer when he/she actually is required to settle outstanding in earnest. How would that become responsible banking and how could you counter those allegations? 

A: This is exactly why we offer range of tenors or options for a one to choose from depending on the size of debt outstanding and his income. We do not attempt in any way to influence customers to opt for longer tenures because selection of a suitable tenure is a personal choice that depends on each customer’s requirements.

What we have seen is that generally for smaller transaction sizes customers tend to choose 6 month to 12 month repayment plans and if it’s a larger amount they opt to stretch it over a longer tenor such as 24 months, 36 months or 48 months. This flexibility gives one the financial headroom and the time to get back on his/her feet. 

So you can see that our core strategy to grow the business is to focus on providing much needed tools and awareness to cardholders to help them manage their personal finances better.

Q: What we often see is banks inundate the card holder with myriad of discounts, offers and easy payment schemes on various goods. In fact nowadays any spend can be converted in to an instalment plan. How does Pan Asia Bank make a difference in this highly competitive marketplace which creates unfettered consumerism and how can you get them in to responsible spending? 

A: Offering discounts is not a bad thing. In fact it helps people get value for money. We also offer various discount offers to our customers on a continuous basis. However, our main focus remains on educating cardholders through constant communication. If you look at our advertisements and promotional materials, major part of our resources are directed at creating awareness of the solutions and tools we offer to reduce interest cost and get oneself out of credit card debt as opposed to luring him/her to spend more. By doing so, we take pride in ourselves that we as a responsible corporate citizen are discharging a duty to the society by trying to inculcate a culture of financial discipline. 

Q: Another often-heard criticism against most banks is that card issuers place some hidden charges in the monthly statements. How could you counter these allegations and what exactly are the charges one could expect to bear apart from the overdue interest in their statement?

A: While we also have the fees and charges that are generally practiced in the credit card industry, cardholders can avoid almost all of them by adopting a disciplined approach to use of credit cards. For example, if a customer settles the full outstanding on or before the payment due date, he/she will not be charged any interest or late payment fees. Also, we need to understand that credit card issuers need to charge interest in order to compensate for the cost of funds and high risk they take by extending unsecured credit. 

Q: Last year all banks raised their credit card interest rates in line with the rising market lending rates. How did you respond to rising market rates because you were once the lowest interest rate player in the market? 

A: We still have credit card products that offer one of the lowest interest rates in the market. Our Black Card’s interest rate is only 25.75% which is lower than the 28% charged most Credit Card issuers. Our balance transfer interest rates are still ranging from 16% to 18.5%.

Q: An often confusing concept in credit cards is the manner in which interest is calculated. Can you shed some light as to how the interest cycle operate and interest is calculated and how could one avoid overdue interest while still using one’s credit card? 

A: In credit cards, the interest is calculated daily on your debit balance and the monthly statement is sent to the customer every 30 days giving him/her further 21 days to settle the outstanding. If you settle the total outstanding by the due date, the total interest calculated up to that point will be waived off. So, in a way one could make use of interest free credit up to a maximum of 51 days if he is disciplined enough to settle the total outstanding by the due date. 

However if you miss the full settlement, you will be charged with the full interest calculated up to that point. Further, if you fail even to make the minimum payment before the due date, you will be charged with a late payment fee.

Q: At a time when high household debt has become a serious economic issue on any economy and credit card debt is at the forefront of this debt pile, what sort of a role can Pan Asia Bank’s credit cards play to lift these people up from the household debt trap? 

A: We have seen many instances where absence of financial discipline has shattered lives of individuals and their loved ones. As a bank we have a responsibility to the society because banks are financially savvier than an average citizen. So, we strongly believe that we have that obligation to offer the right tools and guide them towards responsible use of credit. 

While we understand that credit card is also a business that should generate profits for the issuer, we also take pride in educating people on how to manage their debt effectively and even save extra money for the future. This may not be the most instantly gratifying path a bank could take in this highly competitive market place but we feel this is the right path for us as a responsible bank. So we remain firmly committed to instil effective personal financial management in the citizenry because after all it is not a subject that is taught in a classroom in this country.