Credit card debts will increase when the 20-day interest free period (the grace period where purchasers will not be charged interest) will no longer be automatically enjoyed by all cardholders.

Cardholders have been informed that from July 1, 2008 (for one bank it is May 1, 2008) only those who make full payment of the previous month’s outstanding balance before the due date will get to enjoy the 20-day interest free period.

For those who make only partial or minimum payment on the previous month’s outstanding balance, interest will be charged on the day the new purchases are posted to the card accounts.

For example, Mr Tan’s July 2008 card statement shows an outstanding balance of RM2,000 but he repays only RM1,000. On Aug 15, 2008, he makes a RM800 purchase which is eventually posted to his card account on August18, 2008. Since he does not settle the July statement in full, interest will be charged on the RM800 transaction from the posting date ie, from August 18, 2008.

Thus, if the new ruling on the interest-free period comes into effect, cardholders will lose out.

For the banks it will mean another source of easy income as on average, only one-third of cardholders settle their outstanding amount in full every month.

Bank Negara must not allow the banks to implement the new ruling. It must revert to the status quo and make the 20-day interest free period available to all irrespective of whether there is any outstanding balance the previous statement.

The writer is president, Consumers Association of Penang.