The level of credit card penetration in Egypt remains low despite its worldwide presence. Public fears of becoming indebted, misinformation on the nature, benefits and characteristics of the credit cards as well as the limited availability of point of sales machines and low acceptability of Egyptian merchants of their cards as a cash substitute are the main hindrances behind the low penetration level. The Daily News Egypt defines what credit cards are, analyses their presence in Egypt and interviews several experts on the matter.
How is a credit card issued?
Credit Card issuance is easy, but it has certain requirements and limitations that should be clear to the customer.
Some banks impose certain limits with regard to the income, with a salary minimum of EGP 1,500 ($209). Some also limit credit card issuance to certain professions, including: journalists, lawyers, police officers and judges.
These professions are allowed credit card usage, though it is called in this instance “secured credit card”. In some cases the collateral must be a bank account, not a salary.
Collateral based on assets or bank account:
Credit Card based on personal Collateral (Income or Bank account):
Types of Credit Card:
Most banks issue three main types of credit card depending on the customer’s income:
Credit Card Limit:
Cards allow users to spend a set amount depending on circumstances. Each purchase adds the amount the account.
Interest free period:
There is a set period of time during which no interest is charged, usually between 20 and 55 days. This is called the interest free period. After that, failure to pay the full balance on time may see interest added to the account.
The credit card provider will send a statement each month, listing the following:
Credit card limitations:
Kinds of credit cards in Egypt
The difference between payment cards in Egypt is not limited to Visa and MasterCard; credit cards are classified by banks according to the service they can offer. However all types of credit cards provide interest free credit for up to around 56 days on purchases and the option to pay a minimum of 5% of the monthly outstanding balance, the distinction comes in the rewards and benefits.
Cards for VIP customers
Disclaimer: Information in this article obtained from websites of HSBC, National Bank of Egypt (NBE), Banque Misr, Arab Bank, Arab African International Bank and Commercial International Bank (CIB)
Insurance on credit cards:
Applying for credit card insurance is an option provided by some banks, who coordinate with well known insurance companies such as ALICO or Allianz.
Termination of the insurance policy in the following cases:
1) Policy owner requests the termination of the Policy.
2) Cancelling the credit card.
3) The insured reaches the age limit.
4) The date the Policy is terminated.
5) The company reserves the right to terminate insurance in case the consumer stops paying the due payments on his credit card to the bank.
Insurance coverage becomes invalid in the following cases:
My Money Skills: How is the interest rate on credit cards calculated?
Credit cards are an excellent tool for managing your money on a daily basis when used consciously. Following is a detailed description from the website My Money Skills regarding annual percentage rates, fees, and payments on the total cost of the amount of credit.
Interest rates on credit cards are determined each year. However, these rates are calculated monthly, and for some cards, the interest is calculated daily and levied on you each month.
For example, if the interest rate on your card is 18% and the total amount of your purchases amount to approximately $ 100 with tax, you must pay an extra $18 in interest if you decide to divide your payments over the entire year and if no new purchases are added to your balance, according to My Money Skills.
If the interest on your card is compounded, meaning that the interest is levied on the monthly interest accrued, the total amount of interest on the annual rate will increase quite a bit.
The bank calculates the monthly interest incurred by dividing the interest rate of 18% over the 12 months of the year. The result is a monthly interest rate of 1.5% on the average daily balance.
The average daily balance is a way to modify the amount that you owe and fluctuates from day to day due to payments and purchases. The calculations used to determine the average daily balance seem complex but are actually quite simple.
The bank adds up the total balance on your card for each day and divides the total by 30, the number of days in a month.
The method for calculating interest on a credit card balance may be done on a daily or monthly basis and includes interest on the unpaid balance.
The interest rate is the percentage of the total amount borrowed over a unit of time and is imposed by the bank or financial institution for using the money, and the interest on the card may be calculated annually, monthly, or daily, according to the website.
The annual fee represents the annual cost of owning a credit card, and some entities that issue credit cards offer cards without an annual fee. The annual fee along with interest and other fees are part of the total cost of credit.
By Doaa Farid , Menna Zaki and Mohamed Adel