Over the weekend, Kwizera was mad at his bank, so mad that he did something he hadn’t done in the five years that he has been a customer; writing them an e-mail.

"Dear ‘my bank’, your credit card deductions are done in manner that is exploitative and unfair. For the last months, I have been stuck on a balance of Rwf20,000 to clear the card but you keep reducing the amount due to ensure that I keep paying for the card for a longer period, incurring charges and fines for late payment.

"This is quite dishonest from my bank. Why can’t you just remove the Rwf20,000 at once and relieve me of this burden?”

Kwizera signed out with a threat to leave the bank if his request wasn’t honoured.

Kwizera had money on his account; more than what he owed yet instead of deducting the full debit from his account, he says the bank was only taking small bits of it, hence leaving him ‘stuck with the debt.’

Is the bank at fault?

Kevin Rudahinduka, the head of digital channels at Bank of Kigali, says Kwizera’s issue cannot be entirely blamed on the bank but rather a possibility of "inadequate product education to the customer at the time of acquiring the card.”

"Before getting any bank product, especially cards, it is important to know how they work, and their terms and conditions as signed up in the service agreement,” Rudahinduka says.

In this case, a customer should be clear on what a credit card is, how it works and the difference between it and a debit card.

"A credit card allows the holder to buy goods or services on credit,” Rudahinduka says.

On the other hand, a debit card is used to draw money directly from a customer’s account; most people call it ‘ATM card’ because they often use it to draw cash from the ATM although it can also make direct payments on the point of sale machines.

In simple terms, a debit card is an access key to your own cash on a bank account. It is your money. But when you’re short of cash, a credit card allows you to get an instant loan from your bank.

Like most salary earners, Rodrigue often runs out of money a week after being paid. With several weeks before the next payment, he’s often forced to apply for a salary advance from his bank, a process that often takes a couple of days.

"Again, with a credit card, Rodrigue would have himself a convenient alternative to getting that overdraft,” added Rudahinduka.

Who qualifies for a credit card?

In principle, everyone with a steady income qualifies to get a credit card. According to Rudahinduka, the BK Credit Card usage is high among customers who are regular travellers, corporate entities, businessmen and salaried employees. To get a credit card, one has to apply for it from their respective bank.

"Every credit card has a limit which is based on one’s monthly income. For instance, if your monthly salary is Rwf1,000,000, the credit card limit will be Rwf1 million above which you can’t spend,” explains Rudahinduka.

Simon as an example

On May 1, 2017, Simon got his credit card after two weeks of waiting. He was excited. His limit was Rwf800,000 in line with his net salary. According to the contract, his first credit card bill payment would be 55 days later, June 25, 2017; his contract also said he would be settling 25 per cent of his outstanding credit card bill every month.

BK gives its customers two options, 25 per cent and 100 per cent settlement plans. However, it gives the customers flexibility to always instruct the bank to change to either option depending on a customer’s prevailing financial situation.

By June 25, 2017, Simon had only spent Rwf100,000 of the Rwf800,000 available on his credit card; this means he still had Rwf700,000 unused; this is called ‘credit card balance.’

Since he signed up for 25 per cent settlement, it means that on June 25, 2017, the bank only had to debit an amount equivalent to 25 per cent of Rwf100,000 from Simon’s bank account. This would translate to Rwf25,000.

The bank would then add a ‘finance charge’ of 2.5 per cent of the remaining bill, (Rwf100,000 less Rwf25000 equals to Rwf75,000); 2.5 per cent of Rwf75,000 would translate to Rwf1,875. This means that Simon would pay Rwf25,000 plus Rwf1,875 as credit card bill for the month of June.

"This cycle is repeated when the next payment is due,” explains Rudahinduka.

But had Simon signed up for 100 per cent settlement plan, the bank would have simply debited Rwf100,000 from his account, with no finance charge added; this payment would also restore his credit card balance to the original Rwf800,000.

Since banks are in business to make money, they prefer customers who are on a 25 per cent settlement plan as they earn finance charges.

Back to Kwizera. His outstanding bill of Rwf20,000 and why the bank wasn’t taking all of it clearly means he was on a 25 per cent settlement plan and the bank was simply following the contract it had with him.

"However, upon his request to the bank, we were able to move him from the 25 per cent settlement to 100 per cent, which would allow him clear his bill in one go,” Rudahinduka says.

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