The central bank of Indonesia, Bank Indonesia, announced a cut in the maximum interest rate on credit cards by 25 basis points or 2 percent, starting May 1, 2020.
Bank Indonesia Governor Perry Warjiyo said the cut in credit card interest could help cardholders and small businesses to boost purchasing power amid flu pandemic. The economy was greatly hit by the virus, resulting in outstanding card debt.
“This is aimed at expanding the use of cashless transactions to mitigate the impact of the pandemic. We are working to maintain macroeconomic and financial system stability, as well as [ensure] economic recovery,” said Perry.
In addition to the interest rate cut, the Bank Indonesia is also removing the late payment charge of 3% for cardholders with uncleared balances.
The 3% charge will be waived for an outstanding balance of Rs 150,000 and 1% for the maximum debt of Rp 100,000. This move will help fuel the purchasing activities amid the pandemic.
This recent announcement is already the second time this year the central bank has cut its benchmark interest rate by 50 basis points. The lower interest rate policy will be applied to all card products across Indonesia.
In Bank Indonesia’s date, about 27 million credit card transactions amounted to Rp 25.86 billion in February are halted for payment due to the pandemic. A total of 26.4 million was added to the data for the month of March.
The Indonesian government expects lower household spending as many people lost jobs and major income. The country’s gross domestic product (GDP) will decline as citizens are forced to stay at home.
The Indonesia government projected a worst-case scenario of 3.78 million people falling into poverty and 5.2 million people losing their jobs.
The cut in the credit card interest rate benefits consumers who are facing financial problems caused by the pandemic.