Central bank authorities in the six Gulf Cooperation Council countries have asked the region's commercial banks to reduce annual interest rates on credit cards, which they said have reached unacceptably high levels. Saudi residents pay up to 26 percent in annual interest rates on their credit cards, 16 percent more than the average rate for credit cards issued in North America and Europe. Higher interest rates in the GCC countries have been blamed on low credit ratings and the risk of losing money from bad loans. In the Gulf region, the interest rates charged on credit cards do not reflect the borrowers' credit profiles. While a Saudi citizen living in the US with good credit can get a credit card with an annual interest rate of less than 10 percent, the same person would be charged almost three times that in his home country. There has been no serious move to establish a regional credit bureau in the Kingdom to establish credit ratings for individuals, which would be used to set interest rates based on their creditworthiness. The GCC central banks consider current increases to be unjustified and believe they should be cut to help safeguard the economy in a region where commercial banks have not been affected by the global financial crisis. A recent Burson-Marsteller survey revealed that in Saudi Arabia, 52 percent of its 18- to 24-year-olds are struggling with credit card debt. According to ArabianBusiness.com, the number of credit cards issued in Saudi Arabia rose 104 percent between 2003 and 2008. There were an estimated 3 million credit cards in circulation in Saudi Arabia in 2009, Euromonitor International said in January. As of this month, residents of Saudi Arabia owe SR8.1 billion in credit card loans provided by Saudi banks, a recent Saudi Arabian Monetary Agency report noted. Debts on credit cards issued by Saudi banks have decreased by SR434 million, the report stated. The amount residents of Saudi Arabia owe on personal, mortgage, auto and credit card loans has risen by 3.5 percent in the first quarter of 2010 to reach to SR195.1 billion, up from SR188.5 billion at the end of 2009. Despite that increase, residents of Saudi Arabia are not big fans of the “pay later” cards; in card-based transactions, only 22 percent of consumers choose that option and 78 percent pay at the time of purchase using debit cards or pre-paid credit cards. In the United Arab Emirates, the figures are virtually reversed. In the UAE, credit cards account for 71 percent of card-based purchases there and 29 percent of consumers pay at the time of purchase.
