BANK Islam Brunei Darussalam (BIBD) is luring payroll accounts with a personal finance solution in which it will buy customer's credit card debts with other banks and help them manage their finances at a lower cost.
The Islamic bank has launched a plan dubbed the Credit Card Care Programme or 3CP that is designed to help Bruneians solve their credit woes.
Javed Ahmad, BIBD acting managing director said on Monday that if a customer has several credit cards, the bank will consolidate the cards under its new programme.
"If a customer has $5,000 (each) on three different cards, we will consolidate that debt," he explained. "So they no longer have three debts but one and over a three-year monthly repayment plan, $15,000 will eventually become $0."
BIBD's Javed Ahmad. Picture: BT/Goh De No
Under the programme, the customers would pay for the consolidated debt like a financing scheme and in three years, they will eventually be debt free, he said.
Javed added that this "one solution" BIBD is providing will have only a 5.75 per cent annual percentage rate (APR) and that customers will be better off by at least 80 per cent.
"This isn't just one or two per cent and is not a lucky draw, everyone will benefit from this purely because the rates are so low. Consolidating all the debts into one single financing, which customers can track, will help them save a lot. In addition to that, their debt is reducing every month. Customers pay 5.75 per cent per annum of the balance that's outstanding, not the principal amount," he said.
One example Javed gave was, if a customer has a debt of $20,000 in total, on that $20,000 over three years, they will save at least $7,500. "This is not some gimmick, it's real transparent banking where you see exactly what the benefits are and everyone is a winner. It's not a lucky draw where one or 10 people are going to get lucky. It's looking at the problem within the community to find a true solution. If they have a debt of $40,000, over three years they can save up to $14,000," he stressed.
Javed also said that with 3CP they will settle the outstanding debt with the other banks and there will be no "cash-in-hand transactions". In the end, customers get a single facility and will also get a credit card from BIBD. This, however, requires that a customer transfer his payroll account to the Islamic bank in compliance with the Ministry of Finance's new regulations.
"If you want more cards of course you have that option, but, customers should not see credit as a form of financing. Credit cards should be used as a form of payment mechanics as large number of credit card debt happens when it is not managed properly and eventually, gets out of control," said Javed. This, he added, is basically looking at the current woes a customer has and it's open to anyone as long as potential customer is working with a stable income going into the bank.
"We are looking at rising up to the challenge for the community and finding a solution for them. One thing we are very clear (about) in this process is we might not make money. That we are aware of. But, to rise up to the occasion and help the community get out of debt and in the process win more customers, is not a bad thing. If we don't make money here, we can still have customers stay with us and develop a long-term relationship with them," he explained.
"Ultimately we want to help protect the customers. Credit card is a business which lacks transparency not only in Brunei but the rest of the world. In Brunei, most cards charge two per cent a month and it comes up to 26.8 per cent per annum. If you have multiple cards, pay them in full, then you will take advantage of free credit and in return, earn points," he said.
Hjh Nurul Akmar Hj Jaafar, BIBD head of Sales and Distribution Channel, said: "What we are doing is, to let the public understanding what the situation is. This is an awareness campaign for us to give to clients so they can understand what it is. We don't want our customers to get swayed by $100,000 or $10,000 here, we just want to make sure they make the right decision and inculcate a savings mentality. Being a syariah-compliant bank, we have a commitment to solve customers' problem."
With 3CP, Nurul claims that BIBD has created a product which erases customers' problems by offering lower costs, no processing fee and free takaful cover or "1 Solution". Javed said BIBD will come up with a more comprehensive credit proposition for customers and added that although that will happen, addressing customers debt is the immediate necessity. "Once this is addressed, maybe in three months to get it up and running, we will continuously make sure our cards proposition is improved."
Nurul said in the past, credit card has never been the bank's primary concern as BIBD's focus is on other things. "As you know, savings is the most important. When a customer asks for a card we make very sure that they need it and can afford it but, with the new directive, we need to be on a level playing field so we need it (credit) to be a necessity," she said. Javed also said, now, no one brings traveller's cheques or cash overseas because it is inconvenient and credit card is the most convenient and modern form of payment.