What is the reason behind credit card restrictions?

What is the reason behind credit card restrictions?

03 February 2016, 17:48 902
I have "Bolkart”, the credit card issued by "Bank of Baku”. According to contract signed with the bank, my card’s balance was agreed to be AZN 2000. But a month after the second devaluation of Manat, I was told that limit of my credit card was reduced to AZN 967, Baku resident Sabir Aliyev informed us. He stressed that he has fulfilled all his obligations on time, without delay. So he assumes the reduction of his credit card’s limit does not have anything to do with him. He wants to know the reason behind the reduction. 

In fact, there are many people that encountered this problem. In the past, it was possible to use credit cards for making cash payments. However, the rate of cash payments fell significantly. At the same time, the daily limit for cashless payments have also been reduced . According to statistics from 2015, Azerbaijani citizens have had a million and 89 thousand credit cards. This means that, many people will face with similar problem as a result of the current restrictions.

In comparison with previous years, interest rates for credit cards have increased significantly and restriction for credit cards will lead to decline in the field. The amount of money in credit cards were calculated with manat not dollar. So why are banks taking this step? Which problems are they trying to avoid by implementing these restrictions ?

The step taken by banks should be considered normal, the lawyer and bank expert Ekrem Hasanov told our newspaper when commenting on the issue. Banks are wary that in order to make profit off of devaluation, the citizens will withdraw money from their accounts and exchange it to dollar. But it is illegal: "This step means the banks is changing terms of the contract unilaterally. It is a violation of law.  Banks can refuse to give loan it is obligated to give in only one case: "If the borrower’s financial condition worsens considerably. Only after proving this, can the bank refuse to give the sum of money mentioned in the contract". 

According to Hasanov, it is impossible for all customers' conditions to get worse at the same time: "Reduction or increase of credit card limit can be defined only after individual assessment. Citizens may appeal to court and demand their rights due to the problems they face" 

The founder of "Modern Marketing Group” Yusif Veliyev told "Kaspi” that there are some reasons for the restriction of credit cards by banks: ” If we look at the international practice, we may see that people use credit cards for online shopping or at stores. With help of credit cards people do shopping. Naturally, this concept is different in our society. People mostly use credit cards to withdraw loans thereby changing the purpose of the credit cards.

Credit card withdrawal limit can be viewed as a prevention against problematic loans : " Amout of credit is set according to citizen’s monthly salary. During this time, the amount of monthly credit the customer can withdraw is determined. But when a person withdraws all cash all at onceit can brings trouble on returning of loans in future. So, a limit has been applied on withdrawing money out of credit card. Now, only AZN 100-300 can be withdrawn every month. In general, besides devaluation factor, all problems emerge due to of wrong assessment of customer during the loan giving procedure. 

According to Veliyev, some people may try to take advantage of the current situation and think that they can withdraw AZN 1000-2000 and not return it. In its turn, banks also try to prevent the occurrence of problematic loans, and as a result  they put in place such alternative barriers. 
We tried to contact the above-mentioned "Bank of Baku” and get their opinion on reduction of credit card withdrawal limit and proper procedures for credit card cancellation. Despite the fact that the press service of the bank promised to answer our questions by the end of the day, nobody has responded to our questions yet.  

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