Pay on time, pay less

Having a good credit history is actually good economics. ICICI Bank, the country’s leading private sector bank, has increased the monthly interest rate it charges some of its credit card customers to 3.24 per cent from 3.19 per cent earlier with effect from June 1.

ICICI Bank insists that it’s not the standard rate for every credit card customer. Over the past few months, the bank has been following a layered interest rate approach, whereby it studies its customers’ spending behaviour and repayment patterns for a period of six months, and fixes interest rates depending on their “credit score”. “Over the past six months, a significant number of our customers have managed to get good credit scores and have moved into the 1.5-2 per cent bracket. So, it’s not that every cardholder is charged the highest rate,” says Sachin Khandelwal, Head (Card Group), ICICI Bank.

More and more banks are following this differential interest rate approach, says Harsh Roongta, CEO of apnaloan.com. “So, banks will charge customers variable rates depending on their credit profiles,” he adds.

—Rachna Monga