By: Staff Writer
October 19, Colombo (LNW): Sri Lankan credit- and debit-card users are facing mounting financial pressure as invisible charges, steep interest rates and surging card debt converge amid high living costs and low incomes. Despite directives from the Central Bank of Sri Lanka (CBSL), many cardholders find themselves caught in a punishing financial trap.
Banks charge annual interest rates on credit-card purchases as high as around 20 percent, and up to 26 percent for cash advances—far above the policy rate of 7.75 percent. On top of this, surcharges of 2.5–3 percent are still routinely passed onto customers by merchants when payments are made by card. Since these are often calculated on tax-inclusive prices, consumers end up paying a “tax on tax” in effect.
The emerging scale of the problem is stark. By August 2024, total outstanding credit-card debt at licensed commercial banks stood at Rs. 150.6 billion, up by Rs. 942 million in that month alone.
The number of active credit-cards has climbed as well: by April 2024 there were 1,914,126 in use, though the figure edged up just marginally from end of December 2023.
Consumer advocates say these numbers undershoot the anguish faced by many cardholders whose monthly incomes are squeezed and whose living-costs are rising. One recent study reported that although active card numbers were under 2 million, the value of defaulted cards as of Q2 2024 was Rs. 20.7 billion even though the number of defaulted accounts fell slightly to 168,978.
On top of high interest and surcharges, card users face ATM withdrawal fees (especially at machines of other banks), foreign-exchange mark-ups, and stamp duties embedded in overseas cards. For instance, some “Gold” credit-cards levy Rs. 25 for every Rs. 1,000 spent abroad, in addition to currency conversion costs.
A significant government reform is under review: the Ministry of Finance, Sri Lanka has confirmed it is considering a proposal from the Ministry of Digital Economy, Sri Lanka to eliminate extra fees on card transactions. Initial consultations have been held with the CBSL and the Inland Revenue Department of Sri Lanka to assess how to cover losses borne by consumers. The reform forms part of a broader push towards a fully cash-less economy, routing payments through QR-based mobile systems.
Yet until reforms take effect, millions of Sri Lankans with cards will continue to bear the brunt of hidden costs and high-interest debt. With many households already living on tight margins, the combination of surcharges, interest and default risk poses a growing threat to household financial stability.
