Credit card transaction in taka drops 8%, in dollar rises 4.5%

The approaching national elections, characterised by political instability, and persisting economic uncertainty contributed to a 7.73% decline in credit card transactions in taka during September. Conversely, credit card transactions in dollars have witnessed a 4.52% increase amid the dollar crisis, as revealed by a Bangladesh Bank report.

The central bank report shows Bangladeshis reduced their credit card spending in taka by Tk188 crore to Tk2,249 crore in September from Tk2,437 crore in August.

Credit card usage within the country is predominantly concentrated in departmental stores. In September, departmental stores accounted for 48.54% of credit card transactions, followed by retail outlet services (12.85%), utilities (9.23%), and cash withdrawals (8.64%).

But credit card spending in dollars went up by $4 million. Bangladeshis travelling abroad spent approximately Tk436 crore, equivalent to $45 million, in September on goods and services, compared to Tk417 crore or $41 million in August.

According to central bank data, Bangladesh's foreign exchange reserves stood at $20.78 billion as of 9 November, a significant decline from $34.24 billion in the same period of 2022. 

An analysis of the credit card spending pattern reveals that about 77.69% of these transactions took place using VISA cards, 14.75% using MasterCard, and 7.51% using American Express cards.

According to the central bank, credit cardholders used their cards mostly in neighbouring country India. About 16.66% of cross-border transactions took place in India, followed by 15.90% in the US, 8.90% in the UAE, 8.56% in Thailand, 7.70% in the UK, and 7.36% in Singapore.

Bankers attributed the surge in foreign currency transactions on credit cards to the wider gap between the dollar rate in the kerb market and the banking sector, prompting users to exploit this arbitrage opportunity. On the contrary, card spending within the country declined due to the political and economic uncertainties stemming from the upcoming election.

A City Bank official told The Business Standard that the dollar exchange rate in the kerb market is considerably higher than the official banking channel, with a difference of around Tk5-7. Additionally, obtaining cash dollars has become increasingly challenging, driving an upsurge in credit card transactions

During the first week of November, the dollar was traded at Tk127-128 in the open market, while banks were selling it at Tk115-116.

However, the central bank imposed a maximum selling price of Tk117 for the dollar on exchange houses, effective from 13 November. Simultaneously, it instructed them to buy dollars at Tk115.50.

Under the central bank's policy, Bangladeshi nationals are permitted to spend up to $12,000 annually, either through card transactions or by carrying cash dollars when travelling abroad. However, for credit card transactions, the maximum single-use limit is $300.