The interest rates on credit card advances continue to prevail at 3.5 percent per month, which equates to 51 percent on the per annum basis.

Though, there have been revisions in the benchmark lending rates and interest rates on loans, the rate on advances on credit cards continue unchanged.

Recently, Chennai chapter of Credit Card Holders Association of India reported an increase in number of customer complaints over high interest rates on credit cards, finance charges, late payment fee and other hidden charges.

What can be more enraging for the customers is the fact banks have been also considering to charge annual fee on credit cards.

I Arokiasamy, President, CCHAI, said, that the association has asked the regulator to take appropriate steps to reduce the interest rates on credit cards.

"The prime lending rate of interest has reduced considerably; banks have reduced interest rates on loans. However, no credit card company has reduced the rate of interest on credit cards. We have asked RBI to invoke its supervisory powers and direct credit card companies to reduce the rate of interest to at least 18% per annum,'' Arokiasamy said.

In early 2008, banks issuing credit cards increased interest rate on credit cards by 50 basis points on a monthly basis.

In the later part of the year, interest rates started falling. The rates on personal loan rates have been lowered to around 15 percent from the earlier 20 percent. The rates on mortgages are under 10 percent, against the earlier 13 percent. The auto loans have also become cheaper, with new rates near 10 percent from the earlier 14 percent.

As explained by a foreign bank official, the accumulated loss due to default on loans by certain customers are balanced by recovering the loss in form of higher interest rates from other customers. A recent finding shows decline in credit card payments by 15 percent from Rs 4,932 crore in April 2009 to 4,815 crore in May 2009. Alongside the number of credit cards issued by the banks has also decreased by 12 percent for the same period.

Since October last year, the RBI has reduced repo and reverse repo rates by 4 percent and 2.5 percent respectively. However, the cash reserve ratio (CRR), which is an indicator of percentage of deposits the commercial banks are required to keep with the apex bank has remained unchanged at 5 percent.