HSBC delays debit card scheme again

Bank's second postponement of service upsets account holders who are reluctant to use credit cards because of high interest charges.

HSBC Middle East yesterday said it had delayed its roll-out of debit cards to existing account holders for a second time, to the frustration of many of its 400,000 customers. The bank said distribution of the cards, which had been scheduled for December, would begin on March 1, without explaining the delay. HSBC began issuing the cards to new account holders last month.

Customers said they had anticipated the arrival of the debit cards, which deduct the cost of purchases from their accounts almost immediately, avoiding the interest charges that come with credit cards. "It's very frustrating. The disadvantage of a credit card is that you actively have to remember to pay off the balance and if you don't, then you get charged interest," said Jeffery Simpson, 30, a Dubai business development manager from Chicago.

"I don't understand how it can be so difficult to arrange debit cards for customers. HSBC is one of the biggest banks in the region." Financial experts, too, expressed surprise that most HSBC customers did not have debit cards yet. The technology has been in place in the West for more than a decade. "It is pretty rare these days for a bank not to offer a debit card facility," said Frances Walker, the head of media at the Consumer Credit Counselling Service, a non-profit body in the UK that advises people struggling to manage their debts.

The bank, which has one of the largest chains in the Middle East, originally planned to send out the cards in September, then delayed it until December. A bank source said the latest postponement was caused by distribution problems. HSBC Middle East is the final major chain to offer debit cards. Other divisions of HSBC offer the cards, and some rivals in the region have provided them for more than a year. RAKBank, Mashreq, Standard Chartered, Barclays, Citibank, ADCB, Abu Dhabi Islamic Bank, Dubai Islamic Bank, NBAD, Emirates NBD and Dubai Bank all offer debit cards.

Credit cards are more profitable for banks than debit cards, because customers build up balances that must be paid off each month to avoid interest charges. Alex Ford, 27, an Abu Dhabi business development manager from New Zealand who has lived here for five years, said credit cards encouraged people to spend more. "If you are using a debit card, the money comes straight out of your bank account and it is clear how much you are spending," he said. "But with a credit card, you don't find out until the end of the month.

"I have the self control not to spend beyond my means but some other people do not. Credit cards make it much easier to lose track of how much you are spending. In this day and age, not to offer both types of payment method is ridiculous." Mr Simpson said he used debit cards almost exclusively before coming to the UAE. "It is so much more convenient than carrying cash or running up debts on a credit card," he said. "I read that they were delayed the first time and I was looking forward to getting one. I really want one. Absolutely."

Stuart Birch, a financial consultant from Acuma Wealth Management in Dubai, said debit cards were a good alternative to cash because so many retail outlets accept them. "From the retailer's point of view, it means they can instantly know whether the customer has ample funds in his account to cover the purchase price," he said. "They are also good for consumers because using credit cards can be misleading because they mean people have to be responsible for monitoring what they are spending."

He pointed out that forgetting to pay your credit card on time could result in "a hefty amount in interest", and he warned against using credit cards to borrow cash. "Banks are partly relying on people forgetting to pay their credit card bills on time each month," he said.

Credit and debit cards each have their advantages and drawbacks, and consumers should select the right card for the job, says Stuart Birch, a financial consultant from Acuma Wealth Management. CREDIT CARDS Pros ? Easy funding for big-ticket items. ? Some cards offer protection for buyers if goods are defective. ? Successfully managing a credit card could improve your chances of securing a favourable loan Cons ? Easy access to funds is a temptation to spend beyond your means. ? Cash advances on credit cards are subject to high interest rates. ? Minimum payments service the debt rather than significantly reduce the amount owed. ? Card holder is responsible for making payments on time. DEBIT CARDS Pros ? Convenient and safer alternative to carrying cash. ? Cannot spend more than amount in your account (or more than your overdraft limit). ? Payments debited automatically. Cons ? Your account must hold enough to cover the full cost of purchase. ? Some retailers do not accept debit cards. ? Debit cards are not always accepted in place of credit cards. (For example, they often cannot be used to secure a rental car or hotel room.)