A few weeks ago I read a story in a Barbados newspaper which highlighted the “plight” of commercial banks in Barbados. Apparently, the commercial banks were crying out for an ease on the interest paid to its customers. One one hand I can understand – their aim is to make profits and their goal is to maximise those profits. BUTTTTTTTT, on the other hand, I’m a customer and I know that they make a killing already and I really can’t take any more hits from them.
When you save your money in commercial banks in Barbados, the minimum interest that you gain is 2.5%. That is a regulation set by the Central Bank of Barbados and in my opinion, it should be higher given the effects of inflation. The article said that the heads of the commercial banks want the rate lowered, to more or less increase their profits.
Do Commercial Banks in Barbados Deserve Pity?
My gripe is this. Commercial banks charge fees for everything under the bright Caribbean sun. One experience that I can recall is one of my banks charged me $16 because me balance dropped below $1000 (this was subsequently reversed because they did not inform me and the Bajans caused a stink). They charge you for things like using other banks’ ATM machines, using debit cards and conducting transactions with the teller.
On top of that, they have loan interest, which, when you think about it is ridiculous. If for example, you wanted a $300,000 mortgage with an interest rate of 9% over 25 years, you will end up paying back $755,277. How’s that for interest? The majority of the new homes in Barbados are being sold at over $300,000. The average Barbadian will get a loan to finance their purchase and who will they go to? The commercial banks.
What About the Customers?
Why don’t they give customers an ease which could translate into more business for them? For example, as it stands right now, you would be hard-pressed to find a bank offering 100% land loans. Customers are required to make between a 5% and 20% deposit, depending on the specifics of the land to be purchased. Do you know how many people are interested in buying land or a home, but can not come up with a 10% deposit in cash?
In times like these, you should be trying to entice customers, not drive them away. I suspect that people might show more interest in other types of savings mechanisms like bonds and treasury bills should the savings rates drop lower than the already low 2.5%. I’m not a guru on commercial banking and how commercial banks conduct their business. But I’m a customer who knows that my money is important to me too and I want the best returns that I can possibly get.