Trinidad and Tobago’s largest commercial bank just cut the amount you can spend on your US credit card in half. Yikes! 

So Trinidad’s largest commercial bank, Republic Bank, announced recently that it would be cutting its US credit card limit by 50% – from US$10,000 to US$5,000.

That means the maximum you can spend on your Republic Bank USD credit card each month is US$5,000. This took effect on September 21.

According to the bank, the limit applies to all transactions conducted outside the country and international online transactions, even if you choose TT dollars as your billing currency. 

This means that if Trinis come to Jamaica and use your credit card here, the limit is still US$5,000. Or if you buy online and the item is quoted in USD but your card would have converted the price to TTD, the limit is still US$5,000.  Or if you go to “big foreign”, the US, you can’t spend more than US$5,000 on your card.

Only local TT-dollar transactions online or at merchants won’t be affected by the reduced limit.  

But why did the bank take such drastic measures? Well, they’re saying they had no choice. 

See, Trinidad is in a US foreign exchange crunch. The demand for US dollars is so great that the banks can’t keep up, and that’s putting pressure on their exchange rate. Because high demand and low supply means it’s going to cost more to buy US dollars. And a higher US exchange rate has ripple effects on the entire economy. 

According to Republic Bank, credit card sales reached an “unsustainable level” in September, so they had no choice but to reduce the credit card limit. 

The Finance Ministry backed up this claim. They said that international credit card transactions reached close to US$6 million a day in September, with Republic Bank customers being responsible for a “significant” portion of the sales.

The ministry said that at the rate things are going, credit card sales using foreign exchange will reach US$2 billion in 2023, which is 45% higher than before COVID in 2019.

And again, Republic Bank, being the country’s largest commercial bank would be responsible for a large portion of that. Like I said, this puts pressure on the forex market, which impacts almost everything else in the economy, because so many things are imported.  So this could lead to inflation – prices for many items could go up.

But of course, the move to halve the credit limit has also sparked concern, especially among small and medium-sized businesses. A lower credit card limit means SMEs will have much less purchasing power for goods and services that are sold in USD. Between that, and talks about Trinidad’s online tax possibly being increased, SMEs are really feeling the pressure.

The Finance Ministry says it has asked the Central Bank to inject an extra US$50 million into the banking system, on a one-off basis, in addition to the usual fortnightly injections of cash. 

But for now, we’ll have to wait and see what impact it has on Trinidad’s economy.  And what the government will do to try to improve US dollar revenues.

And that’s the bottom line.