Local cardholders hit by double levies but relief in sight
Sri Lankan cardholders are paying far more than they realise every time they swipe, tap, or withdraw cash. Behind the convenience of debit and credit cards lurks a mess of hidden charges, high interest rates, and overlapping levies often amounting to a “tax on tax” that erodes household budgets.
This week, the Finance Ministry confirmed it is reviewing a proposal by the Digital Economy Ministry to eliminate extra fees on card transactions.
Initial consultations have already been held with the Central Bank and the Inland Revenue Department to assess the financial impact and explore how losses currently borne by consumers could be covered.
The reform drive is part of a broader plan to shift the country toward a fully cashless economy, where transactions will eventually be routed through QR code-based mobile payment systems. While the ambition is long-term, today’s reality is punitive for millions of card users.
Despite clear Central Bank directives, many merchants still pass on surcharges of 2.5 to 3 per cent when customers pay by card.
Though intended to offset processing fees, these charges are often calculated on the tax inclusive price, forcing consumers to pay VAT and then a surcharge on top effectively a tax on tax.
Adding to this, ATM charges vary widely. Withdrawing cash from another bank’s machine can cost anywhere between Rs. 30 and upwards, depending on the bank and whether the transaction involves a debit card, credit card, or foreign-issued card.
Credit card cash advances are particularly costly, with fees often bundled into the withdrawal itself.
For overseas payments, banks apply stamp duty and foreign-exchange markups, quietly embedded into tariffs. One widely used “Gold” credit card, for example, levies Rs. 25 for every Rs. 1,000 spent abroad, in addition to currency conversion costs, several card holders complained.
For those carrying balances, the cost is staggering. While the Central Bank’s benchmark policy rate sits at 7.75 per cent, most Sri Lankan banks charge 20 per cent annually on credit card purchases and up to 26 per cent on cash advances. These rates, coupled with fees, make credit cards among the most expensive forms of borrowing available to ordinary households.
Despite the heavy burden, usage continues to grow. By July 2025, there were 2,088,069 active credit cards in Sri Lanka, up 12,325 from the previous month. Debit cards number more than 12 million.
Debit cards, meanwhile, dominate everyday spending: the Central Bank recorded over 229 million debit card point of sale transactions in recent reporting periods, compared with far fewer on credit cards.
The data show that while debit remains the workhorse of daily spending, credit card usage is climbing steadily meaning more households risk falling into the cycle of surcharges and high-interest debt.
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