Credit Card Balance Transfer - Few Tips

Credit card bills, when rising too fast, need constant monitoring. Any delay in the repayment can result in a serious financial hit because of the high interest cost and other charges that are levied. At the same time, credit card companies continuously give offers to lure new customers from their existing bank. One such offer is the balance transfer facility. Here, a person is allowed to shift the outstanding amount on one credit card to another.

The additional incentive, most times, is that the transferred amount is not liable for any interest charge for a specific period or has a lower interest rate for a specific period of time. When faced with such offers, the question before cardholders is whether to accept it or not? There are a few situations when it makes sense to make this important switch.

For starters, a common grouse is dissatisfaction with the existing bank because of lack of proper facilities and services. The most common reason is the high interest rate being charged by the bank on the credit card outstanding. Also, service-related issues like non-receipt of bills on time, incorrect billing or inconvenient payment dates are common issues. In such a situation, the individual would be better-off, if they change the bank and their credit card by opting for balance transfer.

Then, there could be a situation where the individual is unable to service the loan. There are two types of situations that could lead to this. One is a temporary situation where the immediate cash flow of the person has been adversely impacted so they might have some problem in paying-off the accumulated debt for a few months. The other situation is when the debt has become too exorbitant, making it almost impossible to service it, at least in the short run.

In such a scenario, undertaking the process of balance transfer will ensure that the immediate pressure eases-off for some time. However, postponing the repayment just to buy time will not help.

Another reason why a person could opt for a balance transfer is when any special offers are made to them. For instance, there could a situation where a bank offers a long interest-free period like, six months to one year. Such a situation will give a fairly good period for the person to enjoy interest-free credit and hence, it might be a good option. Of course, there are other conditions like higher limit, lower rates of interest and convenient payment dates that make things attractive for a cardholder to move to another bank.

A word of caution though in some banks, the rate of interest may be zero in the initial months and they might be higher than your existing lender. In such cases, remember that the interim relief is just an eye wash. If you are not confident of the repayment abilities, then stay away from such offers.

Also, bring down your balance in that interest-free period drastically so that when the higher interest rate kicks in, the finances are not so badly impacted. Most importantly, remember that moving to another card saves you from the interest rate burden, but only temporarily. Use this window of opportunity to reduce the loan burden and do not start splurging, once you have been able to bring down your outstanding.

Global Credit Card by PNB

India's second largest public sector lender, Punjab National Bank (PNB) has launched a global credit card. The international credit card of the bank has been launched in collaboration with VISA.

The card was launched on Friday, February 6th by the Deputy Chairman of the Planning Commission Montek Singh Ahluwalia. PNB mentions that this card would be acceptable in more than 29 million merchant establishments and 1 million ATMs across the world. Moreover it will also be accepted at a host of online shopping sites.

Dr. Ahluwalia said that the PNB card will widen the customer service network. It comes with a range of features like free credit period of up to 50 days, no annual fee and attractive reward points. It is a fully loaded photo credit card that will also enable the facility of SMS alerts to all its customers in case of e-commerce and high value transactions.

PNB Chairman K C Chakrabarty informed that, "To start with we are launching two varieties of credit cards - Global Gold and Global Classic, which will meet the needs of its customers and will cater to the requirement of different income groups."

He said that earlier in November, the bank had done a soft launch but with the commercial launch this card will be available across 1,200 PNB branches across the country.

The finance charges and cash advance charges attached to the card are one of the most competitive in the industry.

Besides, the bank had also announced completion of 100 percent core banking implementation at all its branches and extension counters. This will be done through the Finacle universal banking solution from Infosys Technologies.

PNB had declared 2008-09 as a financial inclusion year and therefore has taken moves to expand its product portfolio in order to further add to the customer convenience.

Credit Card Goof-ups by Banks

A Coimbatore resident discontinued his credit card in January 2008 and even got a written confirmation about the account's closure. A good seven months later, in July 2008, the card-issuing foreign bank suddenly offered him a pre-approved personal loan of Rs 20,000, considering his “prompt” repayment history.

While accepting the loan, the consumer was given categoric assurance that the loan’s repayment would not be towards the credit card, as it had been formally closed. "Surprisingly and, to my suspicion, this EMI (equated monthly instalment) was finally charged to my card account in spite of clear communication..."

While admitting that such goofups are not unheard of, a senior Mumbai banker illustrates how they could occur. A card-issuing bank assesses a customer's credit worthiness and, accordingly, allocates a credit limit. If the customer utilises the amount only partially, the remaining chunk could be offered as loan.

However, after he accepts it, the EMI may be charged to the card account, and not the personal loan account, or may even lie in his card account as unadjusted credit. "It's a systemic issue." Such problems, say senior bankers, are an outcome of outsourcing key banking activities and lack of coordination between departments. Therefore, the lending bank must make terms and conditions as clear as possible at the outset itself.

Now, the coimbatore consumer wasn't even mailed the loan’s repayment options. "My concern is if you fail to make payment on a personal loan, a cheque-bounce charge or a nominal penalty is levied. But in credit card default, there are so many more charges."

Two weeks ago, after a prolonged dispute, he decided to pay up the amount. But the collection agents haven't stopped harassing him. "I am again being told that there is some EMI running in my card account and hence they are unable to close my card account." An account, which he thought, was closed over a year ago.

This shocking instance brings forth another point—that of prepayment of credit card loans. A senior banking ombudsman official cites complaints where even if a consumer pays the entire amount, EMIs don’t stop.

“Suppose one has taken a loan of Rs 1 lakh and the balance left is Rs 90,000, which he wishes to prepay. The bank may adjust the prepaid amount against the EMI of, say, Rs 5,000. The rest, Rs 85,000, would be reflected as ‘credit’ balance in his monthly statements.” In other words, his card account would remain active. All banks TOI spoke to, however, say they have clear foreclosure or prepayment charges.

In case consumers have a similar grouse, they could approach the banking ombudsman or RBI's customer service department for resolution.

Online Credit Card deals protected by SMS alert

CREDIT card frauds through online transactions may soon see a dramatic decline. From August 2009, banks will clear online card transactions only after they are authenticated by a separate password. The Reserve Bank of India has also made it mandatory for banks to send SMS and online alerts for all online transactions exceeding Rs 5,000.

The central bank will also shortly prescribe security measures to be employed for card usage in interactive voice response (IVR) transactions, where cardholders punch in their card details into the telephone to make payments.

At present, anyone who has access to information printed on credit cards, such as the card number and the Credit Verification Value number, can misuse the card online. This loophole will now soon be blocked. With the increased use of credit and debit cards in the country, RBI has been reviewing various options to enhance the security of online transactions.

After consulting with banks and card companies, the RBI has decided to make an additional online authentication compulsory for all banks. “It would be mandatory to put in place with effect from August 2009 a system of providing for additional authentication/validation based on information not visible on the cards for all online card not present transactions,” the RBI said, in a circular issued to all banks.

IT experts have been highlighting this security risk for a long time now. Some banks have already put in place a credit card verification process for online transactions. Now, with the passage of the Payment and Settlement Systems Act, 2007, the central bank has got the power to regulate all online transactions.

In the same circular, the RBI has asked banks to provide customers with online alerts on every transactions over Rs 5,000 where the card is not required to be presented physically. The directive on online verification has been issued under Section 18 of the Payment and Settlement Systems Act, 2007.

Section 18 of the Act gives the RBI broad-based powers to give directions to “system providers or the system participants or any other person either generally or to any such agency and in particular, pertaining to the conduct of business relating to payment systems”. These orders can be given by the RBI if it is satisfied that it is in public interest.

Online, credit card frauds cost banks 42cr

Banks across the country reported a loss of over Rs 42 crore to internet/online banking and credit cards frauds during April-December last year with the maximum amount being fraudulently withdrawn using credit cards.

Though the states collectively reported 233 such crimes in 2008, Maharashtra reported 23 incidents — the maximum — during the ninemonth period last year. Tamil Nadu, on the other hand, has topped the list in terms of losing the maximum amount (Rs 2.09 crore) to internet frauds.

While different private and public sector banks on their part collectively reported a loss of Rs 36.54 crore to credit card frauds , the states reported a loss of Rs 6.57 crore to internet frauds.
According to figures released in Lok Sabha in response to a question, the lending institutions in Maharashtra lost Rs 55.54 lakh to online fraudulent practices.

Rajasthan, Andhra Pradesh and West Bengal lost Rs 89.93 lakh, Rs 64.29 lakh and Rs 35.72 lakh, respectively while Kerala and Delhi lost Rs 17.60 and Rs 10.90 lakh, respectively, owing to cyber frauds.

Eleven cases of internet fraud were reported from Andhra Pradesh, eight from Delhi, seven from Tamil Nadu, six from Karnataka and five from West Bengal during April-December 2008.

However, banks in Bihar, Goa and Jharkhand did not lose a single penny to such fraudulent activities.

According to data updated till 2007, out of the total 355 people arrested across the country, a maximum of 156 people were arrested in Madhya Pradesh in connection with cheating-related cases under IT Act — fake digital signature (Section 64) and breach of confidentiality/privacy (Section 72) — and IPC — forgery and criminal breach of trust/fraud).

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ICICI Bank loses Rs 11.47 cr in Credit Card Fraud

One of the largest private sector lending institutions ICICI Bank lost more than Rs 11 crore due to over 8,000 cases of credit card

There were 8,280 cases reported by the ICICI Bank to the Reserve Bank of India, in which it lost Rs 11.47 crore between April and December 2008, Minister of State for Home Shakeel Ahmad said in reply to a question in the Lok Sabha.

A total of 703 and 2,484 cases were received by American Express Bank and HSBC Bank related to credit card frauds, in which they lost Rs 6.04 crore and Rs 4.90 crore, respectively.

According to the data, a total of 12,959 such cases were received during the said period in which various banks lost Rs 36.54 crore.

No cases were reported by IDBI Bank, Canara Bank and Indian Overseas Bank related to credit card frauds last year.

Other banks, which lost significant amount to such practices, were Citibank, which bore a loss of Rs 4.73 crore, Standard Chartered Bank Rs 2.39 crore and Deutsche Bank with a loss of Rs 2.09 crore.

Many nationalised banks were also affected by the fraudulent activities.

Petro Cards - A Review. Part-II

Bharat Petroleum Corporation and Standard Chartered Bank also have a globally valid co-branded debit card, Smartfill, in association with Visa International. Smartfill features include:

• Free fuel through the rewards program, savings on fuel and ‘aXcess plus' benefits.
• Customers earn one reward point for every Rs 125 spent which they can redeem at par for free fuel at BPCL outlets.
• There are also discounts up to 5 % for purchases at In-and-Out department stores located at Bharat Petroleum's petrol stations.

Citibank Maruti Suzuki AutoCard is another credit card that you can get easily if you own a Maruti vehicle. The card can be used to buy petrol from Indian Oil Pumps without paying any surcharge. You get points for purchases made at Indian Oil Pumps and Maruti Service Centers. Also you can earn 20,000 points as additional rewards when you exchange your car for your next Maruti Suzuki car.

Plain Credit Cards
You can also get your normal credit card swiped for fuel at any fuel station. This helps you in saving time in searching a retail outlet of a particular petrol company. There are additional benefits like free insurance, balance transfer, revolving credit, global calling card among others that be enjoyed through using your plain vanilla card. Your plain credit card may also be eligible for surcharge wavier provided you pay a minimum bill value.

SBI Gold/Silver/Platinum Cards are accepted world-wide and provide a 0% fuel surcharge for single transaction spend between Rs. 400 and Rs. 3,000.

HSBC Silver/Gold cards also give a surcharge wavier for amounts between Rs 400 and Rs 2,500.

Make your choice
Plain Credit card or Pre-paid petro card
A credit/debit card may charge an annual fee where as a pre-paid petro card will charge a one-time membership fee, which is non-refundable. But today most credit cards do not have an annual fee so in that case a credit card is always better than a pre paid card. Again in case of pre-paid petro cards you have to pay the oil company in advance for future petrol spends but if you use a credit card you can get up to 45 days to clear your petrol bills. A pre-paid card can be used on a retail outlet of specific company whereas a credit card can be use at all fuel stations. However your pre-paid card is subject to a surcharge waiver but even your credit card may provide you a facility of 0% surcharge.

If you visit a particular retail outlet of BPCL or HP to tank up your car then you can use a pre-paid petro card offered by that company. This would enable you to earn reward points that can be redeemed for free fuel or gifts along with the surcharge wavier. Or else your credit card is always the best option for you.

Pre-paid or Co-branded petro card
The pre-paid petro card may help to keep your spending under control but if you do not want pre-pay for your purchases you can opt for a co-branded credit card that gives a dual advantage of a standard credit card and fuel without surcharge. Both the cards provide a relaxation on surcharge to the user and can be used on petrol pump of the specific company. A pre-paid card is very restricted in its use and a co-branded card is flexible. You can use the later for purchases other than fuel as well. That way your co-branded card has an upper hand over your pre-paid card.

Co-branded / Pre-paid cards or Plain credit cards
In case you do not patronize a single petrol pump/brand or don't feel like carrying too many cards, you always use your usual credit card. Although a co-branded or pre-paid card do provide with a surcharge wavier sometimes even the plain credit cards are subject to multiple benefits including surcharge wavier at certain times.

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Petro Cards- A Review Part-I

Using Credit Card for fuelling up your vehicle is now as common as it can get. All credit cards floating in the market can be used to purchase petrol in any petrol pump.

However a fuel surcharge is imposed on the consumer if he uses a credit card option to buy fuel. When payment of fuel at petrol pumps are made by cards, a fuel surcharge of some percentage is levied by these outlets over and above the cost of fuel.

There are principally three ways of plastic payment for fuel purchase: pre-paid petro cards, co-branded petro cards and plain vanilla credit cards.

Pre-paid Petro cards
Pre-paid fuel cards allow you to load certain amount of money in the card and when it is swiped for fuel, the bill amount is debited from the card. It has an electronic chip which stores information about the amount of money that you have loaded in your card. Every time you use this card to make a purchase, the amount is deducted from the card. You also earn rewards points while using such cards. The reward points can be redeemed for petro miles or rewards that are decided by the issuer. Also there always is a surcharge wavier on using a pre-paid petro card of a particular company.

Presently there are two types of pre-paid cards in the market named as HP Smart 1 and BPCL Petro cards.

HP Smart 1 provides you with following features:

• 5% rewards on total spend at any Hindustan Petroleum retail outlet.
• All petrol and diesel fills, lubricants, servicing, and even your shopping bill at HP Speedmart Stores (convenience store) will be eligible for reward points, provided you use the HP Smart 1 card to pay for these services.
• Thes accumulated reward points can be redeemed for free fuel.

The card can be loaded for minimum amount of Rs 250 and in multiples of Rs 50 thereafter.

The BPCL Petro card offers you:

• Reward points called petro miles earned for all purchases from any retail outlet of Bharat Petroleum in India. However the reward points in this case differ based on what products are purchased.
• These reward points can only be redeemed for gifts at BPCL outlets or through its website.
• The minimum loading amount for this card is Rs 500 and subsequently you can load the amount in multiples of Rs 100.

Indian Oil offers an XTRAPOWER fleet card program. Fleet Card is a smart card, which can be used by the card holder to make purchases of fuel/ lubricants at designated retail outlets of IndianOil. The card includes the features like:

• There are two variants of XTRAPOWER fleet card Prepaid & Credit.
• On prepaid cards, the pre-loading facility is available at designated Retail Outlets of Indian Oil. You can also deposit the desired amount in Central Cash Management System (CCMS) through designated of HDFC bank.
• Attractive rewards on purchase of fuel & lubricants through the Card.
• Personal Accident Insurance Cover and Medi-claim for fleet owner, driver, co-driver and helper.
• Opportunity for earning additional rewards on purchase of J.K. Tyre and Exide Battery.
• Facility to track each vehicle.

Both pre-paid petro cards of HP and BPCL are available for a one time fee whereas the IOC fleet card does not any annual fee but there is no surcharge waiver in case of a fleet card.

Co-branded petro cards
A co-branded petro card is a credit card which is sponsored by both the credit card issuing company and the participating fuel company. One can also use a co-branded petro card to pay for his fuel. This card provides an advantage of getting a surcharge waiver, apart from being a usual debit/credit card. The surcharge levied is on fuel is 2.75 % or Rs 10, whichever is higher. The co-branded petro cards also earn reward points over and above the surcharge waiver.

Co-branded credit cards floating in the market include some like IOC-Citibank and HPCL-ICICI Bank and Smartfill, a card by BPCLand StanChat Bank.

IOC-Citibank co-branded card offers:

• Savings of up to 5% to cardholders on their petrol spends at select Indian Oil retail outlets across the country.
• Customers using this card will avail two reward points per use at an IOC retail outlet and one point each at other outlets, on every purchase worth Rs 100.
• The reward points can be redeemed for free petrol, Servo engine oils and lubricants at IOC petrol pumps.

HPCL-ICICI Bank co-branded earn reward points named as ‘Speed `o' miles' and these points can be redeemed for free fuel at HPCL Petrol Pumps or against gifts available in the ICICI rewards redemption catalogue. Some other features of the card include:

• It is eligible for 5% discount on tyres, batteries and auto accessories sold at select HPCL petrol pumps.
• 15% discount on P-UC (pollution under control) check, labour charges on servicing and minor repairs at HPCL petrol pumps.
• Minimum assured Cash Back per transaction of 1%.
• 1 reward point earned on every Rs.200 spent on all purchases except on fuel purchases at HPCL outlets.
  
  
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LIC Credit Cards

Life Insurance Corporation of India (LIC), which had earlier scheduled the launch its credit card for January will now do so before end-March, a senior company official said.

"We plan to launch our credit card before the end of this fiscal," a LIC spokesperson told PTI here. LIC has tied-up with Karnataka-based Corporation Bank for its white-labelled credit cards. The bank will be the card issuer. The launch was deferred due to "some technical reasons," the LIC spokesperson said.

LIC had asked Corporation Bank to sort out the problems before the launch itself so that there were no issues later on, the spokesperson said. When contacted, a Corporation Bank official said that the bank had sorted out all technical problems and was now ready for the launch.

"The launch was delayed since the card is a white- label credit card which requires some formalities (to be completed). But now we are ready and awaiting the launch date," Corporation Bank's General Manager (New Initiatives), B R Bhat, said. "In any case, we will launch the credit card in this financial year itself," Bhat said.

Charging extra for card use.. is it a violation. Feb-15

A colleague who recently bought an iPod from an electronic store in Lamington Road, Mumbai, was asked to pay an additional 2 per cent for the payment by credit card. Luckily for her, there was an ATM nearby and she was able to withdraw cash.

Narrating the incident, she said, “I was not carrying enough cash, so I wanted to pay by credit card. But when I was told to shell out about Rs 150 more, I made the payment by cash. If not, I would have lost out on a good deal.”

This practice of charging an additional fee is called ‘surcharging,’ said Mr Subrat Pani, Business Head-Cards, Kotak Mahindra Bank. It is not permitted as per the agreement entered into by the merchant and the bank, which sets up the point-of-sales machine. “It is not permitted as per Visa and MasterCard rules. The acquiring bank can terminate the POS facility,” Mr Pani said.

When a bank sets up a POS machine, it charges a merchant fee from the merchant establishment, for swiping debit or credit cards. In some cases, the merchants try to pass on this charge to the customers by charging extra. Complaint option

Mr Sachin Khandelwal, Head, Retail Assets, ICICI Bank, said, typically, the stores that insist on an additional fee in case of a credit or debit card transaction are those that don’t get a lot of business through cards. Larger shops don’t charge extra fees because they get about 35-40 per cent from cards and don’t wish to lose customers, he said.

“Merchants are not supposed to charge any extra fee for using credit cardWe do get such complaints. We then send out a warning and even withdraw the terminal if the charges are found to be true,” he said.

Mr T.V. Seshadri, Vice-President, and Country General Manager, South Asia, MasterCard, said that in cases of surcharges or other discrimination, cardholders should report about the merchant to their respective card issuing financial institution and may also intimate MasterCard.

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Credit Card Payment in Autorickshaws

Preparations are on full swing for the forthcoming Commonwealth Games to be held in 2010. During that time autos will be just a call away. Moreover the autos are being upgraded so that the passengers can swipe their credit cards for making payment as the renovated autos will be equipped with many facilities, including newspapers and water bottles, for the comfort and safety of passengers.

Auto rickshaw popularly known as “common man's radio taxi", the Urban Development Ministry as a pilot project, first of its kind in the country, equipping auto rickshaws with GPS-based systems is launching in Pune on November 29.

Under this project, the commuters can call a control room or send SMS for hiring autos and they will get a receipt after paying the prescribed fare.

"The project aims to provide safer last mile connectivity to passengers. Many cities including Delhi have shown interest in the project," Urban Development Secretary M Ramachandran told PTI.

The Urban Development Ministry is having discussions with different states as part of the national urban transport policy to offer better and comfortable mode of transportation to commuters.

In view of the forthcoming Commonwealth Games, the Ministry is having talks with the Delhi government for the introduction of GPS-based auto rickshaws in the capital before October 2010.

While explaining the salient features of the project, Ramachandran said, "This is a scientific management of auto rickshaws. Since the movement of autos will be monitored by the control room and there will be very little scope of overcharging by drivers, the scheme will be beneficial for commuters especially for elderly and women."

Credit Information Report and Checking Inaccuracies

Pratiba Sachan was feeling extremely angry. How could the bank do this to her? She was a stickler for immaculate money management skills. She never once defaulted or made a late payment for that matter even on her telephone bills.

She had maintained all her accounts with her friendly neighbourhood bank, whom she banked with in all of 15 years, since she got her first pay cheque. She had been saving up religiously for the past 10 years to accumulate enough monies to buy a car and a cozy, contemporary apartment for herself.

Once she had her down payment secured for her apartment, she zeroed in on a really neat one, which was fitted with all the up-to-date amenities. It was located at a very accessible distance to all the places she frequented be it shopping malls, hospitals, multiplexes, the beach and of course her workplace. She even got the best interest rate in the marketplace with a popular housing finance company. Everything was coming together nicely when the big blow came. The HFC called to say, they could not proceed with her loan disbursement because she had a poor credit score! Armed with reams of paperwork and credentials from her still friendly neighbourhood bank, who unfortunately did not have the kind of interest rate on the loan she wanted, she was ready to tackle the matter. After several attempts at calming Pratiba’s indignation and succeeding finally, the HFC said they would be able to provide access to her Credit information Report. However, they also told her that if she wanted any clarification on the details mentioned, she should contact CIBIL and seek those clarifications.

To err is human and Pratiba’s `Credit Information Report’ is no exception to this fact. Errors could have easily crept up in her report that comprises of numbers. Incorrect information about her credit accounts, input errors and confusion caused through similar looking account information, names etc. could have resulted in the errors in her report. Currently there are no facilities enabled by CIBIL, unlike the practice abroad, where an individual can request his or her credit information report from CIBIL, even before he is about to make a credit transaction or apply for a loan. However, if an individual has applied for a loan and has been rejected the loan because of a poor credit score, he can then request the bank to allow him to access his credit report to seek any clarification on the information provided in the report.

Pratiba had the option of getting in touch with CIBIL with the control number of her credit report, which the HFC provided her with. The Control number is a nine digit unique number that helps CIBIL track an individual’s credit report from CIBIL’s database.`When attempting to access your credit report you also need to provide CIBIL with your loan details, the exact knowledge or discrepancies in the report that you have been made aware of by the bank and for which you seek clarification. Ofcourse, you need to pass on essential information such as your full name, date of birth, address, phone numbers, Pan no, Voters Id and Passport no to help CIBIL assist you.

In Pratiba’s case, she was fortunate to communicate the discrepancies in her credit report and get it rectified in a matter of days. Her persistence paid off and the HFC was more than happy to sanction her loan amount. Right now, Pratiba is happily cocooned in her cozy, contemporary apartment and in the past 5 years has never defaulted on her EMIs even once!

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Credit Card Default attracts only 49% Interest

Supreme Court on 4th of Feb has allowed MNC banks to charge hefty penal interest up to 49% on defaulted credit card payments, ending the respite

Guard your credit card IElastic with plastic that lakhs of card holders have had since September last year when the National Consumer Disputes Redressal Commission capped the penalty at 30%.

The SC stayed the apex consumer forum's directive to banks not to charge more than 30% interest on defaulted payments on credit card purchases. The SC had last year refused to heed the appeal of banks against the NCDRC's order.

A Bench comprising Justices B N Agrawal, G S Singhvi and Aftab Alam suspended the relief to card holders on a plea by a coalition of foreign banks — Citibank, HSBC, American Express and Standard Chartered — that their business was suffering immensely because of the "unwarranted" cap on the quantum of penal interest.

Ironically, the plea of banks may have been allowed because of a lapse by the very same NGO `Awaz' that was instrumental in getting the NCDRC order pegging the penal interest at 30% last year.

Though the Bench had issued notice to the NGO four months ago, it has yet not put in its response, possibly helping the court to see merit in the argument of the banks that no penal interest rate, they were only following the guidelines issued by the statutory regulator, Reserve Bank of India (RBI).

The banks teamed up to apprise the apex court of their compulsions to charge between 36% to 49% interest on defaulted payments on credit cards. "No bank as a credit card issuer would charge undue interest rate as, apart from the regulatory framework that applies, the market would not sustain the same by reason of competitive force," Citibank said.

In its application, filed through counsel Rupinder Suri, it said facility of credit cards could be availed without any interest for a certain stipulated period and it was only after the expiry of that period that penal interest was levied on default of payments.

"The credit card holder is aware of the same at the time of applying for it. It is also relevant to note that credit card transactions de-facto constitute unsecured credit availed of," the bank said justifying the high interest rate permitted by RBI on defaulted payments.

The July 7, 2007 order of NCDRC had ruled that "charging of interest rates in excess of 30% per annum from credit card holders by banks for the former's failure to make full payment on the due date or paying the minimum amount due, is unfair trade practices."

It had also said that penal interest could be levied only once for the period of default and should not be capitalised while terming the practice of computing interest on monthly basis as "unfair trade practice".

Credit card Application and default clause - must read article

The banks justified the high interest rate on default payments by credit card holders by listing as many as 27 factors that included even the SMS alerts it sends to the card holders.

Even the cost of acquiring a new customer, that is the cost of calls made randomly by authorised call centres urging people to take credit cards, is also taken into account for realisation through charging of penal interest from a defaulting card holder.

"The National Commission has failed to appreciate that the rate of interest on defaulted or partial payments of credit card dues is determined by taking into consideration various factors, including the risks of default, and therefore, this commission may not determine the issue as to whether the interest at the rates of 36% to 49% per annum is excessive," the banks said.

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Compare Credit Cards - The Right way part-2

Credit card companies charge fees on balance transfer. This fee can be anything from 3% to 5% of the outstanding balance transferred. Alot of times this fee is capped by an upper limit. Again, a credit card with no upper limit on balance transfer fee can offset any savings we were going to make. So, it is better to have a credit card with an upper limit on the fee. For example. A credit card with balance transfer fee at 3% of the outstanding amount with Rs.100 as minimum and a maximum of Rs.750 is definitely better than one with balance transfer fee at 3% of the outstanding amount with Rs.100 as minimum and no upper limit. Transferring a big amount to the latter credit card can cost more than doing it with the former. So, a credit card with lowest balance transfer interest for the longest period along with low balance transfer fee with an upper limit cap on balance transfer fee is a better choice.

Rewards
Reward credit cards bring additional savings to a credit card holder as cashback, reward points, gift certificates and other privileges. The credit card which offers maximum rewards along with minimum restrictions and no limits on reward redemption definitely scores over a credit card with higher reward qualifications, lots of restrictions and rewards which are difficult to redeem. Also when you evaluate the rewards, always keep in mind how the benefits will affect you. For example getting a Fuel reward credit card from Hindustan Petroleum is only useful if there is a HP petrol pump nearour office or home or on the way to office.

These parameters should be kept in mind while comparing different credit cards. Remember, there are lots and lots of traps in credit card fine prints. A credit card offer which appears lucrative can cost a lot if proper attention is not given to the hidden fine prints. Carefully acquainting oneself with the credit card terms and condition and knowing every fact that affects the credit card usage will be of a great help to the credit card holder.

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Compare Credit Cards - The Right way part-1

Comparing various credit card offers before deciding to apply for one, is a very good habit and goes a long way in saving your hard earned money and maintaining a good relationship with the credit card provider. A credit card consumer is often confused about the factors he should take into consideration while comparing credit cards. While some cards look exactly the same, while some sound too good to be true, picking the card to suit you is the most crucial factor. Here are all such important factors along with the analysis on how they should be looked upon while doing a credit card comparison.

Interest Rates

Interest rates are one of the most important factor of a credit card and should never be overlooked. Credit card charges at least three different types of revolving credit rates or interest rates as they are more popularly called. The regular interest rate is charged by credit card issuers on regular purchases made with the credit card. Sometimes, credit card issuers give a 0% Introductory offer on their interest rates, for a certain duration like 0% Intro Interest for 6months to attract new customers. As soon as this introductory rate period is over the regular interest rate sets in. If a credit card holder doesn't default and make late payments the regular Interest Rate is what he should be most concerned with. Other things being equal, a credit card with low regular APR is definitely the better choice. Some people always make sure that they pay their credit card at the end of the month - in that case, you can worry less about the interest rate but a lower interest rate is any day a better choice.

Annual Fee
Some credit card companies charge an annual fee for using their credit cards and associated services. Starting from Rs..500 this annual fees can go up to thousands per annum depending on the status of credit card. Regular, classic and silver credit cards have low or no annual fees as compared to gold, titanium, platinum or signature credit cards. Credit cards with annual fees increase the total ownership cost of the credit card hence as a money saving option, the credit card with a 0 annual fee offer is a good one, if it scores equal on other parameters. Also, credit card companies give options like a one time fee to replace the annual fee or waive off the annual fee for the first year. Always ask for these waivers from the issuer.

Credit Limit
The credit limit is the maximum amount of money one can spend on his credit card. The higher the credit limit the more purchasing power it brings for a credit card holder. Credit limit given to a credit card holder depends on his repayment capacity and the status of credit card which he is applying for. Generally signature, platinum, titanium and gold credit cards have higher credit limits than silver, classic and regular credit cards. All other factors being same one should go for a credit card which gives a higher credit limit. Also you can get your credit card limit increased after a few months of usage by calling the bank.

Finance Charges
Credit card companies charge various fees, penalties, and charges which are clubbed together in a category called finance charges. These charges increase the cost of credit card ownership. Care should be taken to get complete details about the Credit card finance charges and then a judicious comparison should be made so as to arrive on a credit card which pinches least in terms of finance charges. The lower the finance charges the better it will be for the credit card holder.

Grace Period
Grace period is the time from the end of a credit card billing cycle, in which a credit card holder can pay his monthly outstanding balances in full without attracting any interest on it. Grace period allows you more time to pay your monthly credit card bills. Credit card companies offer grace period from 20 days to 50 days or more. The credit card with a longer grace periods are good provided they are competitive in other comparison areas.

Balance transfer
Credit card balance transfers are a good way to save money on outstanding balance interest rates. Transfering a balance from a high interest rate credit card to another credit card will yield benefits only when the credit card is having a balance transfer interest rate lower than the regular interest of the pervious credit card. The ideal situation is to have a balance transfer interest of 0%. Secondly, this balance transfer period should be relatively long. For example a credit card with 0% balance transfer for 12 months is definitely better with a credit card with 0% balance transfer interest for 6 months, as it brings an additional 6 months of interest free period on balance transfer.

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Credit Card Cash Vs Personel Loan

Personal loans from banks in India come in various flavours suiting to almost every imaginable need. Ease of availability, minimal documentation and even doorstep service has become the hallmark of personal loans from banks and financial institutions in India. But are they cheap? Certainly not! Personal loan rates are not equal for everyone; depending on an individual's profile, banks can charge anywhere from 12% to even 30% or more as interest rates on their personal loans. Coupled with the various fees charged on such loans, personal loans are quite a costly solution to personal finance problems.

Mistakenly or otherwise, many people are willing to take cash advances from their credit cards and use them for any personal finance emergency. This practice may sound convenient since all a person has to do is to swipe his credit card and get ready cash, but it has its own drawbacks, which can cause a great harm to the financial health of any individual.

Why do people take cash advance from credit card instead of a personal loan? No enquiries, no documentation, no running to the banks and no waiting for the cash could be the answer. Yes, personal loan requires a procedure, which could take anywhere between 24-48 hours for approval, besides this the banks do look for income requirements, employment eligibility, eligibility in terms of age and residence, a suitable guarantee (if applicable) before granting any personal loan, but when it comes to getting cash for any emergency, personal loans are far better than cash advances from credit cards. The reasons listed below will certainly open your eyes to the harsh reality that sets in once you have taken a cash advance with your credit card, instead of a personal loan.

Interest rates:

Personal loan interest rates vary from 12% to 30% depending on your credit worthiness as decided by the banks, but the cash advance from credit cards will be charged an interest rate upward of 35% in every case, and in some case it can go as high as 50%. This makes it a very high interest rate loan.

Fees and other costs:

Banks charge processing fees, administrative charges etc. while giving a personal loan. If you look very creditworthy to the bank and are willing to negotiate and compare offers from different banks, these fees can be waived. However, in case of a cash advance there is a non-refundable and compulsory cash advance fees with every such transaction. This fees can vary from 3%-5% of the total cash withdrawn, and when this fees has no upper limits things can become very costly. This cash advance fees has a certain minimum value as well, so even if you withdraw a single Rupee, this minimum cash advance fees will apply. The processing fees and other charges associated with a personal loan will seem meager when compared with this cash advance fees.

Interest rate through the repayment period

The interest rates charged on personal loan remains the same throughout the repayment period if you have opted for a fixed rate or it can vary little bit if floating rate was chosen. On the other hand credit card companies apply any repayments to balances with low interest first and so on. So, if you regularly use your credit card and repay fixed amounts, credit card companies will use it to offset your regular balances first and chances are great that your cash advance will be repaid only after your repayments has covered other outstanding balances. This will cause your cash advance to earn a high interest rates for the credit card company. In addition to it if for any reason you miss your repayments with the credit cards, penalty interest rates and late payment fees will increase your burden.

Cash advances from credit card, can be quite disastrous and are not a replacement for personal loans. However, if some circumstances compel you to take cash advance, it will be better that you repay your entire outstanding amount with the very next monthly bill.

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Credit Card Statement - How to read it.

You receive a statement every month reflecting the transactions on your credit card account. Your billing statement is a complete record of your account activity during the past month. Your statement is in two parts, separated by a perforation. The upper (also lower in some cases) smaller portion is the payment coupon, which you can enclose with your payments. The lower portion lists out the transactions on your credit card. When was the last time you read through your credit card bill? How confused were you by the time you finished? Here’s what to look in your statement.

• Your name & address: This is your name and address as per Bank’s records and you need to notify bank in writing if there is any change as soon as possible.

• Reference number: you should quote this number when you have a query on any charge listed on your statement.

• Your Card number: Please write on your cheque/draft when making payments, or any correspondence. You should also write your name and contact number on the back of the cheque / DD as it gives the collections agency a chance to get in touch with you in case there are any problems with the instrument.

• Statement period: This is the period for which charges incurred on your card are listed in the statement.

• Statement Date: This indicates the date on which your billing statement was generated.

• Payment Due date: To maintain a good payment history, please make sure that payment reaches the bank before this specified date.

• Total Amount Due: This is the total unpaid accumulated amount outstanding in your account.

• Minimum Amount Due: This is the minimum amount you are required to pay to keep your account in a good credit standing. This amount is 5% of your Total Amount Due.

• Annual Percentage Rate (APR): The Annual Percentage Rate (APR) is the yearly interest rate or percentage rate that you pay on an outstanding balance in the form of interest. Interest is charged as a percentage of your outstanding balance (purchases and charges reduced by payments or credits posted).

• Payment Details: When making payments please indicate the following details in the assigned boxes on the payment coupon:

1. Cheque number
2. Cheque date.
3. Cheque amount.
4. Bank & Branch on which the bill is drawn.

• You need to detach the payment coupon and send it along with your payment.

• Credit Limit: A credit limit is the maximum amount of credit that a bank or other lender or the maximum that a credit card company will allow a card holder to borrow on a single card.

• Available Credit Limit: This is the difference between your credit limit and the total amount due.

• Available cash Limit: This is the amount of cash you may actually withdraw as of your statement date, and is the difference between your cash limit and the amount of cash you have already withdrawn (subject to your available credit limit).

• Previous Balance: This is a one-glance account summary of the current financial status of your card account as of the statement date.
OTHER CHARGES include:

1. Renewal Fees.
2. Penal Charges for dishonored cheques.
3. Service Charges.

• Sale Date: This refers to actual date of purchase on you card.• Amount: This lists the corresponding amount against each purchase or cash advance or any other charge.

• Rewards Summary: This is the record of the rewards points you have earned/ redeemed. Above explained are the points that are visible on your credit card statement, but there are various other Key points you need to be aware of.

In the Bank’s terminology any credit card holder can be one of the following:

• Transactor
• Revolver
• Defaulter

Transactor is a person who makes 100% payment for his credit dues every time as per his credit card statement, i.e. the previous balance for every next statement is NIL and the Total Amount Due is paid by the cardholder before the due date.

Revolver is a cardholder who pays between 5% or 99% of the Total Amount Due (Minimum Amount Due is 5% of the Total Amount Due).

Defaulter is a person who does not pay even the Minimum Amount Due as per his credit card statement.

Here is an Example

From the given diagram, we have made an attempt to explain you that how do banks bill your transactions.

The above example explains the type of customer who pays more than his Minimum Amount Due and less than Total Amount Due. This type of customer is called a REVOLVER. And a bank earns the maximum from a revolver.

If, as per the above example the credit card holder pays the Total Amount Due (Rs.13, 000) after 25th January and before 10th January (due date) then the card holder will be called TRANSACTOR, because he is enjoying the maximum credit period with no additional interest cost.

And if the card holder pays after the due date, then he is liable to pay the following:

• Late Payment Charges

• Default Charges

• Processing Fee

• Service Tax

• APR

And all of these are payable from the date of transaction and also on the full amount of the transaction. This category of card holder is termed as a DEFAULTER.

A person can be a transactor in one month and a revolver in the next and a defaulter in the month after. It is a function of the payment made for that monthly cycle.

Some Tips On how you should plan your transaction to pay less on your credit card bills:

• Firstly know the billing cycle of the credit card you are holding. Eg. If your billing cycle is from 1st to 30th of every month and you get a GRACE PERIOD of 15 days then your due date comes out to be 15th of the next month.

• After this you need to plan your purchases accordingly, only then you will be able enjoy the maximum interest free credit period. Eg. If your cycle is like the given above then you should plan your purchases from 1st to 10th of every month to be a smart customer.

• You not only need to plan your purchases early, but also you need to plan purchases involving heavy expenditures earliest of all other transactions. This is because banks knock off the transactions as they have occurred as per their records. Therefore, when you will make payments then your bigger transactions would be nullified before your other transactions.

• Always remember that banks charge interest on the full amount of the transaction whether is half paid or partly paid, so clear all your dues as early as possible.

• To be a SMART customer you should always pay the Total Amount Due on your credit card statement and that too after your billing cycle but before your due date, that ways you can enjoy the maximum interest free credit period.

• So now I am sure you are aware as to why you have so much interest charged on your credit cards transactions and also how it is charged. I hope from now you can read your statement smartly and use your card more efficiently by remembering