Puneet Lakhotia, 27 year old bank employee had signed up for an ICICI Bank credit card. He used his card to book tickets online but none of the ticketing websites accepted his regular bank’s net-banking facility.But instead of only booking tickets online, his expenses splurged. Within a year, he was in a debt trap. “Due to the convenience it offered, I used the credit card to pay bills and shop online for books, movies, music CDs and even bought a cell phone,” says Lakhotia. After facing this hardship, he has surrendered his credit card and keeps Itzcash, a pre-paid card for online transactions.
It is very common to hear that credit card was used for convenience. Many of them pay their restaurant and hotel bills as using a debit card involve punching the four-digit identification number. Then there are other advantages are attached to the credit cards like cash-back benefits or points that attract more expenses.
ICICI Bank, the country’s largest private sector bank has compiled a data in which it has mentioned top five expenses that consumers make through credit cards include travel and related activity (including tickets and hotel bookings), fuel refilling, consumer durables, apparel and garments and jewellery. Payment of utility bills is also fast catching up.
“Around 8-12 per cent of business comes from the top five areas. At least, 10 per cent of card-holders pay at least one of their utility bills every month through cards,” said a banker from a private sector bank.
Usually consumers do not keep up to a few expenses, but always start over-spending. For those, who cannot control their expenses from splurging, to use an alternative-payment mechanism is a better idea.
For instance, for online ticket booking pre-paid cards are best option. Three – such cards are currently available in the market — Itzcash, OxiCash and Done Cards.
These three cards can be used for a host of other purchases as well. With these cards you can do online shopping, insurance purchases, mobile recharge and many others.
Similarly to credit cards, these cash cards are also levied with cost, but only for a few transactions like railway bookings and bill payments for public sector utilities because government-owned companies do not give any commission to cash card companies. “The charges are either a maximum of Rs 15 or 1.5 per cent of the value of these transactions, whichever is higher,” said Naveen Surya, managing director, Itzcash.
On petrol bill payments, credit card companies give bonus points and a waiver of fuel surcharge of 2.5 per cent.
Substituting them with pre-paid cards from oil companies will get you the same benefits. All the three major oil companies have their own branded cards. For instance, Bharat Petroleum has a Petro Card and Hindustan Petroleum has HP-Smart 1. None of these cards attracts a surcharge and offers similar loyalty bonuses.
The customers who are enthusiast for clothing and consumer durables, most retailers on Thursday have started loyalty program that give discounts for cash purchases. The persons who can’t control their spending should go for options that require the use of more cash. It will save them from the trouble as well as a high interest payout.
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