Credit Cards.

Credit Cards - Money Matters.

This post is about credit cards. Credit card is convenient for commercial transactions. It is easy to use and is easy to carry. We don't have to carry currency for buying things and it can be used for variety of purchases in many locations across the country and abroad.

Importance of Credit Card.

Credit cards have revolutionised the credit system. Since it is a technology driven instrument, its increasing use indicate progress and development of people. A credit card is issued by a credit card company, usually a bank, to a person who is eligible for it. People who maintain satisfactory balance in bank account through regular transactions could easily get a credit card.

A credit card improves the purchasing ability of a person. It provides the freedom to purchase anything and pay later. Credit card is no longer a luxury; it is a utility instrument. It is a foolproof mechanism for payments and it is recognised the world over as an efficient and quick payment device.

Credit in Card.

Credit card is an advanced lending system which uses high technology. The credit card company pays the seller directly for the purchases made by the card member (credit card customer) and later on seeks payment from him. This is like an unsecured loan, where the card member gets credit facility without providing any collateral security. Credit card could not have been possible without sophisticated computers with intricate networks and the people who make them work.

Just imagine the complexity involved in this simple card. We go to a shop and purchase something and use our card to pay the bill. The shopkeeper swipes the card and the machine recognises us as a registered card member. The shopkeeper enters the amount and asks us to enter our PIN. When we do that, the machine verifies our identity and our transaction and confirms it. The shopkeeper receives payment instantly and we get the SMS confirming the transaction. This process hardly takes a minute or two.

Uses of Credit Card.

A credit card is used for purchasing either goods or services. Almost anything could be bought with it. We can purchase items of daily use, can book flight or train tickets, pay insurance premium or pay bills online. We can use it for transactions in e-commerce sites and many other net based platforms.

Eligibility for Credit Card.

There are some requirements for credit cards. As banks or credit card companies provide you the power to purchase first and pay later, they will ensure that you are capable of paying the dues on time. Three things are mandatory:

• The occupation and Income proof.
• Proof of address and personal mobile number.
• A bank account with linked PAN and Aadhaar Number.

These are the three minimum requirements for a basic card. The requirements will be more for cards with higher value. The value of a card depends upon its features, the benefits and the card limit. The higher the card limit, the greater will be the eligibility requirements.

Banks and their Credit Cards.

Banks provide credit cards as they have considerable expertise in lending. Almost all banks in India have a presence in the credit card business and they offer many different cards with many features and benefits. Some of the leading banks offering credit cards in India are:

(1) State Bank of India: SBI has a number of credit cards to offer. They offer these cards for various purposes and have named different categories such as Lifestyle Cards, Reward Cards, Shopping Cards, Travel & Fuel Cards, Banking Partnership Cards and Business Cards. Each of these categories have a number of cards to offer.

(2) HDFC Bank: HDFC Bank also has considerable expertise in the credit card business. Like SBI, they too offer cards under different categories. HDFC has the following categories: Regular, Premium, Super Premium, Co-branded Cards, Business Cards, Cashback Cards, Secured Cards and Prepaid Credit Cards.

(3) ICICI Bank: ICICI Bank offers credit cards with benefits and features which are comparable to other banks.

(4) Bank of Baroda: Bank of Baroda offers credit cards with many features. BOB offers six types of cards: Premier, Select, Easy, Swavlamban, Unnati and Prime.

(5) Axis Bank: Axis Bank credit cards are also well known in the market.

(6) Punjab National Bank: PNB has a credit cards division just like other nationalised banks and they too offer cards with many features.

(7) Union Bank of India: Union Bank of India also offers credit cards to customers.

These banks are well known in India and they have a robust track record in the lending business. There are other banks too which provide credit cards, but to discuss all of them in this post would be a tiring task, as every bank has a lot of cards to offer.

How to get a Credit Card?

You can apply for a credit card by going to your bank with the required documents and filling up the application form for the card. If you meet the eligibility criteria, your application should be processed within a day or two and the card should be delivered to you within a fortnight. Some banks deliver the card within a period of 7 to 10 days.

Getting a card is relatively easy if you have a decent bank balance and regular transactions. The bank will be happy to offer you a card if you have a salary account or if your salary is credited to your account. Banks offer many things to customers who maintain their account well.

You can also apply for a credit card online. The bank will contact you when they receive your application and after verification, will issue the card to you.

Advantage of Credit Card.

Credit card have the following advantages:

• It is convenient to use. You don't have to carry money to buy things. It is as good as currency notes because the payment is instant and you get proof of payment quickly through SMS.

• As you get credit for a month or more, you have time to pay your bill. There are many methods by which you can pay your credit card bill. You can pay through cheque or net banking. You can also use mobile Apps. People who can't remember payment due date can use auto debit facility.

• If you don't have money to settle the bill at once, you can pay the minimum amount due and can still use your card for purchases.

• If you own a credit card and maintain it properly, you can get an add on card for your family without much formalities.

• Most credit cards have reward points. You get reward points against your purchases, which you can redeem later.

Disadvantage of Credit Card.

The disadvantages are:

• It is expensive due to its high interest rates. Credit Cards charge around 30 to 40 percent as interest annually which is very high. The rate of interest will depend upon the features the card offers.

• Although credit cards can be used for most purchases, it cannot be used everywhere due to its technical limitations. For example, it cannot be used in small shops where card swiping device isn't installed or doesn't work.

Credit Card Charges.

Charges are the most annoying feature of a credit card. The charges are exorbitant and ruthless. A credit card company has many reasons to charge and they do it diligently, without fail. While the purchases you make through the card makes you feel easy and relaxed, you feel the opposite when you receive the bill. The ease and convenience of buying through the card is quite expensive. The credit card company will send you messages of new offers, reward points, cash benefits and so on, to entice you to buy more. When you buy those things, you get the reward in the form of a huge bill. Reward points are not as encouraging as it seem. Lets see the charges involved in a credit card.

(1) Annual Charge: The fee charged from the customer at the time issuing new card to him is called the annual charge. As this fee is charged at the time of joining the credit facility, it is also known as the joining fee. This is a one time fee. The fee depends upon the type of the credit facilities availed, its value and the features offered. Not all cards come with the annual fee; some are free too.

(2) Renewal fees: The renewal fees is what the customer pays every year to renew his card and it is more or less the same as the annual fee. The renewal fee makes the card valid for use for one more year. The renewal fee is added to the credit card bill at the card's anniversary and it shows up in the statement.

(3) Cash Advance fee: This fee is charged by the customer if he uses his credit card to withdraw cash. When cash is withdrawn through credit card, the charges are applicable.

(4) Cash Payment fee: Some banks / credit card companies charge the customer if he pays the dues in cash. Normally, online payment is the unspoken norm for all companies because, by default, the customer is considered as net savvy and competent to pay online. So, if a customer goes to the bank to pay the bill manually, he is punished with a fee.

(5) Finance Charges: The finance charges include all transactions that take place through the card and it is billed every month. Finance charges may also be referred to as service charges. Finance charges are applicable for dues which are not paid, cash withdrawals, late payment etc. even if there is no transaction.

(6) Late Payment Charges: Credit card companies are very punctual. They bill the statement on time and expect the customer to pay the dues on time. If a customer misses the date on which the payment has to be made as per the statement and pays after the due date, he is charged with a fee.

(7) Over Limit Charges/Fees: If a credit card company allows a customer to buy above his credit limit, it would mean that he will be charged with an over limit fee. Usually, the cardholder is not allowed to transact if he exceeds the credit limit, but sometimes, looking at his previous credit performance, he may be allowed to do so. In such case, this fee is charged.

Some Important Points.

Some important points regarding credit cards are:

(1) As credit card provides unsecured credit, its interest rate is high. It should always be used with discipline. Paying high interest for too long is not feasible. It could drain savings in a big way.

(2) Don't lend your card to anybody. Your card is your personal property and it should always be in your custody. You can give your card to people whom you trust, like your children, but they should be well guided and informed about its use.

(3) Ensure that you are a registered card member. Don't change your registered Mobile number frequently. See that you are receiving SMS of all transactions promptly. If you don't, report it to the bank/credit card company immediately.

(4) Don't use more than 50% of your available credit limit. This should particularly be followed if you are unable to pay the total due amount. Record your transactions in a notebook or diary and check it regularly to know the status of your card and the outstanding amount.

(5) Avoid withdrawing cash from credit card as the rate of interest is exorbitant. A credit card looks like a debit card, but functions much differently. The debit card allows you to withdraw your own money, whereas, a credit card will allow you to withdraw money on credit. The difference in charges is therefore obvious.

(6) A credit card gives you three options to pay the bill. They are:

• You can pay the Total Amount Due or
• Minimum Amount Due (MAD) or
• Any other Amount. Any other amount should always be more than the minimum amount due.

The best way is to pay the total amount due. If that is not possible, try to pay any other amount. If that too is difficult, ensure that you pay the minimum amount due at all costs. As credit cards put heavy penalties on customers who don't pay even the minimum amount due on time, it is always important to pay it before the due date.

(7) Don't forget to read your credit card statement. It is a record of your transactions and you should be aware of it. The credit card statement is sent every month to customers. Earlier, the credit statements were sent through post, but with an increase in the number of customers, this became costly. Now, most credit card companies mail statements to their customers. Sending statements through email is quick, easy and cost effective. The card statement shows you the true picture of your liabilities. You can see the data of your purchases and your payments and can take corrective steps if it is needed.

(8) If you accidentally lose you card or if it gets stolen, report it immediately to the bank or block it through your app or net banking facility. A stolen card is likely to be misused and so, be alert and take steps immediately to avoid unpleasant things to happen.

(9) Set limits for purchases on the credit card. Credit card companies allow the card member to set up limits for purchases and cash withdrawal. This is for the safety of the card member. A card member can determine his limits for making purchases through merchants either physically or virtually.

• He can enable or disable his card for cash withdrawal from ATM.
• He can block or limit international transactions (purchases and withdrawal).
• He can make these settings and change them at any time through net banking.

People who own credit cards should always make use of this feature to avoid overspending.

A credit card gives us the freedom to buy what we want, but we should know our limit. A credit card is useful only if we use it wisely.

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PS: There are many different kinds of credit cards in use today. Here is a list of credit cards from two well known banks in India.

STATE BANK OF INDIA

SBI Business Cards (2 Cards)

1. SBI Card PRIME Business
2. SBI Card ELITE Business

SBI Lifestyle Cards (5 Cards)

1. SBI Card ELITE - VISA Signature
2. SBI Card ELITE Advantage - VISA Signature
3. SBI Card PULSE 
4. Doctor's SBI Card - VISA Signature
5. Doctor's SBI Card (in association with IMA) - VISA Signature

SBI Reward Cards (8 Cards)

1. SBI Card PRIME - VISA Signature
2. SBI Card PRIME Advantage - VISA Signature
3. OLA Money SBI Card - VISA
4. Apollo SBI Card
5. Tata Platinum Card
6. Tata Titanium Card
7. Paytm SBI Card
8. Paytm SBI Card SELECT

SBI Travel & Fuel Cards (14 Cards)

1. BPCL SBI Card - VISA Platinum
2. BPCL SBI Card OCTANE - VISA Signature
3. IRCTC SBI Card Premier - VISA Signature
4. IRCTC SBI Platinum Card
5. IRCTC SBI Card (on RuPay platform) - RuPay PLATINUM
6. Club Vistara SBI Card
7. Club Vistara SBI Card PRIME
8. Etihad Guest SBI Card
9. Etihad Guest SBI Premier Card
10. Yatra SBI Card
11. Air India SBI Signature Card
12. Air India SBI Platinum Card
13. Mumbai Metro SBI Card
14. Delhi Metro SBI Card

SBI Banking Partnership Cards (18 Cards)

1. UCO Bank SBI Card ELITE
2. UCO Bank SBI Card PRIME
3. UCO Bank SimplySAVE SBI Card
4. Central Bank of India SBI Elite Card
5. Central Bank of India SBI Card Prime
6. Central Bank of India SimplySAVE SBI Card
7. City Union Bank SBI Card PRIME
8. City Union Bank SimplySAVE SBI Card
9. Allahabad Bank SBI Card ELITE
10. Allahabad Bank SBI Card PRIME
11. Allahabad Bank SimplySAVE SBI Card
12. Karnataka Bank SBI Card PRIME
13. Karnataka Bank SBI SimplySAVE Card
14. South Indian Bank SBI Platinum Credit Card
15. South Indian Bank SimplySAVE SBI Card
16. KVB SBI Signature Card
17. Karur Vysya Bank - SBI Platinum Credit Card
18. Karur Vysya Bank - SBI Card

SBI Shopping Cards (21 Cards)

1. FABINDIA SBI CARD
2. FABINDIA SBI CARD SELECT
3. Lifestyle Home Centre SBI Card SELECT - VISA Signature
4. Lifestyle Home Centre SBI Card PRIME - VISA Signature
5. Max SBI Card - VISA Platinum
6. Max SBI Card SELECT - VISA Signature
7. Max SBI Card PRIME - VISA
8. Spar SBI Card
9. Spar SBI Card SELECT - VISA Signature
10. Spar SBI Card PRIME - VISA Signature
11. Lifestyle Home Centre SBI Card - VISA
12. SimplyCLICK SBI Card - VISA Platinum
13. SimplyCLICK Advantage SBI Card - VISA Platinum
14. SimplySAVE SBI Card - VISA Platinum
15. SimplySAVE Advantage SBI Card - VISA Platinum
16. fbb SBI STYLEUP Card - VISA Platinum
17. Central SBI Select Card - VISA Platinum
18. Central SBI Select+ Card - VISA Platinum
19. SBI Card Unnati - VISA Platinum
20. Shaurya SBI Card - RuPay PLATINUM
21. Shaurya Select SBI Card - RuPay SELECT

PUNJAB NATIONAL BANK

PNB Credit Cards (10 Cards)

1. PNB RuPay Platinum Card
2. PNB RuPay Select Card
3. PNB RuPay Millennial Card
4. PNB Rakshak RuPay Platinum Card
5. PNB Rakshak RuPay Select Card
6. PNB Visa Classic Card
7. PNB Visa Gold Card
8. PNB Visa Platinum Card
9. PNB Visa Signature Card
10. PNB Wave & Pay Credit Card

PNB Co-branded Cards (2 Cards)

1. PNB Patanjali RuPay Select Card
2. PNB Patanjali RuPay Platinum Card

PNB All purpose Credit Cards (3 Cards)

1. PNB Global Platinum Credit Card
2. PNB Global Gold Card
3. PNB Global Classic Credit Card

These are credit cards from SBI and PNB. To known more, please visit the respective bank's website.

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The previous post was: How professionalism influence income?

The next post is: How to grow Fixed Deposits?

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