Pay with debit card and get cash back offer

Now banks are encouraging use of debit cards so pay with your debit card for your shopping, it might get you cash back offer of other incentives.

However banks have faced loss in the credit card segment but are looking at the possibility of make fee-based income therefore public and private sectors banks are more and more persuading their customers to use the debit card.

Banks are offering up to five per cent on certain categories of purchases and redeemable reward points are on offer. Most of the banks including State Bank of India are extensively publicizing the incentives being offered on use of debit card.

An HDFC official informed Business Line, “We have a cash-back program on premium card variants such as gold and business debit card and roll out value-added merchant offers/discounts to our customers from time to time”.

A senior ICICI Bank official from Mumbai told, “We encourage our customers to use the debit card as the product offers great value and convenience. We have seen significant increase in our billings as our customers are becoming increasingly comfortable with our product”.

Mr Mathew Joseph, Deputy General Manager, Andhra Bank says persuading customers to use debit card is to win-win for banks.

He stated, “If volumes can get bigger, debit card use can bring in some fee-based income to banks”. Normally, banks get 1.5-1.7 per cent commission on usage of debit card.

The most important factor is this will help banks in cutting transaction costs. He pointed out, “In brick and mortar banking, transaction cost is about 40 per cent (for every Rs 100 drawn) while in ATMs it is Rs 18. By encouraging cashless transactions, this can be brought down significantly as cost-cutting is now a main focus area”.

Check your card’s credit limits with your bank

Most of the consumer’s complaint that they did not received any information about the recent lowering of credit card limits by card-issuing banks the usual way – via a bank statement, email or SMS.  A senior Mumbai banker told that they came to know about the sudden development only when their swipe card transaction was declined at a merchant establishment. The bankers pointed out the distressed consumers can file a complaint at the banking ombudsman on two conditions.

First condition bank did not notify about the change. As per Banking Codes and Standards Board of India, an independent banking industry watchdog, banks should inform about any change in fees or charges, through the website, statements of accounts , email, SMS alerts and notice board at branches — 30 days before the revised charges come into effect.

Not notifying the consumers about the changes is a violation of the Code of Bank’s Commitment. The banker pointed out, “Banks sometimes try to wriggle out of their responsibility of informing customers by saying that the statement (to the effect) had been mailed. But they have to prove that it was received by the customer by producing a copy of the acknowledgement along with the date of issue of the statement.’’

Another condition is in case of deficiency in service case for “loss of face” one has to face when a card transaction is rejected in public. Generally consumers do not report one-off denial of card swipe, while it can put them into serious embarrassment and inconvenience, especially at a restaurant, a medical facility or while paying for tickets.

Consumers can face the similar situation in case of vis-a-vis debit cards too. In a recent case a Mumbai resident, produced his debit card at a supermarket, was shocked to find out that his transaction was denied. The counter executive possibly will not be able to swipe the card more than twice, as after a third unsuccessful swipe, it would get automatically blocked. The consumer got worried about his account balance. Therefore he called up the bank helpline and was reassured to learn that it was safe.

Soon Credit history can be obtained directly from CIBIL

By the beginning of the next financial year 2010-11 customers will be able to directly access their credit history. Currently customers have to depend on banks but now they can directly approach the Credit Information Bureau of India for information for their credit history on payment.

Mr Arun Thukral, Managing Director, CIBIL, in an interview told Business Line, “We are working on providing information of credit history to customers directly.” Generally CIBIL share information with closed user group such as banks, in reply to customer’s data provided by the banks. On being asked when the customers will be able avail the facility of accessing the information, Mr Thukral replied it would be ready by the beginning of the next financial year 2010-11 and the guidelines are being structured by the regulator in this regard.

At present when bank rejects loan application giving the reason negative credit history then the customer have to ask the bank to provide his credit history done by CIBIL. Mr Thukral said, “This would help customers in instances of wrong identification, which he can challenge with the information provided by the credit bureau within 30 days.” With the introduction of this facility people will get help in improving their financial discipline and build a better credit history.

He added usually the borrower obtain information from CIBIL only when his loan gets denied by the bank, he said. He said, “We are getting our technical partners to help us on this front and also intend to have an educational program on financial discipline to create awareness among customers on how to read their credit history”.

Regarding the risk of ‘identity theft’, if a stolen credit card or pan card is used to access that person’s credit history, Mr Thukral explained the checks will be done to verify the identity before details are given out. However, he informed, till now no fool-proof model has been designed to detect, if multiple identity fraud is deliberately done. He also pointed out that the challenge the CIBIL has been facing is that there is no unique identification number for a particular person.

SBI: to launch credit card facility in Imphal

Soon the people of Imphal will be getting to see the credit card also known as ‘plastic money’ as the State Bank of India (SBI) country’s largest public sector bank working out the process of introducing the Credit Card facility to its customers.

Assistant General Manager SBI, Imphal Benu Hazarika disclosed about this ongoing process during speaking at the golden jubilee celebration of the bank held at Old building at MG Avenue.

Benu Hazarika said that the public sector bank had launched the facility in Guwahati recently with similar facility to be extended to the State at the earliest.

He further said that despite its low interest rate, the rate of availing Home Loans in the State is very low.

He however opined that it might be due to people of the State not aware enough regarding the facilities provided by the bank in Home Loans.

Benu Hazarika informed that four more ATM machines have been bought and will be soon installed at MG Avenue branch shortly in addition to the two existing ATMs.

He also assured that with the installation of these four machines, would ease the customers from the associated inconveniences of having to stand in long queues.

Benu informed in case of technical complicacies, the Imphal branch has purchased new UPSs and a 100 KVA generator to solve it.

Benu further said regarding the ‘connectivity’ with other within the State and beyond, will fully depends on the service provided by BSNL.

The Assistant General Manager further added that the branch has also communicated to the Reserve Bank of India (RBI) regarding the ‘mutilated notes’ circulating in the State.

He notified that at the Imphal branch a Coin Vending machine has been installed from which one can draw out any number of coins.

Benu also highlighted to the gathering that SBI is offering Real Time Gross Settlement Scheme (RTGSS) in which any SBI customer can carry out transaction of money to the accounts of other banks with a minimal charge of Rs 25.

Bank even is offering paperless and hassle free banking to its customers, the bank too has the Internet Banking (INB) facility like any other private banks.

He said SBI through Power Pact and Power Gain facilities offering benefits for business community.

Former Minister Lt Col (Retd) H Bhubon Singh as chief guest and SBISA NE-Circle, CVP Th Rohinikumar graced the Golden Jubilee celebration function and SBI Development Banking Division Manager Tonglu were as guests of honor.

The function was presided by the SBI Imphal AGM Benu Hazarika.

The SBI Imphal started operating on January 25, 1959, has gathered manpower and infrastructures from the erstwhile Manipur State Bank Limited which at present has 20 branches in the State.

Banks will charge hefty penal interest of 49% on defaulting credit cards

Now the MNC banks will charge hefty penal interest up to 49% on defaulted credit card payments. In a recent judgment the Supreme Court has allowed MNC banks to charge penalty up to 49% on defaulted credit card payments. This has brought an end to the respite of lakhs of credit card holders which they had since September last year when the National Consumer Disputes Redressal Commission capped the penalty at 30%.

The apex court has stayed the Reserve Bank of India (RBI) consumer forum’s order given to banks not to charge more than 30% interest on defaulted payments on credit card purchases. Last year SC had turn down the appeal of banks against the NCDRC’s order.

The judgment was passed by a Bench comprising Justices B N Agrawal, G S Singhvi and Aftab Alam in which they 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.

The bench approved the plea of banks may be because of a lapse by the very same NGO ‘Awaz’ that was active in getting the NCDRC order pegging the penal interest at 30% last year.

However four months ago the Bench had sent a notice to the NGO but it has not sent in its response yet, maybe helping the court to see good point 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 had formed group to apprise the apex court of their compulsions to charge between 36% to 49% interest on defaulted payments on credit cards. Citibank notified, “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 filed an application, through Counsel Rupinder Suri in which it stated facility of credit cards can be availed without any interest for a certain stipulated period and it was only after the expiry of that period bank will charge penal interest on default of payments.

The bank pointed out while justifying the high interest rate allowed by RBI on defaulted 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”.

While 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 formers failure to make full payment on the due date or paying the minimum amount due, is unfair trade practices.”

It also stated that penal interest can be charged only once for the period of default and should not be capitalized while terming the practice of computing interest on monthly basis as “unfair trade practice”.

To justify the high interest rate on default payments by credit card holders’ banks listed as many as 27 factors that included even the SMS alerts it sends to the card holders.

Also the cost of acquiring a new customer, that is the cost of calls made randomly by authorized call centers urging people to take credit cards, was also included for realization through charging of penal interest from a defaulting card holder.

The banks notified, “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.”

Credit card fraud busted housewife arrested

Kanika Buddhiraja (27) staying in Rana Pratap Bagh, to her neighbors is fashionable housewife. She did her schooling in a Mussoorie convent, graduation from one of the best colleges in Delhi, before getting married to a textile merchant.

She did Rs 5 crore e-ticketing frauds along with the Thailand-based mother Karampal Kaur Shetty, Kanika the family had engineered over the last one year. The two, along with Kanika’s brother Sarabjit Singh evidently started this “business” two years ago soon after Kanika’s father died. Delhi police sleuths along with their counterparts from Kolkata exposed the racket on arresting three persons from that city. On interrogating the accused, Kanika name came forward and she was arrested from Delhi.

Neeraj Thakur, DCP (crime and railways) told, the gang used to obtain airline and railway tickets online using credit card details allegedly acquired by Karampal, a Thai citizen, from her contacts. Police told in Thailand, a “packet” of 400-500 credit card details can allegedly be obtained for 20,000 Bahts, easily..

“The gang took cash from customers, promising them cheap tickets. When the concerned airline or the bank tried to realize the money from the credit card owners, the card owner would threaten legal action for being charged for a journey they never undertook,” said Thakur.

As per information of crime branch sleuths, credit cards of over 40 Indian and foreign banks were misused by the gang. In fact gang used one American Express premium card for buying 700 tickets over a period of two weeks.

According to Thakur, the affected airlines included Deccan Air (now Kingfisher Red), Kingfisher Airlines, Spicejet, Indigo and Air India. Indian Railways did not escape too.

Amid the three arrested from Kolkata is Naeem Ahmed (24). An officer informed “He is the one of the main brains behind the racket. He bought the tickets and his associates sold them to customers at heavily discounted rates”.

His co-conspirator Shahid Iqbal (25) owns a travel agency by the name of Chand Travels in Kolkata. He used to sell the tickets prepared by Naeem to his customers along with Feroz Alam (23) who runs another travel agency by the name of Janta Travels.

Banks cut down benefits on credit card

Credit card issuing banks are cutting down the benefits available to customers.

Some of the credit card issuers have started cutting down the basic cash withdrawal facility, or lowering them, others are reducing the reward program to keep a check on unsecured loans.

Barclaycard, the card division of the Barclays group, has conveyed to some of the credit card holders that the cash limit has been reduced to zero “to help manage the credit situation”. The new competitor to the cards business in India has SMS messages to card holders informing them about the change. A customer care executive told that the limit has been lowered for all card holders.

Likewise, for some of its customers HSBC have reduced the credit limit by over 50 per cent, including the amount of cash a card holder can withdraw, whilst ICICI Bank, the largest credit card issuer in India, in the coming weeks will be announcing similar measures.

Besides this, ICICI Bank and HDFC Bank will also be reducing the rewards program. ICICI Bank through monthly statements has already informed its customers about the withdrawal of certain benefits, HDFC Bank has also mentioned in its monthly statement that the MyRewards program will be updated from next month. ICICI Bank told that the Xpress Rewards Program has been withdrawn for all credit card holders, while the basic rewards program continues.

Though most banks did not respond to questionnaires e-mailed on Saturday.

These measures from the credit card issuers have come at a time when banks are reworking their strategy on unsecured loans such as credit cards and personal loans, segments which have seen a steep rise in delinquency levels.

“By reducing the credit and cash limits, the banks want to ensure that their exposure to unsecured loans is kept at a minimum and the risk of rising defaults is mitigated. As the chances of job losses increase, the customers are likely to go for aggressive spending on credit cards going forward. This raises the chances of higher non-performing assets (NPAs) in the banks’ loan books, which urged the credit-card issuers to lower the credit limits,” said Deepak Agrawal, banking analyst at Brics Securities.

An analyst said in the coming days banks might also look at reducing the interest-free period available on credit cards.

As per approximate data available with banks, during the last 12 months credit card negligence has more than doubled to over 10 per cent. The other tormenting aspect is the high degree of turn over which is indicated by a rise of 86 per cent for the year up to August.

In India the credit card base has been estimated at around 27 million, out of which ICICI Bank has over 9 million credit card holders.

As per information available from the Reserve Bank of India, the total credit card outstanding at the end of August was approximately at Rs 29,000 crore, which is high around Rs 13,500 crore over the corresponding period last year.

Banks cut down on credit card sale agents and sale of cards

Now you might not be getting irritating calls from the bank BPO or executives offering credit cards as the banks and credit card issuers such as ICICI Bank, Citibank and HSBC have cut down on cold calls to potential customers. According to industry estimates the banks and credit card issuing companies have cut down on calls by 50% against 200 calls made in a day even as recently as six months ago. In the past six months the private banks have reduced the number of direct selling agents, who were given the job of selling credit cards by as much as 25%.

A senior official of a leading Mumbai-based private sector bank informed, “We have curtailed the use of DSAs in India as the concept is not working according to our expectation. Also, with the economy slowing and prices moving northward, we are becoming careful about unsecured lending at this critical juncture.”

ET sent an email sent to ICICI Bank, Citibank and HSBC but did not receive any response. A senior official of HDFC Bank said, “We have relied more on our in-house team to sell credit cards, as it helps connect with customers better.”

According to the Credit Card Management Consultancy approximation, a firm that tracks the credit card industry private banks has reduced their marketing expenses on these channels in the past few months.

Credit cards cover terror attacks under personal accident cover

The credit cards which cover personal accident also include terrorist attacks in the policy. Therefore the kin of those killed in terrorist attacks such as the recent one in Mumbai should double-check victims’ credit cards for personal accident cover. The insurance regulator and card issuers stated terror attacks are automatically included in policies that cover “death due to any cause” and claims by beneficiaries should be considered.

Although in most cases, card holders interested in personal accident cover have to pay for it, but HSBC offers such cover free of charge to holders of its ‘Premium’ and ‘Platinum’ classes of cards.

A representative of SBI Card, one of the largest card issuers in India said, “Terror attacks like the one which happened in Mumbai are covered under the terms and conditions of the policy. This cover is not for free and the customers opting for this policy pay for it.”

Royal Sundaram Alliance Insurance or New India Assurance Company provides insurance cover to Citibank card holders who are interested in purchasing personal accident cover. Ajay Bimbhet, MD & CEO of Royal Sundaram Alliance, told his company’s agreement with Citibank includes terror cover.

“Terror attacks would automatically be included in a policy that covers ‘death due to any cause’. It would also be absurd to make a distinction between damaged caused by state action against terrorists and damaged caused by terrorists during encounters while paying claims,” says Insurance Regulatory & Development Authority (IRDA) member (actuary) R Kannan.

According to sources nuclear, biological and chemical terrorism are not included under the terms and conditions governing group personal accident cover. The quantum of cover provided completely depends on the sum guaranteed under the policy which the credit card holder chooses.

HSBC Cards offers complimentary cover of Rs 1 crore for its Platinum card holders in case of accidents traveling by air and up to Rs 10 lakh for accidents in the course of rail or road travel. For those who have paid for personal accident cover, it is Rs 2 lakh for holders of its Classic cards and Rs 4.5 lakh for Gold card holders. When ET reporter contacted banks, they refused to reveal the number of card holders who were being given complimentary cover or how many had opted for paid personal accident insurance.

Banks cut down credit card limit’s for all credit card holders

Both private and state-owned banks are aggressively lending to retail customers as interest rate have come down. On the other hand because of global financial crisis and a squeeze on domestic liquidity, most banks, including the country’s largest private bank ICICI bank have intentionally started bringing down their retail operations. Due to increase in number of defaults banks have become more cautious on all kinds of consumer finance and retail loans, especially two-wheelers, personal loans and credit card loans.

Following the line banks have cut down the credit limit of credit card holders.

Manoj Sharma (name changed to protect privacy), a 27-year old Central Government employee in Delhi, a few days ago was shocked to see that his credit limit on his Barclays Bank credit card has been sniped by almost half to Rs 10,000 from Rs 18,000 which he enjoyed for the past 14 months. It was rude in the sense Sharma had actually made a case with Barclays for a hike in his credit limit but, instead it was reduced.

When he contacted the bank, the helpdesk was unable to give him much justification for the cut in his credit limit. Sharma told The Indian Express, “A representative just told me that the bank had been doing this to a lot of customers lately, though it wasn’t clear why”. He argued that fairly he has a clean credit history on it. On a fortnight later, Sharma received an e-mail from Barclays saying “the bank reserves the right to revise a customer’s credit limit but that same is not necessarily an indicator of your financial standing… request you to contact us after six months for us to review your card account limit enhancement.”

Sharma is not the alone cardholder to be get hit by credit crunch but almost all Indian bourgeois. Over the last four years credit card payment had grown at a phenomenal 40 per cent on an average. In India there are around 25 million credit card holders and the numbers had increased to an extraordinary 40 per cent a year over the last four years with India maintaining a healthy growth rate of 9 per cent plus.

Now the nonstop calls from bank executives and direct selling agencies aggravating you for a new credit card or to have the credit limit on your existing card raised have almost stopped.

Banks are no longer asking to fill out a credit card invoice form at the petrol pump so that they can charge it to your card. In case you plan a shopping trip abroad, your bank may not be too comfortable with the idea. Manhattan Bank is sending warning e-mails to all its users asking them to inform them about any plans of going abroad and using their credit card there beforehand.

A bank executive told The Indian Express that they are carrying out thorough bi-annual reviews of the credit history of their card users and are conscientiously bringing down the credit limits of those with even slightly problematic histories. Many bankers acknowledged that they have become more cautious while giving out personal loans.

As per the data of the Reserve Bank of India, the number of credit cards circulating in the country has fallen by about 1.5 million in the first five months of the current financial year to 26.73 million. However credit card debt, do not account for a significant percentage of total bank credit in the economy (just over 1 per cent). Bankers are view that in the current crisis they have no option but to resort to such penny pinching.