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Indian Credit Cards – Think before you consider taking one !

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After living in US for more than 4 years, I am used to paying by credit cards 95% of the times. Infact, anytime you check my wallet, you will see more cards than cash notes. I rarely keep any cash. From the grocery store to fuel pump to cabs, anywhere and everywhere I use credit cards and never ever worry about getting charged extra or anything like that. The Credit system is so developed in US, that consumers and credit card companies both have very little risk to worry about.

Not in India !

As soon as I land in Mumbai, I first make sure that I am carrying cash. I do all my purchases using pure cash - nothing else !
In late ninetees, I was keen on using credit cards. It was kind of a new fad. However, I soon realized that I was spending double in purchases when using plastic, and was paying thrice when I got billed by credit card companies. I never had any idea of how late fees worked and how finance charges were calculated. After 6 months of craziness it was time for me to cut my credit card into pieces and promising myself never to use them again.

How many of you have such stories to tell. I bet there are many of you out there.

In India,  you visit any bank or ATM, you are sure to find trademark sales people specifically trained to identify the prospective customers and approaching them without giving a second thought. Almost everytime I am in a line on an ATM, I have been approached by these people. They are very aggressive and most of the time, first time buyers are caught here. Nowadays, with Indian middle class consumer growing Indian Credit Card picturerapidly, the credit card companies are swelling like never before with these aggressive tactics.

But is India ready for credit cards ? Do we have a structure in place to find a certain individual’s credit worthiness? Do we have a stringent policies on how credit card companies are charging their customers? Do credit card holders understand what they are paying for ?

I am sure most of these are grey areas and here is where lies the major problem, both to the consumer as well as credit card companies.
Here are some of the excerpts from a news that appeared in International Herald tribune:

Rates and fees frustrate credit card users around the world, but Indian consumers have something special to complain about: interest rates average more than 30 percent, and can soar to more than 50 percent, while charges tacked on for late payments are sometimes a whopping 20 percent of the overall balance.

Yes, that is true, Indians sometimes pay as high as 50% Interest rate for their balances on credit cards.

About 1 in 10 credit card accounts in India are “charged off,” banks here estimate, or have fallen so far behind that they are never expected to be paid, compared with about 1 in 25 in the United States, according to Standard & Poor’s data. 

The actual defaulters would have been many more. However, the credit card companies hire goons or goondas to do the vasuli (extort money from card holder), and so the number stands at 1 in 10 !

Because India lacks a comprehensive central credit reporting agency like the United States has, the repercussions for borrowers who stop paying bills are unclear. Disputes between banks and borrowers are generally settled out of court.

“Settled out of court” is almost everytime by some rowdy collection agent.

By the way, has anyone experienced a visit from these goonda collection agents ? If yes, let me know any interesting stories – you can also mail me at admin (at) trak.in.

I will publish them here. You can remain annonymous :)

  1. […] Many of the rich fear buying goods, or even booking flights and holidays online because of potential credit card fraud. So, many of them tend to use their corporate credit cards rather than their own personal […]

  2. Arun Shekar says

    Hey Jeevan,

    I believe none of the credit card companies are safe and abide by law in India. But in my opinion, Citibank somewhat stands out a bit, maybe.

    Arun.

  3. jeevan says

    can any one tel which credit card s best.? i mean no fake bills & extra charges

  4. c/lokeswararao says

    ABN Amro bank has been pestering me for several months with claims for insurance i never
    registered for, plus interest plus interest plus interest and so on. i never used their
    card for purchase, cash advance or loan for even one rupee but they claim dues for health
    insurance i never applied for or agreed to. i did not apply for insurance, i did not gake
    medical tests or submit reports, i never enrolled for insurance, never gave my consent or
    permission to the bank. also, no policy number was conveyed to me, no terms, no policy
    document, no receipt or certificate for payments and yet they are asking for thousands of
    rupees as dues. also the executive for Quality and Excellence customer relations is
    persistently and repeatedly ignoring questions like Who registered me without permission or procedure for health insurance and merely parroting fraudulent demands for payment.
    yours sincerely c.l.rao

  5. Arun Shekar says

    Hi Folks,

    Many working class people with good income and healthy expenditures probably won’t face the evil side of the Credit Card industry in India. Got back to India few months back after my degree and I am yet to get my first job but i have already got an idea of what it is like to deal with Credit Card menace in India. My mom has been using Credit Cards for the past 15 years and never defaulted on payments but sure she had late payments and hence charges incurred.

    She got her dues converted to fixed EMI’s on low interest rates with ICICI CC, otherwise she would have paid higher I-rates on regular installments. But these idiots(their executive) asked us to deposit money in the credit card account from where payments for the fixed EMI’s would be taken automatically. But this never happened, so here they are 2 hooligans, Dirty clothed, one without helmet, one with probably fractured leg but able, yelling and shouting at me who happened to be alone later joined by my older brother. They had no sense or even a tiny winy bits of brain to even listen to me or let me explain that my mother isn’t reachable cuz she was on her flight but forced the door open and did not let me close.

    It ended with them trying to snatch away my phone, pushing me back, trying to hit me…and at the end of the day, their bloody manager was at door asking for forgiveness telling me that these goons have no brain and this is why they are hired. And promised to rebook everything without interest as it was their mistake. 8 months passed by, after making 2 payments as requested by them…till now, no rebooking whatsoever. Each time they pass on the call to someone else.

    Got to know about those two hooligans named ali khan and rahul malhotra.

    Now waiting for the next time these Fckin Hooligans to come back and an impending call to the cops (which is by the way of no use) followed by a case in the court.

    Corporates and Corporate Cultures can’t get Dirty and Dirtier in India than anywhere else

    Arun

    Delhi

  6. cyberian gypsy says

    To answer Vasudeo question:

    Fraud happen in India as well as in west .In west because of excessive reliance on technology , in india because of lack of awareness.

    checks conducted by banks : verification at residence and office addresses , checking sal slips etc , looking for cibil matches & monitoring transactions/usage

    Biggest hurdle in tackling frauds – law enforcement is ill equipped and is technologically challenged in handling these instances.Syndicate frauds remain a threat in India- these largely hit banks and nt customers.

  7. Vasudeo says

    Hi every one.

    My name is Vasudeo. I have also lived in US for some time before returning to India. I have also been using Credit card as if it were a requirement. But in India, I am advised, that I should not use them at all or if I want then I should use them very very very cautiously.

    I want to know about one thing. How are identity thefts are caught in India. Suppose if a person take a house on rent, produce fake documents as his residence proof, take a fake pan card with somebody’s name and his face and then take credit cards then how are banks going to track him?

    Is photo morphing or some such image identity software used in Indian banks? How do banks track whether the same photo is used in multiple accounts?

    Write me on [email protected]

    Vasudeo.

  8. Sofia says

    Excellent Post, i brought up a similar topic on my blog last week to talk about the horrible practice of banks in India hiring recovery agents (read goons) to collect bad debt.

  9. Gordon says

    Dear Sir,

    Good morning!
    How much is the subscribtion fee?

    Best Regars!
    Gordon

  10. sunil verma says

    credit cards are very good.

  11. No late fee says

    It totally depends where you get your credit card from. i found out how to get one with really reasonable pay back rates and it really helped.I got mine from here <a href="http://www.sinplin.com/">Visit No late fee</a>

  12. tarun kumar baliyan says

    worst

  13. Liberal Indian says

    “If you are not routinely late and they have charged a late penalty for a couple of days delay, you can actually haggle and get them to waive the penalty off, usually after you threaten to cancel the card”

    This is exactly how it worked in the US tooo . . . ;-) In fact there you did not even need to threaten to cancel the card.

  14. Yogesh Raja says

    Card and cheque fraud will continue to grow until banks implement ID KEY system described on website http://www.xwave.co.uk

    ID KEY (memory stick or card) which will have Card Key Code matching individual card or cards will reduce card fraud to virtually ZERO at retail outlets and ATMs because fraudsters will not be able to obtain this invisible and changing to new value after every transaction complex code required for activating transaction.

    Why would fraudsters get tempted to use stolen or skimmed cards when they know that unless they have the right ID KEY they will not have option to enter PIN number to conclude transaction? This system will eliminate the need for us to use CHIP on cards and even protect our PIN numbers.

    Image and name retained on ID KEY will activate printer to print ID sticker (small sticker with image and name printed on it) at any transaction point. This will enable us to personalise our signatures to deter identity fraud.

    Government MUST make banks implement ID KEY system to protect the public and traders from becoming victims of card and cheque fraud because since 1994 they are declining to exploit this system to combat virtually all financial frauds. Along with banks, this system will save police, courts and prisons fortunes plus deter doggy traders from selling our personal and card details to fraudsters and terrorists.

  15. trakin says

    Liberal Indian..Hmm…you may be correct – and I am very happy if you are, coz that will really ease your life. As I mentioned, I have burned my fingers, so I will doubly check now if I am going to take a CC in India. However, the thing that you mentioned

    “If you are not routinely late and they have charged a late penalty for a couple of days delay, you can actually haggle and get them to waive the penalty off, usually after you threaten to cancel the card”

    in itself is a huge problem. This goes to show that there is no stringent process in place and anything works. and my main worry is that. Thats the reason the credit card companies can easily use the Goonda tactics for getting money, unlike here in US where you have preocess to file chapter 11 and your credit is affected.
    I know a few people who take credit cards, pile up a huge sum and never pay, as they are affiliated to big guys..and no one can touch them…and this payment comes from innocent people in form of Interest rates that are as high as 50%….

  16. Liberal Indian says

    Like you, I worked in the US for 5 years before returning to India about 5 years ago. Unlike you, I have been using credit cards; in fact the %age of my expenses that I put on my cards has been steadily increasing. Credit cards in India have evolved a lot in the last 5 years to be more or less in line with what I have seen in the US:
    1. Most credit cards no longer have an annual fee
    2. More and more Merchants in India now accept credit cards
    3. The practice of charging the 2.5% charge back to the customer has almost disappeared
    4. Finally, quite a few credit card companies also have cash back offers as well as points programs that actually give you back money
    5. If you are not routinely late and they have charged a late penalty for a couple of days delay, you can actually haggle and get them to waive the penalty off, usually after you threaten to cancel the card ;-)

    The interest rates are high and so are the penalties, but as far as I remember the same is the case even in the US.

    The reason why we are seeing this can be summed up in one word, COMPETITION. The banks are falling all over themselves to provide ready credit to a hugely aspirational Indian consumer who wants to have it all and have it now. Plus there are enough loosers out there who cannot manage their finances and end up paying huge interest rates and penalties to make this an especially profitable business.

    So, I would encourage you to try using Credit Cards again . . . maybe you will be pleasantly surprised . . . . that is as long as you remember to ALWAYS PAY ON TIME . . . .

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