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 sureÂ that I am carrying cash. I do all my purchases using pure cash -Â 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 andÂ promising myselfÂ 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,Â 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 rapidly, 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 fromÂ aÂ 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.Â
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 someÂ rowdy collection agent.
By the way, has anyone experienced a visit from these goonda collection agents ? If yes,Â 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 :)