Who likes credit cards anyway?

Bankers hate it. Merchants hate it. Informed consumers hate it.

Bankers hate it because it is not making any money. 60% of the credit card holders do not roll over their credit. Which means they pay their balance in full. A good news for the consumers but not so for the banks. They have to provide the money for interest free for a period 20-50 days.

Add to that the credit card frauds which happen. All the banks lost 36.54 crore rupees in 2008 due to credit card frauds. ICICI Bank topped the list and it followed it up by closing 1.5 million credit card accounts. ICICI Bank has even redrafted it’s retail loan strategy to reduce the exposure of unsecured loans.

There are around 27 million cards in the country. ICICI Bank is the market leader with 8.5 million cards, followed by HDFC Bank Ltd with 4.4 million, Citibank with 3.8 million and State Bank of India with three million cards. (Mint)

Merchants hate it because they have to pay a fee to the bank for using the service. What would they do? They would pass on the charge back to the customers. The charge will be in the range of 2-4% of the bill amount. Biggies like Big Bazar, Shopper’s stop won’t do it. It is the smaller shops who have the credit card machines neatly lined with some cloth on it.

Consumers, which is us actually love using credit cards but not the exorbitant bills. Sure, cards provide a convenient way of cash less transactions. For the meticulous persons (60% of the users are that) it all make sense. They can charge everything to the card, enjoy the interest free period and then pay the balance in full.

This would provide a strong financial planning and some interest accrual for the money in the bank which you otherwise have to use. But, for the people who take the cards for a ride, the cards will take them for a ride. If you miss a payment a charge of 350 is slapped on you.

I rest my case with this question. Who likes credit cards?

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Author: Sriram Vadlamani

Sriram Vadlamni is a IT professional and an avid blogger. He blogs about India business at Indianomics.com and you can follow him on twitter @indianomics (Email: sriram.vadlamani@gmail.com)

Who likes credit cards anyway?

Tagged as: how to use credit cards, india credit cards, india credit cards frauds

{ 1 trackback }

Missed paying your phone bill? You next loan will be costly: August 14, 2009 at 12:48 pm

{ 4 comments… read them below or add one }

1 Rabi Gupta May 1, 2009 at 11:29 pm: I have personally faced CC problems in my life. One was HSBC which first got my name incorrect. The replacement card which I got with correct name, came with a surprise fraud transaction of 3500 Rs. After multiple complains they removed the amount, but not the fine (because I didnt payback the fraud amount, Can you believe?). I again logged a complain, this time my card was blocked. I was happy I stopped receiving any statements, and off course I never wanted to use any other HSBC card again. To my amazement I again got one statement this month with my incorrect name asking for 5000 odd Rs…… Grrrrrrrrrrr!!!!!!!!!!
Second case was with SBI, its a smaller issue but I stopped using it either. Now I’m using one ICICI Credit card for life saving purposes only.
2 Sriram Vadlamani May 2, 2009 at 9:31 pm: Ironically my name was wrong on the HSBC card too. I guess you are not the only person Rabi.
Cards are consistently inconsistent -just like Kolkata Knight Riders.
3 Sumedh May 4, 2009 at 9:23 pm: Credit cards are useful for buying stuff online…true, if you buy in India, you have other options like net banking…but for other purchases from US (say domain name), one needs credit card…
4 Haider Khan October 18, 2009 at 5:32 pm: Why is the CVV number written on the card?? When the card is swiped at a merchant establishment the magnetic strip is used