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?
Suggested reading : Indian Credit Cards – Think before you consider taking one