An article well made out. But the issues are connected with merchants'
sides only. Cr card mints money only through the EMI payers and the
defaulters, who use the cards, but cannot afford to pay. I use my cards
only as a non carrier of cash; money in bank; small amount at home;
payments through UPI, Cr Cards and bank transfer; and all dues even if it
is 10 kh sis transferred through bank only; so cr card banks do not gain
anything out of me but I enjoy 45+ days credits. However even the rupay
cards like SBI HDFC etc through UPI will not operate properly as still
there are a lot of loopholes. There are so many on this earth in asian and
some african countries, including South africa, who do not accept cards at
all; even air flights bookings other than airports, by agents, do not
accept the cr cards but will accept the cheques, cash and Bank transfer
only. But once you leave india, the best is using cr cards; if you pay
dollars in Singapore in StarBucks, for coffee, they will tender only
singapore dollars; every country will tender their currency only. But using
those currencies is difficult in any nation; and even if you return all
those currencies at airport SBi , a lot of formalities for conversions had
to be done. If you bring them home, and give it in SBi where you have
accounts or with your bank, they will ot accept coins but notes only and
that too , after filling the forms etc; the Indian rupee will only be
credited to your account after a few hours. So the usage of cr cards
prevents such difficulties.
And it is beneficial, if you use just 45 days credits. But card
payment prevents bargaining. Amazon, Big Bazaar, Big Baskets, Flipkart, etc
forces you to pay MORE THAN THE RIGHT PRICE. But if you calculate fuel
price , sometimes it is OK. But black money holders are not interested in
digital payments as they will be squarely traceable. In the example given
by Mr G, the cost of the product is shot up by profit plus interest by the
merchant charged on cards. Maybe , I am not sure, 48000 becomes 54000
divided by 3 at 18000 pm. This is the profit for all except us but our cost
of product 54000 if sold after 3 months, will fetch only 1000. In
jewellery, unbilled cannot be avoided if one pays by card. Also one loses
the bargain there in the reduction of the price on wastage etc. If you go
through UPI for large amounts , connecting RuPay cards, your hacking is
imminent. Cash withdrawal temptations by so many had ruined the families.
Transfer of the balance from one card to another ,pushes everyone into
money pressures. Cr Cards is a good tool but a bad master also. And many
banks (nationalised) do not issue better limits; private banks issue
keeping your deposit as security like an overdraft. 60 years is also a
taboo for all as end of life. More I know but later K Rajaram IRS 251223
---------- Forwarded message ---------
From: 'gopala krishnan' via Thatha_Patty <[email protected]>
Date: Mon, 25 Dec 2023 at 13:50
Subject: CREDIT CARDS-REG FORWARD
To: Patty Thatha <[email protected]>, Iyer <
[email protected]>, Kerala Iyer <[email protected]>
Why Indians are getting more, and using more, credit cards? – Forward.
Credit cards can become debt traps if dues are not paid regularly
By Nachiket Kelkar Issue Date: December 17, 2023
CREDIT CARDS HAVE been around for a few decades. In fact, it is the primary
mode of payment for purchases in many countries. But in India, they had
never really taken off as they were seen as being out of bounds for most of
the salaried, and retailers were reluctant to accept them.
That is, however, a thing of the past. Not only are more and more people
getting credit cards, but also they are using them more frequently. The
most recent data on payments and settlement systems by the Reserve Bank of
India says the number of active credit cards in India was 9.13 crore in
August 2023. It was just 7.8 crore a year before that—that is a 17 per cent
growth. In January 2020, it was just 5.6 crore. So, in some three and a
half years, the number of credit cards surged 63 per cent.
The growth in credit card usage is even more impressive. In August this
year, credit card spends touched Rs1.48 lakh crore, up 2.7 per cent from
the month before that and up 32.3 per cent from August 2022.
What is driving this growth?
“The continued increase in discretionary spending on vacation, travel,
entertainment and consumer durables in metros and beyond, and digital
payments have propelled credit card usage in India,” said Puneet Bhatia,
vice president, acquisition and product management, American Express
Banking Corp. India.
Indians are swiping their cards everywhere. “PoS (point of sale) spends
across all key categories, including consumer durables, furnishing and
hardware, apparel and jewellery, have increased significantly, indicating
consumers’ strong preference for offline shopping experiences as well,”
said Abhijit Chakravorty, managing director and CEO, SBI Cards and Payment
Services. Promotions by large e-commerce platforms in the festive season
have also been a big driver.
In Amazon's recent Great Indian Festival sale, one out of every three
purchases was made using the co-branded credit card Amazon Pay has with
ICICI Bank, the Amazon Pay Later option or via EMIs (equated monthly
instalments). The usage of the Amazon Pay ICICI credit card soared 65 per
cent, said Mayank Jain, director, credit and lending, Amazon Pay India.
Co-branded cards offer excellent value proposition to users. For instance,
Amazon Prime members can get up to 5 per cent cash back each time they use
it on Amazon. “You can maximise benefits by capitalising on exclusive
rewards, discounts and perks offered by the partnering brands,” said Gaurav
Chopra, founder and CEO of IndiaLends.
Promotions and offers by banks on EMI purchases on cards is another driver
for growing cards usage. In the first 48 hours of Amazon's Great Indian
Festival sale, EMI payments emerged as the top choice, with one in four
shopping orders placed in instalments, and three out of four EMI orders
qualified for no-cost EMI benefits, said Jain.
The biggest boost, however, would have been the option to link credit cards
to UPI. For now, this is restricted to RuPay cards. “Customers will benefit
from the ease and the increased opportunity to use their credit cards.
Merchants will benefit from the increase in consumption by being part of
the credit ecosystem with acceptance of credit cards using asset lite QR
codes,” said National Payments Corporation of India, which manages UPI.
Many retailers, especially smaller ones, were earlier not keen on accepting
credit cards owing to the charges associated with them. For instance, a
retailer would need to buy a PoS machine and pay the merchant discount rate
(MDR), generally two to three per cent, as well. If a consumer makes a
purchase of Rs10,000 and pays by credit card, the retailer would have to
pay an MDR of Rs200 to Rs300.
There are no such charges on UPI payments. Also, the person paying via the
credit card linked to UPI can scan the same QR code that one would scan for
normal UPI payments and all the payments can be consolidated in just one
app, making it convenient to monitor and manage all the expenses.
Parag Rao, country head of payments, liability products, consumer finance
and marketing at HDFC Bank, said his bank had seen a ten-times growth in
UPI on credit card spends in the past six months and it had around 45 per
cent share in the segment. Chakravorty of SBI Cards said 9 per cent of its
RuPay cardholders had enrolled for the UPI usage.
A lot of this growth is not from the metros. It is estimated that by 2025,
tier III and tier IV towns in India will have a combined GDP of around $1
trillion, and they would add around 250 million new financial consumers to
the market. “Aspirational young Indians with high disposable income,
increased awareness, and heightened taste for premium have been empowered
by economic growth, growing entrepreneurship, and deeper penetration of
e-commerce. This is propelling growth in spending on cards like never
before,” said Bhatia of American Express.
The rise in credit card spending mirrors the strong growth the banking and
financial services industry is seeing in retail credit, especially
unsecured loans given to consumers. According to the financial stability
report of the Reserve Bank of India, overall gross advances grew at around
14 per cent between March 2021 and March 2023. Retail credit grew at a
compounded annual growth of around 25 per cent in the same period. Credit
card dues crossed Rs2 lakh crore for the first time earlier this year. This
surge in retail lending has got the RBI concerned, with the regulator
warning banks and NBFCs to be careful.
“If you look at the past couple of years, the year-on-year average growth
on retail credit has been close to 30 per cent in most institutions and
secured retail credit has grown at 23 per cent,” said Swaminathan
Janakiraman, deputy governor of RBI, in the post monetary policy briefing
in October. “If you see that in the context of the rest of the credit
growth, which is in the range of 12-14 per cent, it looks to be an outlier.
So, as a supervisor, it is our intention to inform the banks that this is
an outlier level of growth.”
Of late, the RBI has introduced several security measures for cards such as
tokenisation, where sensitive data like the card number and security code
are anonymised with a unique token. Janakiraman said banks should
strengthen their internal surveillance mechanisms so that any risk that
might likely be building up was “handled upfront rather than coming to
grief at a later time”.
In a move to check the rampant growth in consumer loans, the RBI recently
raised risk weights in respect to consumer credit exposure of commercial
banks, including personal loans, by 25 percentage points to 125 per cent. Risk
weights on credit card receivables of scheduled commercial banks and NBFCs
were also raised by 25 percentage points. Essentially it means banks and
NBFCs have to back their retail loans with more capital.
While credit cards have their advantages, they can become debt traps if
dues are not paid regularly. Banks allow users to pay credit card dues
every cycle fully or partially. The interest rate on credit card overdue is
steep—2.5 per cent to 3.5 per cent a month. Also, the interest is charged
on the outstanding balance as well as subsequent purchases once the
interest free period lapses.
My note- I found the reading quite interesting appeared in fire-fox opening
page today . During 2002 I had a heavy purchase using HSBC credit card. I
requested to permit me to pay the particular bill in two instalments. What
happened was then onwards, every month, 50% of the dues was deducted from
the bank. With much difficulty, I changed to full deduction.
Now systems have changed. I purchased a new TV 230 cm. before a month. Cost
48000-00 rupees. I just asked whether any system by paying in two or three
months to the shop. I gave my HSBC credit card. Three instalments was
approved by credit card with an added interest of about 1500-00. I agreed
to it and payment was made. While the shop got full amount, I get a bill of
about 18000-00. Such facilities are now with a credit card. The card is
auto deduction from Bank account. This card is very useful for hospital
expenditures etc.
I requested for a credit card from Bank of Baroda for limiting to an amount
of 25000-00 and I got it with add on cards. It was about 15 years back. It
was sanctioned and I am using it for daily purchases of vegetables, fruits,
provisions etc. Auto deduction is done from bank account.
With PIN for purchases, present days credit card is very useful. One should
ensure, full amount is bank a/c for deduction.
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