FAQs - Credit Cards
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A
credit card can be used to purchase goods and services on credit or obtain
cash advance. Payment by Credit Cards has come to be increasingly accepted by
merchant establishments during the last decade. A number of credit card users
and potential users frequently ask following questions. BCSBI attempted to
answer them.
1. What is the information you must know before taking a
Credit Card?
·
Banks are required to make
available copy of most Important Terms and Conditions (MITCs) governing
credit card operations. These are broadly following :
o admission fee, annual fee, renewal fee, etc.
o interest rate on cash advances, penal interest on late
payment,
o billing cycle, free credit period, etc.
o various other charges including late payment fee, etc.
·
As banks levy various charges ( in
the form of joining fee, annual fee, renewal fee, late fee, processing /
transaction fee, default charges, etc,) you must get complete information
about these charges / rates before signing the agreement with the bank.
·
Before signing agreement with a
card issuing bank, please read carefully the terms and conditions.
·
Interest rates on credit cards,
world over, are high as compared with other loan products offered by banks. Therefore,
before accepting the credit card, you should check the interest rates and how
it is calculated and computed at what intervals?
·
Whether insurance cover available,
if so is at a cost or offered a freebie.
2. What you must know about fees and charges?
·
Banks cannot levy any charge other
than those indicated at the time of issue of the card. For subsequent
(prospective) changes, written consent of the cardholder is necessary by
giving him one month notice. If the cardholder does not agree, he can surrender
the card without attracting any charge/fee.
·
Banks are free to determine the
rate of interest on credit card dues.
·
Generally banks quote these rates
on per month basis. Banks are also required to quote annualized percentage
rates (APR). They are required to explain the method of calculation of
annualized rates with suitable examples for easy comprehension. Interest rate
of 2.95% per month translates into as high as 35.04% per annum.
·
Besides the APR, details of annual
fee, late payment charges (method of calculation and number of days) are also
required to be indicated prominently.
·
Service Tax (including education
cess) currently @ 12.24% is levied on all fees, interest and other charges.
·
These days, owing to competition,
banks waive admission fee and/or annual renewal charges. The waiver of annual
charges may be for a certain period. Generally such waivers are provided at
the sole discretion of the bank. Cardholders should ascertain this
information before signing for the Card.
·
EMI facility offered against
credit card may be subject to levy of transaction/processing fee. Please
check before availing of a loan against credit card.
·
In case the total outstanding
exceeds the credit limit, an additional charge is levied automatically on the
excess amount. Therefore, ask the bank, before accepting the card, the amount
of additional charges levied on exceeding credit limit.
3. What is “due date” of payment?
·
Banks have to ensure that there is
no delay in dispatching statements and the cardholder has at least a
fortnight for making payment before the interest starts getting charged.
·
The monthly credit card statement
always indicates the ‘Payment Due Date.’ Please read the instructions about
this in the monthly statement.
·
Clear funds need to be credited to
credit card account on or before Payment Due Date.
4. If you do not pay total amount due on the card before due
date, how interest is charged?
·
If you draw cash against your
credit card, interest is charged from the date of drawal of cash/transaction.
·
On purchase of goods and services
from merchant establishments or service outlet, if you make a payment which
is less than the total amount due, the entire outstanding from the date of
statement may attract interest.
Example - A cardholder made a purchase of Rs.15,000/- on January
14, 2007. If the statement cycle is 25th of each month, the due date of
payment was February 10, 2007. If he made payment of Rs.15,000/-, by the due
date, no interest was payable. However, if he made a payment of Rs.4,000/-on
February 10, 2007, and paid remaining amount of Rs.11,000 on February 25,
2007, the interest would be calculated, as under, assuming interest rate
chargeable was 2.95% p.m.
*
From 14.01.2007 to 25.01.2007 interest for 11 days @35.04% p.a. on
Rs.15,000/-
*From
25.01.2007 to 10.02.2007 interest for 16 days @35.04% p.a. on Rs.15,000/-
*From
10.02.2007 to 25.02.2007 interest for 15 days @35.04% p.a. on Rs.11,000/-.
·
Reverting to the above example, if
additional purchase of Rs.10, 000 was made on 11 February 2007, you are
liable to pay interest from 11 February till you settle all your dues to the
bank.
·
Interest charge will be levied
when a customer does not pay his dues in full before the payment due date.
·
Interest charge will be charged on
all such transactions that are a part of the balance being carried forward.
The customer also loses out on his interest-free credit period and will be
charged interest on all fresh transactions.
·
Interest charge will be charged
from the date of the transaction till the date of payment, on a reducing
balance.
·
Regarding late payment charges,
you can ask for the details such as number of days for which you are required
to pay charges, etc., if you are not satisfied by the details given in the
statement.
5. How any payments made against your dues after the due date
be adjusted by your bank?
You
should know bank’s order of priority for appropriation of your payments
towards new / old borrowings, fees, etc. Priority of adjustment of payments
made is generally in the following order :
·
fees,
·
other charges,
·
interest,
·
cash advance,
·
purchases, etc.
6. If you do not receive monthly statement what is your
responsibility/liability?
·
Banks are required to dispatch
monthly (as per billing cycle) credit card statements on a predetermined
date, free of cost.
·
If a cardholder does not receive
the statement on the due date, he should obtain a duplicate statement or make
the payment on the basis of copies of the charge slips in respect of the
purchases made. Non-receipt of statement should not be taken as an excuse for
non-payment of dues.
7. If the bank has charged you wrongly for a transaction what
must you do?
In
case of dispute over a transaction in the statement, you can ask the bank to
give more details such as documentary evidence in support of your having
authorised such transaction and the bank is required to give the same within
a period of 60 days.
8. What is your responsibility if an add-on card is issued?
Add-on
cards can be issued only under your authorization and you are responsible for
the liabilities/ outstanding dues on the add-on cards.
9. If you get a credit card without your asking for it, what
must you do?
In
terms of RBI guidelines, unsolicited credit cards should not be issued by
banks. The bank should not also
unilaterally upgrade credit cards and enhance credit limits. If you receive
an unsolicited card, you may reject and also make a complaint to the Banking
Ombudsman.
10. If a bank offers you insurance cover what must you do?
·
Some banks offer insurance cover
along with issuance of credit card. If the insurance cover is compulsory, you
may take up with Banking Ombudsman or BCSBI at the website www.bcsbi.org.in
·
If this is optional, please find
out what is the amount of premium payable, who is supposed to pay it, what
the policy covers and when the policy will be activated. Complimentary
insurance policies offered by banks generally cover only lost/stolen card
cases. All other covers are valid only for the “active” primary cardholders,
as per issuing bank’s definition.
11. Is there any minimum amount for which credit card can be
used?
`Visa’
has advised the merchant establishments that they should not set value limits
as a condition for accepting payment by Visa cards.
12. What should you do if you lose your card?
·
You should immediately report the
loss by calling the helpline 24 hour phone banking. It should be followed by
written confirmation. You will also be required to submit documents prescribed
by the bank like FIR, indemnity letter, etc.
·
Some banks offer insurance policy
for lost/stolen cards within the geographical limit. Please ascertain details
of the scheme from the bank before you sign the agreement.
13. What if you make payment more than your dues to the Credit
Card issuing Bank?
You
are not eligible to earn interest on your excess payments.
14. What Safety Measures should you follow?
·
Change
the Personal Identification Number (PIN) periodically.
·
Do
not use numbers personally relevant to you like date of birth, marriage
anniversary, vehicle number, house/flat number, etc.
·
Do
not keep the credit card and the PIN together.
·
The
PIN should not be conveyed to anybody through mail/ over telephone/mobile,
etc.
·
Do
not allow anybody else to use your card / PIN.
·
Your
access to the electronic banking will be disabled if wrong PIN is entered
successively 3 times (or more number of attempts as decided by the bank).
·
Read
carefully information in message box in the monthly bill.
·
You
should not allow the card to be taken out of your view for the purpose of
swiping and ensure that nobody notes down the CVV number of the card.
·
Do
not allow the merchant establishment to swipe the card twice or fill up two
charge slips.
·
Do
not sign an incomplete charge slip.
·
You
should not give photocopy of the card (especially the reverse side) to any
person.
·
Do
not take help especially at ATMs while using your card.
·
Do
not allow anybody to look over your shoulders during ATM transaction.
·
Do
not issue outstation cheques for payment of dues on credit card.
·
Do
not issue a cheque without ensuring that there is adequate balance in the
account.
·
As
far as possible, make purchases from a reputable source.
·
Give
out your credit card number online only at secure and reputable site/s.
·
Make
sure the transaction is secure when you electronically send your credit card
number.
·
Ensure
that the individual / company you are dealing with is genuine.
·
Do
not judge a person / company by their website
·
Before
making online purchase from an unknown vendor, it is better to obtain the
complete physical address rather than depending only on the post office box /
telephone number. Further, you may ring up the party to see if it is genuine
and the telephone number is correct and working.
·
Be
cautious when responding to special offers (especially through unsolicited
e-mails)
·
Be
cautious when dealing with individuals / companies from abroad
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