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Today credit cards have found massive usage due to the convenience they offer. Unlike the old days, you do not have to carry cash all the time. Whenever you go out for shopping, all you need to do is take your credit card with you, shop whatever you want, swipe your credit card at merchant’s machine and walk out with your purchase. Simple, isn't it? In addition to the simplicity, Card issuers offer many type of benefits like cash back, reward points, interest free credit and discount offers on purchases made at select stores. All this makes it attractive to use a credit card in lieu of cash for your purchases. If you are wondering, "What happens after I swipe my card at merchant’s machine?", then read on to know more.
When you hand over your credit card to the cashier to pay for your purchases he takes it and swipes it in the merchant's point of sale (POS) system. This system is connected to the merchant's bank via a communication link. This POS system helps in verifying your data by using an electronic verification system. The details verified include the validity of your card and the availability of sufficient balance on your credit card to pay for the purchases.
Once your details are transmitted to the merchant's bank, they are sent to your bank which then authorizes the payment if all the details are in order. This authorization is then sent to the merchant's bank, which then blocks the amount from your credit limit so as to reimburse it to the merchant later on. The authorization generates an approval code and is transmitted to the merchant. This code has to be keyed in by the cashier, after which two copies of charge slip are generated. This charge slip is your agreement to pay your issuing bank the amount of purchase. You then sign one copy of the charge slip and take the other one with you, along with your purchase.
Just like you, there are many others who use credit cards for their purchases. They also generate their own charge slips. All these charge slips are stored in batches and submitted by the merchant to his bank, once a day at the end of the working day. But remember, the nature of the relationship of the merchant with his bank is far different from your relation with your bank. It is called a merchant account and is actually a line of credit rather than a regular account. As per this contract, the bank agrees to undertake collection of payments on behalf of the merchant from his customers' banks. These payments are credited to the merchant's bank accounts after deducting the fees for all the services involved.
When the merchant deposits these batches in his bank, they are sent by the merchant's bank for clearing and settlement through the credit card association. This association charges your purchase amount to your bank and pays the amount to the merchant's bank. The merchant's bank then reimburses this amount to the merchant.
Your bank now charges your purchase amount to your credit card account. On the specific date, your bank will generate an account statement, listing all the credit and debit transactions in your account. If the debits are higher than credits, you have to pay the difference to your bank. You will also be given a due date, which is the last date by which you have to repay your bank in full. Failure to pay off this amount in full by due date will mean you will have to pay late fees as well as interest charges to the bank. These fees and charges can be very high, so be very careful.
Credit cards are a powerful credit tool to help you tide over short term financial requirements. However they must be used judiciously, as any misuse of the credit card can lead to high charges and make you fall into a debt trap, besides dropping your credit score drastically. So the watch word is - BE DISCIPLINED TO REPAY your credit card!
As the time is changing, the credit card providers have started tailoring their cards as per one’s requirements.
A credit card is a payment card issued by a particular bank for customers looking to avail instant credits to easily purchase goods and services without spending a single penny from their pockets. The bank extends a line of credit with which the user borrows money, to be paid to a merchant. The cardholder is required to pay back the borrowed sum of money subsequently to the lender bank along with extra interest rates.
Credit cards in India are available in different variants like Gold, Silver, Platinum, Titanium, Classic, Premium and Business, distinguished by the level of services they offer.
Specific to a customer’s requirement the following are also offered:
Customers need to get in touch with an executive from a bank of their choice and submit a filled-in application form with the required documents. The bank will process your application after appraising your credit history and will then approve the new credit card according to your requirements.
In India, banks charge the highest rate of interests for credit cards, from 36% to 42% per annum. A bank decides the interest rate for a particular customer based on his credit history, financial capability and also depending on the type of card he chooses. Applicants with good credit scores and regular payment patterns get the best deals on their credit card interest rates.
Banks in India have tied up with Visa, MasterCard and American Express (AMEX) to process credit card payments, connecting merchant accounts with the acquiring banks.
In India, banks generally offer credit cards to individuals above the age of 21 and with a steady monthly income. As part of their verification process, banks do a deep dive into the customer’s credit history and assess previous payment patterns to understand the customer’s financial situation. Only after ensuring that the applicant has the financial capability to repay the expenses incurred using a credit card, will the bank approve the customer’s application.
Yes, in India applicants are required to earn a minimum of Rs 75,000 to 1 Lakh per annum, though this criterion varies depending on the type of the card.
Annual Percentage Rate (APR) or the ‘’cost’’ at which a customer takes credit from a bank, is the simple interest rate charged by a bank on expenses incurred on a credit card for a year.
The best mantra while managing a credit card is to ‘’Pay as and when you can”. Delaying a credit card payment is not a wise option, as banks tend to impose high late payment fees and gradually increase the interest rates charged. The customer would actually end up paying way more than his original purchase amount.
Add-on cards can be taken for family members of the primary card holder with extra charges anywhere between Rs 125 to Rs 1000. The credit limit of the primary card gets carried over to the new card with similar features. Also customers can get a comprehensive bill with details of both the cards.
Global credit cards give a customer the leeway of instantly performing cashless transactions from any corner of the globe. Accepted worldwide, global cards give you the flexibility of spending in any foreign currency and later paying your bills in your local currency. A customer can also avoid the hassle of carrying huge amounts of cash or using traveller’s checks.
Credit card reward programs have been introduced by lenders to popularize the various cards they offer by rewarding a customer for transacting using their credit card. The cardholder is awarded points as per his expenditure for purchasing goods and services. The accumulated points can later be redeemed by customers for certain discounts and gifts as per the bank’s guidelines.
The Reserve Bank of India mandates the provision of multiple levels of authentication from banks, for customers using credit cards to make an online purchases. Additionally, customers are advised by banks to use their credit card credentials only in encrypted internet connections to avoid fraudulent transactions.
Customers can also use their credit cards as ATM cards and withdraw a stipulated amount of cash, preset by the bank as cash advance. Though this feature gives a customer access to instant cash, the bank charges very high interest rates for credit taken using this facility.
The Maharashtra State Government, with a view to reduce traffic jams, is planning to introduce a system where toll charges can be paid through credit cards. The issue of traffic jams in highways due to toll booths was raised during a session where this decision was made collectively by the ruling and opposition parties. Credit cards would facilitate simpler payments and reduce the total interaction time at toll booths. While the state’s PWD Minister said that vehicles from villages near Kharghar toll booth was initially exempted from toll fare, he also noted that the exemption cannot be a long term solution.
Isn’t it high time that you applied for a credit card? BankBazaar.com will help you shortlist the perfect credit for your lifestyle needs. Also, with BankBazaar’s credit card comparison tool, you can compare the features and benefits of credit cards and also apply online!
25th March 2015
In order to keep a check on borrowers, Indian banks like ICICI, Axis, Kotak, SBI and Central Bank are offering credit cards against fixed deposit accounts. Banks are promoting this twin package aggressively as fixed deposits can be used as a fall back feature in case of delayed or irregular credit card payments. A customer requires to have an existing fixed deposit account or open a new one in order to apply for a credit card. The deposit amount accepted ranges from Rs 20, 000 to Rs 25 lakhs.
Unlike the traditional way of processing applications, in this case a bank processes a credit application quickly and customers only have minimal documentation to finish. The fixed deposit associated with the credit card needs to be taken for a minimum tenure of 180 days and a lien would be marked against the deposit. The credit limit allotted on this particular type of credit card is 80% to 85% of the fixed deposit amount.
23rd March 2015
The Reserve Bank of India (RBI) is easing off the norms for payments affected through NFC or contactless cards by negating the need for additional authentication in cases where the transactions are lesser than Rs.2000. Usually, this additional authentication comprised of supplying a PIN number or entering the OTP (One Time Password). The apex bank notes that this ruling follows the wide-spread request from customers to ease this process and is definitely not a trade-off between the inherent security that additional authentication vouches for. RBI advocates the use of technologies that will help in this initiative, including new-age techniques like Near Field Communication (NFC), which is currently used in contactless cards. At the moment, only ICICI Bank has rolled out NFC based cards while SBI is planning to follow suit soon.
16th March 2015
Mumbaikars using the Metro on line 1 ( Versova-Andheri-Ghatkopar corridor) can now travel hassle free with a combo card that doubles up as a credit/debit & metro smart card. Mumbai Metro One in association with ICICI and SBI cards, on Wednesday (25.02.2015), launched the combo card that comes with an in built functionality of auto reload if the balance is less than 50 rupees. The back end systems automatically top up the account for Rs.200.00 from the credit/debit card account linked to the combo card. This ensures that you never run out of currency in your metro account. This card can be used at any of the 12 Automatic Fare Collection (AFC) systems in Line 1 of Mumbai Metro. Customers can also use the combo card to make regular purchases and earn loyalty points.
9th March 2015
Chennai Metro rail commuters can now easily ‘recharge’ their smart cards in any shop within 500 meters of the metro rail corridor. The Chennai Metro Rail Limited (CMRL) will take the help of franchisees to facilitate this for customers by promoting the use of cards instead of tokens. CMRL will be the first to introduce such a smart card recharge scheme through franchisees when compared to other Indian Metros.
Chennai Metro Rail Limited (CMRL) has tied up with India’s largest bank, State Bank of India for this new venture. SBI credit and debit cards would be used as metro smart tickets and these can be topped up at kiosks available in metro stations by feeding the card number and by using a customer’s credit or debit cards. Customers can recharge their cards with a minimum of Rs 100/-. The maximum cap on this amount and the deposit required has not yet been determined by CMRL.
3rd March 2015