FAQs - Credit Cards

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 :

  • admission fee, annual fee, renewal fee, etc.

  • interest rate on cash advances, penal interest on late payment,

  • billing cycle, free credit period, etc.

  • 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.

• 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.

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• 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.

• 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.

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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.

• 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.

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.

Add-on cards can be issued only under your authorization and you are responsible for the liabilities/ outstanding dues on the add-on cards.

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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.

• 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.

`Visa’ has advised the merchant establishments that they should not set value limits as a condition for accepting payment by Visa cards.

• 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.

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You are not eligible to earn interest on your excess payments.

• 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