Mar 132017
 

[Disclaimer: This post is not sarcastic]

Credit card always ring a negative bell in middle people’s mind. Rightly so. Credit card companies have been notorious in duping innocent customers with finer prints and hefty fines. Read here, the tyranny of one such customer at the hand of a big bank. However, if one is vigilant, ever so slightly, then it’s not actually bad.

First, let’s get to basics. Credit card is an instrument through which one can get “free” loan for a period of close to 1 month on an average. Basically it’s exactly like your ATM card, except you can’t draw cash using it (actually you can, but that is too costly and must be avoided). You can use it to make payment for shopping at super markets (or any big store which accepts card) and on e-commerce sites, or paying bills etc. online. You can even carry your Credit card overseas and make payment in foreign currency (provided you have an International validity card).

And to make these payments you dont need to have cash upfront. Once you make any payment using the credit card, the card company would send you a statement at the end of the month (or another fixed date) telling you how much you spent- when, where etc. This statement will also tell you when do you need to pay this “Free” loan back to the company. There is generally a time period of 15 days given from the date of statement to the date of payment. Hence, one gets anywhere between 15-45 days “free” loan depending on when the purchase was made. Important to note is that

Amount to be paid = Amount spent

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There is not charge for the “free” credit period! This is the reason why everyone should have a credit card.

The statement also has columns for financing charges and due from previous statement. These would be generally blank if one makes credit card bill payment on/before time. But those who don’t see the dark side of Credit cards. If one doesn’t make the payment of outstanding within the due date, the bank charges a hefty interest rate (typically 3% pm or 36% pa) on the outstanding amount as well as a penalty. This is where it gets ugly and people who make this mistake end up swearing by the name of Credit cards.

But the solution is simple, just keep a tab of due date of credit card bill payment and ensure the full amount is paid in time. Better still, make the payment as soon as the bill arrives rather than waiting till the due date.

If one keeps this discipline then Credit cards are a boon. Not only do you get free credit period, there are often different kind of promotions run by either the Credit card company or merchants/etailers giving cashbacks and discount for using certain Credit card. Which brings me to my original point- have as many Credit cards as you can (and which you can rigorously track for due dates). Since, promotions are run across different kinds of Credit card, having multiple Credit cards increases the chances of being eligible for one.

However, one big factor to consider before plugging into the pool of Credit card is internet security. While maintaining discipline of making timely payments is within one’s control, internet security isn’t. Credit cards (or for that matter Debit cards, ATM’s, Netbanking) carry an inherent risk of online frauds. Having multiple cards only increases this risk. One of the precautions to take while enrolling for multiple credit cards is to keep the credit limit at the minimum. This will ensure the risk of fraud is limited. Another security measure is to disable International Usage on the card.

So, if you have the discipline go for it. But if you always turn late to meetings, avoid Credit cards.

Mar 132017
 

Following is a piece of letter that I would love to write to the CEO of “Sahar ka Bank”.

My deep-down emotions/grievances are included in brackets.

 

TO,

CEO,

“Sahar ka Bank”

Sir,

This is to bring to your kind notice that how good the customer service of your bank has been. I believe your bank churns out good profits every year. And during my recent experience with your bank I have unearthed “the best practice” that you have been following to turn red bottom line to green.

During my college days I was given this Credit Card that carried no charges for the first two years; as a promotion offer. And being an extremely opportunist person (WARNING!!! High Sarcasm Detected) I could not resist that offer.

I got the Credit Card in a few days and along with it came all the “GOOD” things in the world. The card was supposed to carry my photograph, but I think the photo pasting guy at your company did not quite like my face and hence he obliged me with a photo of some random guy. That was quite helpful of him and I offer my heartiest thanks to him (Extreme Sarcasm Alert!). And now since that photo of mine that I had submitted is of no use to the company, can I please get that back. Or may be the photo pasting guy is planning for another photo edit. In that kindly suggest him to pardon my photo.

(The twist in the story goes here) That was the start of really adventurous ride. As a policy of your bank to provide total health comfort, (Wait! This was a bank when I last checked!!!) I was provided with a random health insurance policy. Some 1400 bucks were charged to my account. I think it’s a commitment your bank to care for the health of the customer as well (along with wealth). Very concerned Bank indeed!

Some days later I got a call from some guy telling me about all the good things your bank does. That person also mentioned about the health policy and I, out of my total negligence for health, denied subscribing to the service (WARNING!!! Yeah, again that sarcasm one). It was confirmed on the phone that the policy is reversed. So I was a happy soul. (And equally happy was the bank, as I would later on get to know that the policy still remained in my account)

All during this, I was getting a monthly letter from the bank at my home address. There was a mention of outstanding amount second month onwards. And so my father got worried. I kept convincing him that the amount is wrongly accounted and would be cleared subsequently. (IMPORTANT: Always listen to you father, if you don’t then the following has to follow)

2-3 months passed. Now as your bank has a very good policy of reminding its customers frequently through letter mails and emails, I was constantly in track of the outstanding amount which remained around 1400 rupees all this while.

So one fine day I wrote to the bank about the policy that I didn’t subscribed to and in plain simple words explained that their business in my college would get seriously affected if they continued to bother about my health (WARNING!!! Yup, sarcasm strikes again). So a cool dude from the other end replied, immediately, that the amount is being reversed. Me a happy soul again and so was your bank. But how?

Your people did a nice trick. They had bundled one more policy along with the health policy and now that policy remained in my account.

I tried reaching to them about the outstanding but after 4-5 transfer of calls I used to end up being ON HOLD. So me being an extremely “kanjoos” guy, stopped trying. As it had already cost me around half the amount that I was supposed to pay and I hoped that one day your bank will realise the mistake and close the account.

Also somewhere during all this I applied for discontinuing the credit card service. Don’t know when, but your bank did listen to me; only after some 100 rupees worth of phone calls were made.

In the meanwhile I lost my wallet during a train travel. So, the card was lost and unfortunately (Yeah that WARNING again!) the card blocked.

So now the story stands at- some 300 outstanding on my card which I lost and got blocked and which I have applied for closing and got to know subsequently that it was closed.

Around 18 months had passed by now since my subscribing to the card and then I met two of my friends who told me about CIBIL. So I got a little worried because you will be sending the “very good credit history” that I have with your bank to CIBIL and  would never mention the “equally good customer service” that you provide. I again spent some money on the phone calls to know the exact details as of date. I was told that some 350 rupees were outstanding. But, thankfully (IMPORTANT- No sarcasm here), the account was finally closed. I was told to pay the outstanding and clear the account.

But you must know have known me; 350 bucks! never! So I inquired further and was told to mail about the issue. I wrote a mail explaining the details. A self-generated mail came saying the good guys would respond in 3 working days. And 3 days hence I got a glossy mail stating that the amount outstanding is on account of a health policy (it was here that I got to about the second policy of the bundle!), some amount was charged for cancelling the earlier health policy and further some amount for interest charges.

So, I replied in “sweet” words that I never wanted the “health benefit” since I am extremely irresponsible towards my health and hence reverse the policy. Now the self- generated mail asked me to wait for 5 days. Five days passed by but no reply came. So, I again mailed with the sweetest words in the world and lo! a reply came on the same day stating that all the amounts have been reversed.

Such a concerned bank for world health! It should get funds from W.H.O. for its support for improving health standards.

BTW, the profit that can be generated though this CSR activity is enormous. So the bank has a potential of churning out around 300-400 bucks from every card holder. If the customer is very “dheeth” then also the bank can gain something by tying up with the telecom company on account of customer care facility which is not toll-free.

So overall even if they manage to convert 10% of around 50 lakh card holders they can easily make 20 crores/year of PBT!!!