Credit card firms get smarter: free is out, fees are in | business | Hindustan Times
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Credit card firms get smarter: free is out, fees are in

You may not have received a call offering a free credit card over the past few months and that is not by chance. Credit card firms are consciously going slow on free cards and focusing on fee-based cards that are more productive as the economic downturn brings home some hard lessons.

business Updated: Oct 11, 2009 20:31 IST
Sandeep Singh

You may not have received a call offering a free credit card over the past few months and that is not by chance. Credit card firms are consciously going slow on free cards and focusing on fee-based cards that are more productive as the economic downturn brings home some hard lessons.

Plastic that matters

* Banks are wary of issuing free cards that involve service but guarantee no revenue

* Fee-based cards invite serious customers who actually use the cards –and not just flaunt them

* Platinum cards with high fees are in vogue this year with new launches

While credit card companies had earlier fought for higher market shares in the number of cards disbursed, they are now looking for higher spending on the cards and the repayment ability of the customer, which helps in a market where banks are wary of payment defaults.

On both counts, it makes sense to go for fee-based cards because people tend to use more of what they have paid for.
According to the Reserve Bank of India, the number of cards in force dropped 17.2 per cent in July from a year ago, while the billed business slumped by 11 per cent over the same period.

“The industry is more focused on fee-based cards as the customers spend more on them. In India, the average spending of our premium card members’ is tens of times

the industry average,” said Rajesh Saxena, CEO, American Express Banking Corp. India, which offers only fee-
based cards.

Several premium segment cards were launched this year. While Citibank launched its Platinum Select card in February that charges an annual fee of Rs 4,000, ICICI Bank launched ICICI Bank Singapore Airlines Visa Platinum card in May 2009 which charges an annual fee of Rs 6,000.

“As customers become more discerning in their choices, products that will carry a fee may well become an increasingly important feature of credit cards market,” said Sandeep Bhalla, Business Manager, Cards, Citi India.

Industry executives say premium cards do not just sit inside wallets, but are used all the time.

While the inactive and free cards are letting the industry down in India, the premium card segment is at par with global standards.

“Card usage patterns of premium customers in India are very comparable to markets like Hong Kong, Singapore & US,” said Saxena.