Back-breaking interest on credit card dues, misuse of lost or stolen cards, bills that may as well have been written in Greek… Is your credit card giving you a headache? If yes, that’s about to change.
The Reserve Bank of India (RBI) on Wednesday put in place several measures to make credit card usage in India safer and more transparent.
Responding to customer complaints about the high interest charged on credit card dues, the RBI asked banks to make clear their ceiling rate, including allied charges like processing. So, you won’t need to worry about ‘hidden’ charges anymore.
On May 7, the RBI had issued a circular specifying similar norms for personal loans. It has now said they apply to credit cards too.
As reported by HT on June 30, many banks — including ICICI, ABN AMRO, Standard Chartered and HSBC — had increased their monthly finance charges on revolving credit by up to 0.50 per cent. This took the monthly interest rate on credit cards to an astronomical 3.5 per cent, compounded monthly.
Simply put, if you carry forward credit card dues of Rs 1,000 for 12 months, you’ll end up shelling out Rs 1,511. That’s a rate of interest of 51.1 %.
While banks are free to decide the rate of interest for any loan, a senior official said the RBI “wants banks to disclose their ceiling rates to customers”.
The RBI also made it clear that the bank would be responsible for any loss arising out of misuse of a card not applied for or accepted by the customer. To reduce misuse of lost cards, the RBI recommended that banks issue cards with a photo of the cardholder and his personal identification number.