Not being penny wise is a boon for credit card companies

If Shakespeare had lived in the age of credit cards, he would probably have replaced the character of Shylock in The Merchant of Venice with a credit card company! Pushpa Girimaji tells more...

If Shakespeare had lived in the age of credit cards, he would probably have replaced the character of Shylock in The Merchant of Venice with a credit card company! In fact the character of Shylock pales into insignificance in front of some of the practices adopted by credit card companies

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Take for example, the fractions of a rupee that they put in the bill, such as Rs 55,700.32 or Rs 68,252.21. Now people who have ignored that small fraction while paying their dues have had to pay a heavy price! That’s because, credit card companies treat that 32 paise or 21 paise that you may think fit to ignore , as an unpaid amount and charge interest applicable to bills on which full amount is not paid. So in the next bill , you will be charged interest on not just that 20 paise, but on the entire transactions on your card that month. If you refuse to pay the interest on the ground that it is patently unfair, the “dues” soon snowball into a huge amount.

A typical example is that of a consumer who received last month, a bill for Rs 89,425.41 He paid Rs 89,425 and well in time, but ignored the fraction (41 paise). In the next month’s bill, he was shocked to find that he was being charged an interest of Rs 7,257.21 . When he protested and said he had paid the entire bill, he was reminded that he had not paid 41 paise in that bill! Eventually, the interest amount was reduced, but to Rs 3,889.50.! It’s time the RBI did something.

In the first place, why should credit card companies charge that small fraction of a rupee in the bill at all? In fact way back in 2006, while referring to “interest rates on deposits” in one of its master circulars, the Reserve Bank of India advised banks to ignore fractions of less than 50 Paise. Again in its communication dated March 30,2007, addressed to all commercial banks, the RBI reminded banks about this circular and said “banks were advised that all transactions, including payment of interest on deposits/charging of interest on advances, should be rounded off to the nearest rupee; that is, fractions of 50 paise and above shall be rounded off to the next higher rupee and fraction of less than 50 paise shall be ignored.”. Why can't credit card firms follow a similar practice?

Will the RBI please take cognizance of the way consumers are being exploited by credit card companies and initiate urgent and stringent measures to prevent such practices ?.