Thursday, May 7, 2009

Back to Basics - Credit Cards - PART III

Why pay? Just use and forget!

Why should we bother paying back? With the number of banks and their eagerness to sell cards, I could get one new card every month, use it to the fullest and then just throw the card away!!

Well this would have been a great thing to do, except that we will be hurting our own credit history.

The banks, with the availability of computational power, are now maintaining database for all the customers, including their credit history. To avoid getting cheated/reducing losses, they even maintain a common database of the customers who have defaulted.

Every bank cross-checks this list for the defaulters before issuing credit to any individual.

So in case I default in a credit card now and apply for a home loan 5-10 years from now, my home loan application will be rejected due to my bad credit history. And this is applicable to all kinds of loan.

In fact, multi-national banks have gone a step ahead. They have inter-linked their operations worldwide.

I know a case in an MNC wherein a customer called from US to enquire about the outstanding on his card, which he had used 7-8 years ago. His outstanding was only Rs.80.00. When I enquired on how I could help him, he told that his home loan application in US got rejected due to the outstanding on his credit card in India. He was labeled as a defaulter for an amount of Rs. 80.00!! When I dug deeper into his account details, the outstanding amount was for Card theft insurance and not even a principal!!

Therefore the onus is on us to make sure that we use the card carefully. The banks will be getting more serious on the quality of the loans to be issued after the sub-prime debacle in US.


Some tips to use a credit card in a safe way.

1) Make full payment of the outstanding.

2) Use auto-funds transfer facility in the savings bank account to avoid last minute cheque lost/delay cases. Make sure that there are enough funds in the account on that day.

3) Try not to use credit cards while visiting third world countries like Thailand and other south-east nations. Card phishing is a very common activity there. Get prepaid international card instead.

4) Do not get over dependent on the card for meeting your expenses. Card payment collectors can be quite embarrassing.

5) Use cards only in known/reputed web sites. Try not using it for things like adult entertainment, online lottery, etc. There is a high possibility that card details will be phished.

6) If going at places like local Bar, ask them to swipe the card in front of you. Have seen numerous cases when the card is swiped multiple times for the same amount at these places. 

7) Try and keep a track of your purchases through card and cross check them with your monthly bill.

8) If unsure about the available limit, call customer care number and confirm before spending.

9) In case you are not using the card, call customer care and ask them to close the account. Don’t keep the account active under any circumstances. It leaves a loop hole for cheating.

10) Try and avoid taking loans which charge EMI directly to your cards. They are much more costly than similar loan products available otherwise.

11) Do not give your credit card to any one unknown. Not even to bank employees. I have come across cases during my small career in cards collection, where con men went to customers’ residence posing as a bank employee and asked the customer to hand over the silver card so that bank could issue them a gold level card. The customer, without cross checking the employee’s credentials and without cutting across the card, handed it over to the con men. The customer ended up with a bill of 50,000.00 at the end of the month. And he was forced to pay it too.

12) Cut the magnetic strip before disposing the card. Or even when sending it to the bank for cancellation.

13) Call the customer care as soon as you realise that you have lost your card.

14) Try to read the fine prints of the card application form if and when the time permits.

This list is not exhaustive though. We have to be careful, always. Today, plastic is as good as real money. A small noting of few numbers can cost u a good deal of money. Always be careful about your card. Its your liability.

Hope that the above details are useful to all. In case anyone has any doubts, please feel free to scribble back.

1 comment:

arun said...

never knew a credit card had so many hidden drawbacks ...damn useful bro ..and do try using the "follower " widget coz that would allow ppl to follow ur blog and let them know when u update...keep it coming