How Many Credit Cards is too much ?

Credit Card sales agents rank amongst the top 5 white collar liars in Indian business. When selling, they tell that everything you want is for FREE - Free cards, No joining fee, No service charge, low APR, Air miles or Cashback etc. This will lure any Indian to apply for one and head himself into the trap.

You must always ask how many cards it too much ?
Due to the nascent and the merging nature of Credit Card industry in India, with rampant mis-selling and fraud, we advise consumers to have just two credit cards. Preferably one from VISA and other from MATERCARD so that if one is not accepted you can use the other. Also try to have a 15 days gap of billing cycle so that the payment obligation in case of extreme spending is not heavy at a time.

Cancelling a Credit Card:
If you haven't used a Credit Card in 6 months, then you probably don't require it. Do not pay Annual Fees and hold a Credit Card. It is advisable to write to the Bank to cancel your credit card instead of calling them, as we have found that most call center executives of Indian credit card companies are not up to the mark. By canceling in writing [either send it by registered AD or goto the bank and get a SEAL on copy of the request for cancellation letter], you have the proof and record of the same. Also make sure you don't have any balance on the card when you are terminating it.

Credit Outstanding Rising in India

The credit outstanding on plastic cards has risen by more than 50% to Rs 19,345 crore as on Feb-15, 2008 according to the RBI. One of the reasons for the rise is, Credit Cards are easier to obtain than personal Loans and the latter of course comes at higher interest rate too. One of the major contributors to the outstanding credit is the young population of India joining the labour force, which doesn't believe in saving.

The credit card industry in India is still nascent according to VISA. Indians make just 1% of their total purchases by credit cards against 20% for Koreans. The global average is around 9%.

The Indian Credit Card market is expected to touch 55 million cards by 2010-11.

Slower credit card growth in 2007-08

According to data released by the RBI, Credit Card growth slowed down in FY 2007-08 mainly due to defaults by consumers. Here are some latest facts,

• India now has 26 Million Credit Card users - 1/10th the size of Mobile Phone users :-)
• For FY 2007-08, growth in new credit card accounts was 18%, previous financial year 33%
• Minimum annual income to own a credit card is now Rs 120,000 + PAN Card + KYC compliance
• ICICI Bank is now the largest credit card issuing bank in India with 9 million cards.
• Defaulters on Credit card is up by 2% to 12% compared to 10% in FY 06-07

One of the reasons attributed to higher default rate is because other retail debt is demanding higher EMIs which has put pressure on individuals. Also over leveraging up to 20 times their annual income on loans has led to the rise of defaulters.

PNB Credit Card by October

India's second largest PSU bank, Punjab National bank which was seeking permission from the RBI to launch credit cards in India in association with AIG - American International Group has decided to go solo because of lack of clarity and clear signal from the RBI.

PNB will launch full fledged credit cards. Currently the bank is offering co-branded cards in association with HSBC wherein PNB sources clients while the risk and reward are reflected in the books of HSBC. However, going forward PNB will launch a wholly owned subsidiary by October-08.

PNB Official said,

We have decided to start it within the bank since it does not require any regulatory approval. Subsequently if the RBI approved the JV, we will hive off the credit card division.

PNB has a large customer base and it is really essential they launch the card division as slowly as possible with good customer care in place.

High Court Rules Against Citi Credit Card

In a landmark judgment which comes as a relief to the consumer, the High Court of Delhi has ruled against sub-prime loser Citibank's Indian Credit Card division.

Citi cards had filed a recovery suit against one Mr. Deepak for an amount of Rs 3.61 Lakh. The High court has granted stay to Deepak after hearing his version that the settlement amount in the above case was mere Rs 2.0 Lakh and not Rs 3.61 as claimed by Citi Card.

The High Court also made an oral statement saying - This case looks like a clear case of extortion by a foreign bank.

Future Credit looking beyond Group Companies

Kishore Biyani promoted, Future Capital Holdings Ltd which went public at an astounding premium has set its eyes on Telecom, Airlines and other Utility companies to tap in more customers. It is well known to our readers that Future Capital migrated around 1 million ICICI-Bank Biz Bazaar and other Pantaloon group company customers to Future Capital. Now Future Capital wants to expand loyalty membership cards to service oriented companies.

Mr. Ventak Srinivas of Future Capital said,

There are bunch of Telecom and airline companies which are looking at a platform and would liek to expand the consumption of their consumers. We are in discussion with Kingfisher Airlines.

It makes real sense for Future Capital to strike deals with as many companies as possible and give loyalty point to shop in any of the retail stores of Pantaloon Group.