Vinod Hansraj was always worried that his credit card could be misused. The staff at his detective agency frequently used his card to pay at the government’s website to access company-related information.
He decided to take a credit card against a fixed deposit that had a credit limit of Rs 15,000, one-fourth of his other card. A few months later, he discovered from a friend that his earlier credit card company had a facility whereby he could make a temporary card from his account for Internet transactions that would be valid for just 48 hours.
“The best part was that I could restrict the credit limit of the virtual card to as low as Rs 500,” said Hansraj. He never logged on to his credit card’s online account to explore features, as his pin was kept safely at home since the day it arrived.
Just like Hansraj, many credit card users fail to take the benefit of features provided for convenience and security.
Even before the Reserve Bank of India mandated a compulsory password for online transactions, HDFC Bank and Kotak Mahindra Bank offered virtual cards.
“Many users are not comfortable using their card online due to security reasons. That’s why we introduced this facility,” said Parag Rao, executive vice-president and head of products and portfolio management, credit cards, HDFC Bank.
Let’s look at other such features that credit card companies are offering:
Pay by transaction: The latest entrant in the credit card space, Dhanlaxmi Bank, offers cardholders a 45-day free credit period, irrespective of the billing date. While applying for the card, the applicant needs to just specify if he wants to pay like this or according to the billing cycle. In the former, the bank starts charging interest rates only from the 46th day onwards.
The bank also gives an online financial planning tool that analyses the expenditure, segment-wise. The customer can track if more money is being spent in lifestyle purchases or need-based purchases.
Add-on card restriction: If you are afraid to give an add-on card to, say, your child, because of the high credit limit, there is a solution. Some issuers are issuing add-on cards, wherein the primary cardholder can restrict the credit limit. HDFC Bank allows you to restrict the limit to as low as Rs 1,000. Usually, the add-on card has the same credit limit as the primary card.
Lower interest rates: Credit card issuers point out that many users, on an average, keep at least three cards, as they hold savings accounts or fixed deposits with different banks. Private credit card players providing better facilities charge exorbitant interest rates, upwards of 40 per cent.
Public sector banks such as Bank of India, Union Bank of India and Syndicate Bank have annual interest rates of 22-24 per cent. “Even if a person has a card from these banks, he frequently uses the one that either has a higher credit limit or provides ease of payment,” said the head of the credit card division with a private bank.
Chip-based cards: If you are a frequent flyer to international destinations, there is a strong possibility that your data could be stolen (known as skimming). In fact, many issuers suggest customers destroy their cards if used internationally. To prevent such misuse, Axis Bank and HDFC Bank have started providing cards that are chip-based, called EMV cards.
These cards have a chip, rather than a magnetic strip, that stores information in an encrypted form. In developed markets, the regulators have asked companies to compulsorily issue EMV cards.
While Axis Bank is issuing such cards to platinum cardholders, HDFC is replacing chip-based cards for customers who are international travellers. However, any customer can call for an upgrade.