The wild, wild world of credit cards

If the credit card limit is exceeded, it is your problem. And, that is true even if the card is stolen.

Twenty-year old Anil Sharma did not know that a small negligence in keeping track of his credit would mean a bill of Rs 18 lakh, especially, since his credit limit was only Rs 55,000. A call, however, to the customer support of the bank confirmed the amount.

Sharma swung into action immediately and filed a police complaint. He even informed the issuer about the unfortunate event.

He was optimistic that the bank would not hold him liable as he had two strong points in his favour: he had a police complaint to prove that the card was actually stolen. Importantly, if the bank had allowed the miscreant to cross the credit limit, it was an error on its part. He was wrong.

The credit card issuer said that as per the rules if a person lost the card, any amount misused was his responsibility.

The head of credit card division with a private bank explained, “If a card is either lost or stolen, the cardholder needs to pay.

It is similar to carrying cash with you. Say, someone takes a personal loan from the bank and loses the cash, it is not the bank’s responsibility”.

VN Kulkarni, chief counsellor at Abhay Credit Counselling Centre, says that he has handled around 45 such cases in the past few months dealing with all major credit card issuers. The problem: Misuse of a credit card much beyond the credit limit. But the bank holds the customer responsible.

Most private banks do not restrict card usage if the person is nearing the credit limit. There is a fine between Rs 500 – 750 if a person breaches the sanctioned credit line. The reason: “Usually, customers do not cross their credit limit except for emergencies. In some cases, customers with a good track-record may use the card for big purchase and cross the credit limit; but they pay back on time,” said the head of cards.

Some public sector banks (PSB), on the other hand, do not allow payments if the transaction breaches the credit limit. “For any such purchase, the customer needs to call up the bank in advance. An officer checks the payment track record and accordingly sanctions or denies it,” said the head of personal banking with a PSB.

In Sharma’s case, police caught burglars and the card company got its money back. “However, if the same things happen to you and someone misuses the card online, there is little chance of getting the money back,” said Jehengir Gai, a consumer activist.

According to him, if a card is misused, the liability falls on different parties under different circumstances. If the card is lost or misused after a person has received it from the credit card company, the cardholder will be liable for the misuse up to the sanctioned limit.

Anything beyond the credit line is the company’s responsibility. “A limit on the card means that it is the maximum amount a company allows the customer to spend on the card. Letting them use beyond that with a penalty is not the right practice,” said Gai.

However, if burglars swipe the card at a merchant terminal, the liability would fall on the establishment owner. It is the merchant’s duty to verify the signature on the card before processing the transaction.

Gai also pointed out that most customers did not prefer to take the credit card company to a consumer court in such cases, as they preferred to opt for settlement issuer offers.

Being aware of available options does help if you lose a credit card, but the primary responsibility does remain with the cardholder to protect it.