Credit Card Fees: Is Your Banking Charging You Before Activation Of Card? Here's What You Should Do!

The rising number of complaints about banks charging joining fees even before credit cards are activated has led to confusion among consumers. These issues range from unsolicited cards being issued without customer consent to undue delays in closing card accounts. As credit card users, it's essential to be aware of the guidelines that protect you and ensure that you're not unfairly charged or misled. Here's a detailed guide to understanding credit card activation, related rules, and what you should do when things go wrong.

What Happens During Credit Card Activation?

Your credit card is not activated automatically upon issuance. Instead, it becomes active only after the customer completes a specific action that confirms their willingness to own the card. Most commonly, this is done by using an OTP (one-time password) sent to the customer's registered mobile number. However, some non-financial actions can also lead to activation.

For instance, even if you don't make a purchase or cash withdrawal, setting a PIN for your card will still be considered an activation. According to the Reserve Bank of India (RBI), any customer-initiated process, such as generating a statement, changing a PIN, or modifying transaction controls, will be treated as card usage.

The RBI has emphasized that customer care interactions, unless they involve actions like changing transaction controls or generating a PIN, are not considered credit card usage. Essentially, unless you explicitly activate the card through a verified process, the card should remain dormant.

When Does a Bank Charge a Joining Fee?

Some users have reported being charged joining fees before their credit cards are even activated. However, as per RBI's guidelines, banks cannot charge you a joining fee until the card is officially activated. Since a credit card account is created only upon activation, charging fees before this process is against the rules.

If a bank tries to levy a fee before you've activated your card, you should immediately contact the issuer and dispute the charge. The RBI is clear that activation must occur through your explicit consent, usually via OTP, to be considered valid. This means you can safely avoid any fees if the card remains unused and unactivated.

What Happens If You Don't Activate the Card?

If you haven't activated your card within 30 days of issuance, banks are required to seek your OTP-based consent to keep the card active. If you do not provide consent within this period, the bank must close your credit card account within seven days of seeking consent.

This rule ensures that users who decide not to use a credit card after it is issued aren't penalized. Additionally, it helps prevent situations where cards remain active for an extended period without the customer's knowledge, which could lead to unnecessary fees or even fraud.

Unsolicited Credit Cards

Unsolicited credit cards have become increasingly common, but these can lead to complications if not handled properly. If you receive an unsolicited card, you must not provide any form of consent-whether through OTP or any other means-because doing so could activate the card, opening you up to fees or other financial obligations.

According to RBI guidelines, if a card issuer sends you an unsolicited credit card, they must close the account within seven working days of confirming that no consent was given for activation. The closure of the account must be communicated to you, and no costs should be incurred during this process.

In the case of receiving an unsolicited card, it's recommended to destroy it after confirming the closure of the account. If you want to take it further, you can file a formal complaint with the card issuer and escalate the matter to the RBI Ombudsman under the Integrated Ombudsman Scheme.

Will an Unused Card Impact Your Credit Score?

One common concern is whether an unsolicited or unused credit card will negatively affect your credit score. The good news is that inactive cards will not impact your score. However, there have been cases where information about inactive cards has been incorrectly reported to credit bureaus, potentially leading to unnecessary complications for cardholders.

The RBI mandates that credit card issuers can only report information to credit bureaus once the card has been activated. Any information related to inactive credit cards that has been reported must be withdrawn within 30 days.

What Is the Difference Between Deactivation and Closure?

It's important to understand the distinction between deactivating and closing a credit card account. Deactivation refers to temporarily blocking the card, typically done in cases of loss, theft, or fraud. This action prevents any further transactions but does not terminate the relationship between the cardholder and the issuer.

On the other hand, closing a credit card account involves ending the relationship altogether. Once closed, no transactions can be made, and the account is officially terminated. If you intend to close your credit card account, be sure to submit a formal request, and the bank must process it within seven working days, provided there are no outstanding dues.

What Happens If You Have Outstanding Dues?

If you want to close your credit card but still have outstanding dues, there is a process to follow. Upon receiving your closure request, the card issuer must provide details of the dues without waiting for the billing cycle to complete. Once you've cleared the dues, the closure process can proceed.

The seven-day timeline for closing the account is paused until the dues are cleared. Once the payment is made, the countdown resumes and the issuer must finalize the closure within the prescribed period.