Credit Cards: Things to know before applying

Updated: Tuesday, March 26, 2013, 11:14 [IST]

With increase in online shopping, usage of Credit Cards have increased accordingly. Payment by Credit Cards has come to be increasingly accepted by merchant establishments during the last decade, as per the Banking Codes and Standards Board of India (BCSBI).

Before applying for any credit card offered by banks ensure you check the following points.

As banks levy various charges, you must get complete information about these charges / rates before signing the agreement with the bank.
Before signing agreement with a card issuing bank, please read carefully the terms and conditions.
Interest rates on credit cards, are high as compared with other loan products offered by banks. Therefore, before accepting the credit card, you should check the interest rates and how it is calculated and computed at what intervals?
Whether insurance cover available, if so is at a cost or offered a freebie.

What you must know?

Banks cannot levy any charge other than those mentioned at the time of issue of the card. For subsequent changes, written consent of the cardholder is necessary by giving him one month notice.
Banks are free to determine the rate of interest on credit card dues.
Banks are required to explain the method of calculation of annualized rates with suitable examples for easy comprehension. Interest rate of 2.95% per month translates into as high as 35.04% per annum.
Service Tax (including education cess) currently @ 12.24% is levied on all fees, interest and other charges.
EMI facility offered against credit card may be subject to levy of transaction/processing fee. Please check before availing of a loan against credit card.
In case the total outstanding exceeds the credit limit, an additional charge is levied automatically on the excess amount.

Wrong charges on your card

In case of dispute over a transaction in the statement, you can ask the bank to give more details such as documentary evidence in support of your having authorised such transaction and the bank is required to give the same within a period of 60 days.

Source: BCSBI

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