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  • Category: Miscellaneous

    Why credit card is not common in India?

    Credit card system is almost common in US, UK, Singapore, Australia and several developed countries. For each and every transaction and shopping they uses credit cards only. The banks and financial institutions provide their customers credit cards instead of debit card. However in India there is a lot of processes and inquiries for this. What could be the economical differences between india and other countries which offers credit cards to their citizens. What are the drawback as well as advantages to the bankers in this regards?
    Authors please focus on bankers and countries, not on customer's benefit.
  • #576761
    Bankers and credit card companies are commercial entities. They work for earning a profit. They extend any load, issue a credit card or extend any other facility merely for earning a profit. They are neither a charity organisation nor run social welfare schemes like the Government. Therefore, they have to ensure that the credit given by them is duly paid by the credit card holder together with due interest in time without any default.

    With a view to ensure above, they carry out necessary scrutiny about the capability of the individual concerned about their repayment capacity. There seems nothing objectionable in that. Every financier has to right carry out necessary checks before lending.

    In India, there is more tendency of transacting in cash as tax evasion is the norm. Transactions through credit cards are duly recorded in the system and due taxes are required to be paid in any case. This is also one of the reasons of people not taking much interest or show enthusiasm in credit card transactions.

    Let us encourage each other in sharing knowledge.

  • #576781

    Credit card system is almost common in America and the European countries.Can you reason out why? their markets and infrastructures are different, we can not compare with India.
    Advantages --
    1.Transparency in Transactions through credit cards.
    2. Tax evasion will be difficult hence less corruption.
    3. Bankers will have income from customers such as annual fee,service tax, late payment charges,interest from EMIs
    4.Suppose maximum customers start using credit card ,no ATMs required, less staff required to issue cash on counters, less stationary, less guards.
    5. When customers do not have money but have credit card they still keep on spending, so business grows.
    'Education is a lifelong process, keep on learning new things'

    'Education is a lifelong process, keep on learning new things'

  • #576782
    We Indians are not sincere and decent enough to repay our loan. Many have the mentality to cheat the bank or the loan giver. Also, the interest rate charged by the bank is very high. A common man will not be able to possess a credit card. We may not use the credit card but have to pay the annual fee without fail. The fine levied for non-payment or late payment also too high.
    The Fear of the public to hold a card, and the fear of the bank to collect back the money is the major problem that Credit Card is not common in India.

    No life without Sun ¤

  • #576784
    @ #576781, Does credit cards help controlling corruption in a country? In India, people are getting frustrated from bankers due to credit cards. If you go through consumer forum you will found several complaints against banks offering credit cards.

    @ # 576782, Sun Sir, can you please elaborate why Indian banks charge high interest than others? Why people keen to deposit money in foreign banks (not to expose black money) whether they get less or more interest against deposits? I mean to know the both sided interest rates.

    Naresh Kumar
    'Every bad situation will have something positive. Even a dead clock shows correct time twice a day.'

  • #576785
    Well, the basic reason is the high rate of interest charged on a credit card. If you are a spendthrift and do not make prompt payment of your dues, a credit card can make you a bankrupt in a shorter span of time. It can best be used as a means of buying something on EMI. That would attract a flat rate of interest unlike the heavy rate of compound interest charged for other types of transactions.

    Even the card issuers are puzzled at the low rate credit card penetration. There could be many reasons to it. There are tough guidelines as far as issuance of credit cards is concerned. Banks are not ready to take any risk in this regard. That makes it a major reason for the lack of interest for opting for a credit card.

    Live....and Let Live...!

  • #576805
    Credit cards are loosing its attraction because of high rate of interest that they are charging to its customers and worst of it, they fail to make payment in time causing an additional interest to be levied. Such arithmetic itself becomes burden to the payers. The other point is the relaxed discipline of the customers with respect to payment. Defaulters are not to be punished heavily for the non payment of the loan. Such process would lead to loss of the Banks. All such negligence have led to adopt a tougher steps on the part of banks to be taken while extending the facility of credit cards to ensure that the loan does not turn out to be a bad one.

  • #577036
    I beg to differ with the point of view that credit cards are not common in India. It is very much common with people who are not afraid of a credit card & who use the credit card judiciously. What I feel is that if someone makes his credit card payments in time then he can enjoy free credit up to his card's limit for a maximum of 50 days. For such people the loan's interest rate is also very low, from 10-14/15% per annum on reducing balance. Banks feel that their money is safe with such people, hence they offer loans at low rates to such people. So, I would like to say that interest rates are high for those only who have a bad payment history & a bad credit rating (CIBIL).

    In India people are used to loan waivers and they think that even the banks will also waive off their loans. So, they take loans & do not pay on time or even do not pay at all. When the banks initiate recovery procedures then they cry foul, whereas they themselves are at fault most of the times. Keeping that aspect in mind, banks adopt stricter measure at the time of issuing of credit cards to safeguard their interests. Banks, after all, are giving credit for earning.

    Moreover as stated by N K Sharma herein above, there is a lot of black money circulating in India, and those having black money avoid credit or debit cards as they cannot account for the money as every bank account is linked to one's identity through aadhar card.

    So, I would like to summarize it by saying that a person with good payment history has nothing to fear & gets loans at very attractive interest rates. Only those who have bad payment history face difficulties & get loans at higher rates, if at all they get it.

  • #577041
    What I feel that from the customers point of view the usage of credit card is discouraged or not liked because we tend to make more purchases than required. For example when i was having Petro Card I used to fill the vehicle tank full every time where as now I am filling two liters per day. Here what I mean to say that we tend to spend more in the garb of credit card and then find it difficult while repayment. More over some credit cards are charging more service charges which is again burden. And the after effects of non payment of credit card amount cannot be imagined by common man.
    K Mohan
    I consider myself as the learner everyday

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