Clarification on Payment Due Date for Credit Cards

Just a few days back I read an article in the Times of India pertaining to the confusion on Credit Cards Payment Due Dates. Having worked in the Credit Card industry, I thought it would help if we threw some light on the subject.

All Credit Card Issuing banks have 2 payment dates.
(1) Print Due Date: This is the Payment Due Date which is communicated on the customer statement. This is the date communicated to the customers, by which the payment needs to be made
(2) Actual Due Date: This is usually between 2 to 5 days after the Print Due Date. This includes 2 to 5 days of grace period which the bank gives for the cheques which have been dropped on the Payment Due Date to Clear and for the clear funds to reach the credit card issuing bank

In most cases customers drop cheques on the Payment Due Date as communicated on the statement. If the cheque is dropped in the drop box as communicated by the bank on the payment due date, it gets picked up the next day and sent for clearing. The payment gets credited to the Credit Card only after 2 or 3 working days depending on the clearing period and if it is an outstation cheque or not.

If the Banks start levying the fat late payment fee of Rs.500+ if the payment does not reach them by Print Due Date, 80% of the customers would get charged and the call centre would get calls that we have dropped the cheques on time – how dare you charge us etc. This is the reason why the due date configured on the bank statement is different.

However, if you use Internet Banking, NEFT to make Credit Card Payments, they reflect instantaneously as they do not need to go through the cheque clearing process and hence the customer will not get charged even if he makes a payment a bit late after the print due date and before the actual due date.

Late Payment Charges are a major source of revenue for credit card issuers, and this revenue line is monitored at the highest level. There is a monthly target for Late Payment Fees and strict guidelines for Late Payment Fee Reversals as well. Most banks will reverse out the Late Payment Fees the first time … however will be very strict after that. However if you spend more than Rs.20000 on your Credit Card every month and have been paying back regularly, then your bank will not want to lose you as their customer and you can get them to reverse the fee sighting some reason or the other.

However, I suggest that you make your Credit Card Payment in time, however if you have forgotten, the first time you will be excused, but after that you jolly well start paying the fees. You need to be responsible – if you take your bank for a ride, be rest assured, they will take you on a ride as well.

For comments, suggestions and queries, you can write in to Ask.Pranav@Gmail.Com and I will write back to you as soon as possible.

This is the season for Hidden Charges on your Credit Card

Over the last few months Indian Credit Card Issuers are going through a tough time on the inability of the customers to pay back the money that they have spent on the Credit Card. The whole model of the Credit Card industry has been turned up-side down. This has happened due to the following reasons.

(1) Tremendous Sales pressure within the banks has forced them to give Credit Cards to sub- prime Customers, customers who do not have a proven ability to pay
(2) Some banks have even given Credit Cards to customers who do not know what a Credit Card is, and hence do not know they need to pay back (sounds funny isn’t it!)
(3) About 3 years back, the banks on an average would lose Rs.3 for every Rs.100 lent out as bad debt, not that number is Rs.15 for every Rs.100 lent out
(4) This is a 12% reduction in the profit margin, which was anyways between 3% to 4%, and now the companies are heavily in loss

As a result banks are issuing fewer credit cards and to make the business more profitable have increased the fees and charges, hoping to make more fee revenue. Therefore it is very important to pay attention to the revised fees and charges communication that you would receive from the banks. It would also do you good to check the revised fees and charges communication on your Bank website.

Just a few pointers to what has happened in the market over the last year

(1) Barclays has raised the Late Payment Fee from Rs.300 to Rs.500 to Rs.600 to I think Rs.1000 for some tier of customers (I agree they have been very transparent which was their launch tagline ….. and I have received 4 badly printed inland letters communicating the changes)
(2) HSBC has done away with the fuel surcharge of 2.5% which was waived for the customer and if you want a fuel surcharge waiver they have introduced a fee of Rs.349 or so which will make sense only if you have fuel purchase in excess of Rs.12000 per year
(3) HSBC has introduced a transaction charge on making Credit Card Payments through HSBC Branches and Drop Boxes (how funny is this …….. the customer is actually paying back, when many customers are not paying back)
(4) Deutsche Bank has reduced the value of a Reward Point from Re.1 to 75 Paise
(5) ICICI Bank has started charging for Credit Card Payments through NEFT

So dear customers, the point I am trying to make is that BEWARE ……. All Credit Card issuers are trying to get more fee revenue and will try to extract those fees from you. Some do it openly and some do it slyly. So please check your Credit Card Statements carefully and if you see any hidden charges, please login a complaint with the bank and if they do not reverse it, with the Banking Ombudsman. Anyways do let me know … I would like to know the ways in which Credit Card issuers are trying to make their money.

You can write to me on Ask.Pranav@Gmail.Com and I will revert back to you as soon as possble.

Regards.

Pranav.

Case Study (HSBC Bank) - Payment for HSBC Credit Card which was never received!

Customer Says:

Hi, I applied for HSBC credit card one year before and after some weeks I got call and letter from bank that they are not issuing any credit card and in case i got any credit card, dispatch it. No credit card and document i received.

After 6 month i got a call from HSBC recovery dept. to pay my due of 5000 otherwise they list my name in defaulter and blah blah. After that i called customer care who says my account is closed. After that i start ignoring them,but they continuously calling me .

Then they started bargaining with me to settle down.At the end i offered them, to pay 1000 rupees .Then they told me that their man will come at my place next day and pay him cash.As i heard from net that after that also they don't stop. Then i asked him to give me the letter of settlement i will pay that amount in the bank.And :D they refused. so the game continues...I would like to hear if there is any solution to get rid of it without paying any due to recovery dept and HSBC.

Ask Pranav Says

Yes, there is a way out. I am assuming that whatever you have stated is the truth.
If you have not even received a Credit Card from HSCB, there is no reason why you need to do any settlement with them. You just need to tell them to give you proof of delivery of the Credit Card and the Transactions that were done in your card, and wait for your response. There would mostly be some form of fraud on your Credit Card and you had never received it, there is no need to pay for the same.

You can collect all your communication with HSBC and share the same with the Head Customer Care at HSBC, the E-Mail will be updated on the website. If you do not get any response, then write to the Banking Ombudsman, the E-mail ID of which is updated on the HSBC Website, also keep a record of all the communication.

As you have not paid back the money (at least as far as their records are concerned) they would have reported your name to the Credit Bureau, once the case has been resolved you need to tell the HSBC guys to remove your name from the Credit Bureau, they can do it internally. Please do not leave them before they do this, else your changes of getting a loan subsequently may be affected.

If you have any further queries, do write into Ask.Pranav@gmail.com and I would be happy to answer any questions that you may have.

Also do check http://www.simplybank.blogspot.com/ for articles on financial education that may be useful to you.

Case Study (SBI Credit Cards) - Rs.500 Late Patyment Fees on Outstanding Less than 50 Paise

Customer Says: SBI Credit Card

HARRASSMENT BY APPLYING UNJUSTIFIED CHARGES: I was using the SBI GOLD card no. 431751234567890 from 2006 to JULY-2007. In one of the payment i made payment of the amount excluding the fractional amount, e.g. Billed Amount was 884.23Rs. & made payment of only 884Rs. to make it round figure. But in the next months statement the bank charged me late fees for the remaining 23 paisa.

When I requested their customer care executive for reversal of the same he refused to do so. I stopped making payment of that late fee, and repeatedly requested customer care to consider it, but all in vain. The same is going on and the latest amount due against the card in the month of June -09 is of 2476.90 Rs. Now I am fed up of talking with customer care department, as they are not at all ready to understand my issue. Sir, I want to bring it to your notice that if really I wanted to cheat the bank, I would have used the card further also as the credit limit over my card was of Rs 52,000, but I never did that. You can even verify my track record before this incidence. I hereby request you to please look into this matter kindly and give me the reversal of the amount whatever you charged me. Otherwise it will be a big injustice with me.

Ask.Pranav Says:

Hi, I faced a similar problem with my Barclaycard. The issue is that most Credi Cad issuers allow a short Payment of Rs.100 on the Total Amount Due. If you pay Rs.100 less than your Total Amount Due, you will still not be charged any Interest.

However Banks likeSBI Card and Barclays do not follow this practise. Hence all customers have to be very careful and ensure that the full amount de is paid to the nearest Paisa. I suggest you do the following.

(1) Register a Case with the Banking Ombudsman stating that you had not paid a few paise and the Late Payment Fee Charged has been Rs.500+ for a short Payment of 23 paisa.Word the letter saying that the Late payment Fee cannot be 1000% of the Payment Outstanding
(2) My bigger worry for you is that by now, they would have reported your name to the Credit Beureau completely ruining your Credit Card. Fo more details on what this means you can visit the following article which explains what a Credit Beureau is.
http://simplybank.blogspot.com/2009/04/what-is-cibil-credit-bureau-and-why-is.html

I suggest you pay off the amount and close the matter as it is very important to have a good Credit Record these days. For any further clarifications you can write to me at Ask.Pranav@Gmail.com or visit my Blogsite on http://www.simplybank.blogspot.com I am sure you will find some articles of use out here.