Monday, August 08, 2005

Raining lifetime free credit cards

The credit card industry in India seems to have picked up something from international markets. Credit cards are now "free for a lifetime". Up until now, credit cards usually had an annual service fee associated with them, which could be waived/reduced by a simple telephone call or at times, a threat of giving up the card. There were also many who paid up the service charge.

The Indian credit card user has not lost his conservative moorings yet. On an average, most card holders rarely use the credit card as a "credit" card. They just use it as an alternative to cash and as a means of delayed payment. So most repayments happen nearabout the due date. Atrocious interest rates ( upto 24%) charged by the providers do not help their cause either. It is not so in the US, where credit is a way of life. Since credit card holders enable the card merchants to earn money, there is no annual fee in the US on credit cards. Since card merchants dont earn (as much as card merchants in the US do), there has been an annual fee in India for a while (my logic).

But now, almost simultaneously, there are offers of lifetime free cards. That means, no service charge. However, some of them have a "non usage charge" which comes into play if you dont use the card for, say, 6 months. Why the simultaneous raining of free cards? Perhaps it is a good idea to snare credit worthy holders and keep them for life. Perhaps one of the reasons people switch cards in India is because of lower annual service charge (and I know this to be true). Perhaps its the RBI. Perhaps the cost of collecting annual fees isnt worth it.

Anywhich way, it is a good thing.

1 comment:

CreditPir said...

Americans are the most active credit card users because we have many credit card issuers therefore we can not imagine our life without them and use them everywhere and anywhere.