RBI warns of high credit card usage - Cut down ...

RBI warns of high credit card usage - Cut down on credit card expenses

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A2z1
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RBI is warning you of using your credit card too much

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Customers seem to be happily swiping their credit cards. According to Reserve Bank of India (RBI)’s data on deployment of gross bank credit, the growth in credit card dues was 23.7 per cent over the previous financial year as on March 18. The total was Rs 37,700 crore, against Rs 30,500 crore in the same period last year.

The value of credit card transactions as on February 2016 was Rs 20,921 crore, up from Rs 18,886 crore in January. In comparison, the value of debit card transactions at merchants came down in February to Rs 12,954 crore, from Rs 14,611 crore in January.

And, the transaction value per card has gone up to Rs 3,106 from Rs 2,642 in 2009-10, a rise of 17.5 per cent. Over the past year, the rise has been two per cent.

Consequently, the economic research department of State Bank of India says, “Within personal loans, it is the credit card loan segment that is rising rapidly, indicating a rise in consumer indebtedness. A benign inflation trajectory might also be one of the reasons leading to higher consumer spending. However, household debt, as measured by credit dues per credit card in India, has been rising even in real terms (after being adjusted for wholesale price index inflation).”

Two years ago, banks were more conservative in issuing credit cards, but now they seem more relaxed, says Ranjit Punja, chief executive officer and co-founder, CreditMantri.

“We see a lot of people with incomes of Rs 15,000-20,000 per month applying. This is a segment that would normally not get credit cards. Whether this was an unmet demand that already existed or has started now, is difficult to say,’’ he says.

The rise in overall spending through credit cards should worry customers. And before you fall into a debt trap, start reducing it now. Most people get stuck in such a trap because it creeps up slowly, says Punja.

A big credit card debt can affect your chances of securing loans in future because, today, banks rely heavily on credit reports from credit bureaus. However, if you do run up a big credit card outstanding, there are ways you can bring it down.

Convert transactions into EMI

Today, if you make a large transaction, you immediately get an alert from your bank, asking whether you want to convert it into equated monthly instalments (EMIs). "You have the option to convert one or more transactions into EMIs. So, instead of paying the entire amount in one month, you can pay through an EMI,’’ says Rajiv Anand, head, retail assets, Axis Bank.

You can choose the EMI option while making a purchase, both in case of online and offline transactions. The credit limit is reduced to the extent of the principal outstanding and is freed as you keep repaying. You also do not have the option of pre-paying once you convert it into EMI.

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Adhil Shetty of BankBazaar says it is better to opt for an EMI on credit card. "Some credit cards have zero per cent interest rate on EMI. Other benefits include reward points and additional discounts offered by e-commerce players in tie-up with certain cards. Hence, EMI on credit card is nothing but a personal loan, but without the usual documentation and delays associated with a personal loan. If your bank charges an interest rate on converting the transaction into EMI, the rate could be lower than normal interest rate on credit card.

Convert dues into a personal loan

Another option is to convert the dues into a personal loan. "If the outstanding crosses a certain limit we suggest that customers convert it into a personal loan so that they are forced to repay a certain amount every month,’’ says Sumit Bali, senior executive vice-president & head-personal assets, Kotak Mahindra Bank.

The advantage of doing so is that the interest rate on a personal loan is lower than the rate on credit card dues. But, if you are already over-leveraged on your credit card, getting a personal unsecured loan could be tough, points out Punja. Another advantage of a personal loan over converting the transaction into EMIs is that you can get a longer tenure in case of the former. When converting the transaction into EMIs, the repayment tenure is between six and 12 months, while in a personal loan, you can get up to five years to repay. The biggest advantage is that interest rates on personal loans are lower than on EMIs, around 14-17 per cent against anything upwards of 30 per cent.

Secured loans

Essentially, you have to replace the high cost credit card debt with low-cost debt and the best option is to take a secured loan, says Punja. These include gold loans, loans against fixed deposits (FDs), loans against shares, etc. You can pledge assets like gold jewellery, bank FDs or shares and take a loan against these. There are conditions that you must keep in mind for each of these. For instance, in case of gold loans, you have to keep in mind the loan-to-value ratio, which is currently 75 per cent. This means that you can get loan only up to 75 per cent of the value of gold. In case of loan against shares, check if the shares you own are in the bank’s list of approved securities.

Most banks give loans only against shares of top-rated companies. In both cases, if the value of the asset falls, you will be asked to either repay your loan partly or pay margin to the bank. Again, you will have to go through the documentation process and pay processing charges for the loan. In addition, taking on too many loans will affect your credit score.

RISING ONLINE TRANSACTIONS A REASON FOR HIGHER CREDIT CARD USAGE

While sounding cautious, a State Bank of India report says the situation is not as worrisome as 2009. "Personal-loans share is once again rising in the total loan portfolio, which leads one to wonder if this increase suggests a movement towards a similar glaring situation or portends a brighter economic outlook ahead. However, personal-loans share does not seem worrisome with the level even below March 2009,’’the report says.

Agreeing that retail credit is increasing, Sumit Bali of Kotak Mahindra Bank says it is not yet a concern. "With e-commerce growing, credit card transactions are growing. Youngsters in India are more comfortable with debt and are financially-savvy. There are customers who pay part of the dues, get their credit limit released and reuse the card.

But, banks today are far more informed about their customers’ ability to repay. So, we work with customers to bring down their credit card dues," he says.

Credit dues going up means cards are being utilised more, says Rajiv Anand of Axis Bank. “That by itself is not a reason to worry. What banks track from a risk perspective is whether customers are consistently revolving their credit,” he says.

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26 Comments  |  
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Entertainer
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Next year, they will say it’ the virtual credit card segment https://cdn2.desidime.com/assets/textile-editor/icon_toungueout.gif

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Moderator
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so soon https://cdn2.desidime.com/assets/textile-editor/icon_toungueout.gif

Missing
Deal Captain
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@hese wrote:

so soon https://cdn2.desidime.com/assets/textile-editor/icon_toungueout.gif


its ok..

Dimer will make sure its usage increase by 10% in this month alone..
(if offers like udio comes)

Missing
Deal Lieutenant
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@Plato wrote:

Next year, they will say it’ the virtual credit card segment https://cdn2.desidime.com/assets/textile-editor/icon_toungueout.gif


its just loop. money is moving round and round.
e.g. udio →FC→ citrus → Bank→udio
people will cut down usage if udio gives 5% for adding money to bank acc.

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Entertainer
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@ssarvesh wrote:

@Plato wrote:

Next year, they will say it’ the virtual credit card segment https://cdn2.desidime.com/assets/textile-editor/icon_toungueout.gif


its just loop. money is moving round and round.
e.g. udio →FC→ citrus → Bank→udio
people will cut down usage if udio gives 5% for adding money to bank acc.


https://cdn2.desidime.com/assets/textile-editor/icon_cry.gif Please don’t remind me of this offer. Watt lag gayi meri is offer ke chakkar mein. Visa blocked my money for 1 month https://cdn3.desidime.com/assets/textile-editor/icon_sad.gif

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I found this sponsored content on one of the ad networks.

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Deal Subedar
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income tax team also keeping an eye on credit card usage

A2z1
Deal Major
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@sunnie wrote:

income tax team also keeping an eye on credit card usage


On expenses above 2 lacs in a year Income tax sends notice when assesment is done.
Though that is just to make sure one is filing IT returns. They ask for return details as card spends info goes directly to IT deptt by bank in AIR.

Dd
Budding Star
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@ssarvesh wrote:

@Plato wrote:

Next year, they will say it’ the virtual credit card segment https://cdn2.desidime.com/assets/textile-editor/icon_toungueout.gif


its just loop. money is moving round and round.
e.g. udio →FC→ citrus → Bank→udio
people will cut down usage if udio gives 5% for adding money to bank acc.


Never ever involve your bank account when looping money in wallets. Do it from Wallet to Wallet, but don’t involve your bank.

Missing
Deal Subedar
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@A2Zdeals wrote:

@sunnie wrote:

income tax team also keeping an eye on credit card usage


On expenses above 2 lacs in a year Income tax sends notice when assesment is done.
Though that is just to make sure one is filing IT returns. They ask for return details as card spends info goes directly to IT deptt by bank in AIR.


right, but high chances of queries in future. Jab sawaal aayega tab kuch yaad b nai hoga

Missing
Deal Lieutenant
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@saurabh1 wrote:

@ssarvesh wrote:

@Plato wrote:

Next year, they will say it’ the virtual credit card segment https://cdn2.desidime.com/assets/textile-editor/icon_toungueout.gif


its just loop. money is moving round and round.
e.g. udio →FC→ citrus → Bank→udio
people will cut down usage if udio gives 5% for adding money to bank acc.


Never ever involve your bank account when looping money in wallets. Do it from Wallet to Wallet, but don’t involve your bank.


its final destination and for credit card bill settlement we need bank money.

Missing
Deal Newbie
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2 lakh limit/ per year for 1 card or multipal cards like if i have 3 cards then i have limit of 2 lakh of every card or max per 3 card ?
Missing
Deal Cadet
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@dada2015 wrote:

2 lakh limit/ per year for 1 card or multipal cards like if i have 3 cards then i have limit of 2 lakh of every card or max per 3 card ?


there is no limit to use cc i m spending 8 to 9l yearly from last two years no issues… if u r doing business and not paying income tax properly then in that case you should be careful else no need to worry.

A2z1
Deal Major
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@dada2015 wrote:

2 lakh limit/ per year for 1 card or multipal cards like if i have 3 cards then i have limit of 2 lakh of every card or max per 3 card ?


@krc

List of High Value Financial Transactions reported to Income Tax Dept

The below expenses / investments are reported to the IT department. If there is a mismatch between your declared income in ITR and your investment / expenditure, you may get an Income Tax Notice. So, keep a track of the below high value financial transactions;

If cash aggregating to Rs 10 Lakh p.a. is deposited in your Bank Savings Account.
If you make Credit Card payments of more than Rs 2 Lakh p.a.
If you buy mutual fund units worth more than Rs 2 Lakh.
If you invest more than Rs 5 Lakh in Debentures or Bonds issued by any company.
If you buy shares worth more than Rs 1 Lakh.
If you invest more than Rs 1 Lakh in Gold ETFs.
If you buy or sell an immovable property worth more than Rs 30 Lakh.
If you invest Rs 5 Lakh or more in RBI bonds in a year.

Only thing is you should file income tax return.

Missing
Deal Cadet
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@A2Zdeals wrote:

@dada2015 wrote:

2 lakh limit/ per year for 1 card or multipal cards like if i have 3 cards then i have limit of 2 lakh of every card or max per 3 card ?


@krc

List of High Value Financial Transactions reported to Income Tax Dept

The below expenses / investments are reported to the IT department. If there is a mismatch between your declared income in ITR and your investment / expenditure, you may get an Income Tax Notice. So, keep a track of the below high value financial transactions;

If cash aggregating to Rs 10 Lakh p.a. is deposited in your Bank Savings Account.
If you make Credit Card payments of more than Rs 2 Lakh p.a.
If you buy mutual fund units worth more than Rs 2 Lakh.
If you invest more than Rs 5 Lakh in Debentures or Bonds issued by any company.
If you buy shares worth more than Rs 1 Lakh.
If you invest more than Rs 1 Lakh in Gold ETFs.
If you buy or sell an immovable property worth more than Rs 30 Lakh.
If you invest Rs 5 Lakh or more in RBI bonds in a year.

Only thing is you should file income tax return.


Thanks bro for informing…
but if we file income tax return then ???

A2z1
Deal Major
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@krc wrote:

@A2Zdeals wrote:

@dada2015 wrote:

2 lakh limit/ per year for 1 card or multipal cards like if i have 3 cards then i have limit of 2 lakh of every card or max per 3 card ?


@krc

List of High Value Financial Transactions reported to Income Tax Dept

The below expenses / investments are reported to the IT department. If there is a mismatch between your declared income in ITR and your investment / expenditure, you may get an Income Tax Notice. So, keep a track of the below high value financial transactions;

If cash aggregating to Rs 10 Lakh p.a. is deposited in your Bank Savings Account.
If you make Credit Card payments of more than Rs 2 Lakh p.a.
If you buy mutual fund units worth more than Rs 2 Lakh.
If you invest more than Rs 5 Lakh in Debentures or Bonds issued by any company.
If you buy shares worth more than Rs 1 Lakh.
If you invest more than Rs 1 Lakh in Gold ETFs.
If you buy or sell an immovable property worth more than Rs 30 Lakh.
If you invest Rs 5 Lakh or more in RBI bonds in a year.

Only thing is you should file income tax return.


Thanks bro for informing…
but if we file income tax return then ???


These rules are setup to catch those who do not file returns. When IT deptt receives this info as annual information return or under some other form, they do not have tagging of return filing which leads to redundant work.
i have received IT notice several times. I respond with copy of my filed return & that’s it.
Unless IT officer really want to scrutiny some case.

Missing
Deal Cadet
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@A2Zdeals wrote:

@krc wrote:

@A2Zdeals wrote:

@dada2015 wrote:

2 lakh limit/ per year for 1 card or multipal cards like if i have 3 cards then i have limit of 2 lakh of every card or max per 3 card ?


@krc

List of High Value Financial Transactions reported to Income Tax Dept

The below expenses / investments are reported to the IT department. If there is a mismatch between your declared income in ITR and your investment / expenditure, you may get an Income Tax Notice. So, keep a track of the below high value financial transactions;

If cash aggregating to Rs 10 Lakh p.a. is deposited in your Bank Savings Account.
If you make Credit Card payments of more than Rs 2 Lakh p.a.
If you buy mutual fund units worth more than Rs 2 Lakh.
If you invest more than Rs 5 Lakh in Debentures or Bonds issued by any company.
If you buy shares worth more than Rs 1 Lakh.
If you invest more than Rs 1 Lakh in Gold ETFs.
If you buy or sell an immovable property worth more than Rs 30 Lakh.
If you invest Rs 5 Lakh or more in RBI bonds in a year.

Only thing is you should file income tax return.


Thanks bro for informing…
but if we file income tax return then ???


These rules are setup to catch those who do not file returns. When IT deptt receives this info as annual information return or under some other form, they do not have tagging of return filing which leads to redundant work.
i have received IT notice several times. I respond with copy of my filed & that’s it.
Unless IT officer really want to scrutiny some case.


thnks again bro…in short those who file returns have no woories??

Osho
Deal Newbie
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those who don’t file IT Returns ??

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Deal Captain
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@maggot wrote:

those who don’t file IT Returns ??


Start doing it right now if your income level falls under that. Else no worries. https://cdn2.desidime.com/assets/textile-editor/icon_smile.gif
But again they need to make sure that they don’t do the above mentioned things.

A2z1
Deal Major
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@BUTTERFLYBOY wrote:

@maggot wrote:

those who don’t file IT Returns ??


Start doing it right now if your income level falls under that. Else no worries. https://cdn2.desidime.com/assets/textile-editor/icon_smile.gif
But again they need to make sure that they don’t do the above mentioned things.

@Magus

There was some news for those who has not filed returns, can file returns for last 5 years till august. Will search & share details.

A2z1
Deal Major
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@maggot

Reincarnation of magus?

Osho
Critic
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@A2Zdeals wrote:

@maggot

Reincarnation of magus?



Magus is alive and kicking. maggot is a cheap copy of Magus. https://cdn2.desidime.com/assets/textile-editor/icon_toungueout.gif

Images %286%29
Deal Captain
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@Magus wrote:

@A2Zdeals wrote:

@maggot

Reincarnation of magus?



Magus is alive and kicking. maggot is a cheap copy of Magus. https://cdn2.desidime.com/assets/textile-editor/icon_toungueout.gif


https://cdn2.desidime.com/assets/textile-editor/icon_toungueout.gif https://cdn3.desidime.com/assets/textile-editor/icon_lol.gif
Maggot: a soft-bodied legless larva of a fly or other insect, found in decaying matter. https://cdn3.desidime.com/assets/textile-editor/icon_lol.gif

Index
Deal Captain
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@maggot wrote:

those who don’t file IT Returns ??


Duplicate https://cdn1.desidime.com/assets/textile-editor/icon_confused.gif

Missing
Deal Subedar
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The 2 Lakh limit is per card.
In Income tax return format, there is a provision for voluntarily declaring details of cards which had transactions above 2 lakhs. This data is matched with the data available in the IT dept database created from Bank AIR. Problems arise only when there is a mismatch.

As far as the original report in the first post is concerned, seems to be a paid news, as banks earn profits only when people convert speedings into EMI or personal loans. When full outstanding is cleared every month there is not much earning to the banks.

Osho
Deal Newbie
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@Magus wrote:

@A2Zdeals wrote:

@maggot

Reincarnation of magus?



Magus is alive and kicking. maggot is a cheap copy of Magus. https://cdn2.desidime.com/assets/textile-editor/icon_toungueout.gif


Cheap Thinking Magus has got Maggot in his Brains https://cdn3.desidime.com/assets/textile-editor/icon_twisted.gif

A2z1
Deal Major
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@maggot wrote:


@Magus wrote:

@A2Zdeals wrote:

@maggot

Reincarnation of magus?



Magus is alive and kicking. maggot is a cheap copy of Magus. https://cdn2.desidime.com/assets/textile-editor/icon_toungueout.gif


Cheap Thinking Magus has got Maggot in his Brains https://cdn3.desidime.com/assets/textile-editor/icon_twisted.gif

This is like backup plan.

@Magus

Missing