With competition hotting up in the credit card market, banks are wooing customers with various offers. With over 10 million credit cards in the system, banks are churning novel schemes to ensure higher card spend.
"We have to come out with special schemes to encourage usage of the ICICI Bank card as a primary card," said Chanda Kochhar, executive director, ICICI Bank. The country's second largest bank has triggered off a fresh war in the market by relaunching its cash-back offer.
Cash-back credit card: How good is it?
"It is a lean season when most purchases is not influenced by festivities," said Kochhar, justifying why the leader in the credit card market with over 3 million cards, has chosen June to August to launch the scheme.
ICICI Bank's 30,000 merchant outlets, which are part of the cash-back scheme, are equally doing their best to encourage greater usage of the bank's credit card. They are reaching out directly into customers' wallets as they ask whether a customer has an ICICI Bank card during the period of the scheme.
"There is a need to create awareness as shoppers have a host of cards and may not necessarily know of all the offers happening at that point in time," said a senior teller at Big Bazaar.
Customers are totally confused and often may not recall or even know what deals are going on in the credit card market space as banks turn on and turn off the special cash-back schemes.
"It is bewildering. We do not always know when the scheme is on and it becomes a herculean task to decide which card to go for. My preference is to go for a card that suits my needs and is available all year round," said a credit card holder.
Today, Citibank is the only player offering a perpetual cash-back offer on its cash-back card, available at an annual fee of Rs 500. With this a customer gets cash back returns varying from 1 per cent to 5 per cent of the purchase value depending upon the type of purchases. The maximum amount a customer can get back in cash is capped at Rs 20,000 a year.
Cash-back first started in the US and is growing by leaps and bounds internationally. However, rewarding the customer for using a card is not limited to cash. Today, rewards have got segmented as banks target different customer segments through co-branded cards.
"Depending upon one's choice, customers tend to pull out that credit card which affords them maximum value at that point in time. This need not be cash back," said Citibank business manager T R Ramchandran.
This can vary from free air miles, free fuel or free (mobile) airtime. Citibank offers all the four choices through its co-branded cards with Jet Airways, Hutchison, Indian Oil Corporation, plus its own cash-back card.
Nevertheless, industry analysts said credit card spends and numbers do rise manifold with promotional offers in the market.
The festive September to December season typically brings about a 30 per cent jump in credit card spends across the industry. Last year, when the period was compounded with cash-back offerings of ICICI Bank, HSBC and Citibank among others, growth in card spends jumped by 37 per cent.
Many customers club their purchases and make the best use of their multiple credit cards that offer a cash-back deal.
