How to be more careful with your credit card

Can you imagine your life without a credit card? Whether it's to make payments online, shop till you drop, or for use as a lifeline in an emergency, the arrival of the credit card has been fortuitous both for the consumer, as well as the credit card company.

Card cloning?!

As efficient and easy as the credit card makes your life, the world over, credit card theft and fraud is a problem that is slowly but certainly spiralling out of control.

Card-cloning is the latest in a string of issues faced by the banking industry, by which card details are furtively recorded during transactions at petrol pumps and supermarkets and emailed across the globe for illegal withdrawals from ATMs.

In fact, customers at a petrol pump in the city of Leicester recently found that their card details were used to withdraw money from various places across the world, including India.

IIT fraudster!

Closer to home, an 18-year-old IIT student posed as a bank executive, got credit card details from customers, and then used the data to book air tickets and buy laptops. He tied up with a travel agent to cancel the tickets and share the returns, while he sold the laptops across the country at a discount.

He scammed 25 cardholders of Rs 650,000 in less than six months!

While the banks and authorities grapple with theft and fraud, it's not just these conmen and tricksters that you need to look out for.

Are you a victim? Learn to protect yourself

Firstly, did you request your card, or was it forced on you? You need to know that no bank has the right to forcibly issue a credit card without prior consent, and they certainly can't charge you for it.

Your acceptance of and/or use of the card automatically implies your acceptance of the terms of the user agreement. You should know what the agreement contains and, if there is anything in it that you disagree with, you are responsible for declining the card.

In some agreements, there is a time limit for rejecting the card. If/when that time passes, the agreement automatically becomes valid.

When an issuer does try to sell you a product on the phone, you must ask for terms and conditions, application forms and so on before you agree to take a credit card.

Make it a priority to fill in all application forms yourself, and choose your credit card company only after reviewing all the specifics such as interest rates, processing charges, and so on.

Companies also add to costs by tacking on subscriptions to insurance services or publications without your approval. Be wary of these occurrences.

In fact, if you read the fine print carefully, you might see additional information about rewards and travel programmes, insurance coverage and privacy policies, lists of fees, and information about foreign currency transactions.

Make sure you understand what each of these means, and what it is you are getting yourself in to.

Credit card interest rates

What about the interest rate on your card? How often have you been offered, and succumbed to a card at 0% interest, only to find that interest is charged after the first few months?

Then there is the common occurrence of a sudden increase in the interest rate, with no forewarning. While banks have the discretion to make changes, the RBI has now released guidelines stating that the total annual percentage rate cannot be more than 30 per cent.

It is interesting to note here that while the RBI has issued a list of guidelines, these are generally not issued to the consumer. Understand that if the credit card company does withhold information, it is considered an offense.

Banks are expected to be transparent, especially in their terms and conditions. In fact, the Reserve Bank of India has ordered that the terms and conditions should be printed in a size that is easy to read and process!

Late payment

Late payment is another issue that plagues most consumers, because interest is charged on the unpaid balance.

Many people make cheque payments on the due date, and with no mechanism to record the date of payment, card companies sometimes use this as an opportunity to slap on late fees. Some banks have even introduced the concept of charging people for not using their credit cards.

Bank alerts

And finally, did you receive an e-mail, SMS or letter from your card issuer about the recent lowering of credit limits?

Many people did not. Legally, banks must notify any change in fees or charges (through the website, statements of accounts, email, SMS alerts and notice board at branches) 30 days before the revised charges become effective.

In order to prevent credit limit being reduced, make sure you pay your credit card bill on time. Always pay more than the minimum requirement, and repay as much as you can quickly to get that loan off your books.

Sorting out a dispute

If there have been problems with your card, then arm yourself. Begin by creating a record of the incident by writing to the head office of the card-issuing organisation.

Since most banks have a dispute redressal mechanism in place, you might register a complaint on the phone; remember to note the name of the person and the time and date of the conversation.

If your complaint is not acknowledged and no action is taken within a month, then you have the option of lodging a complaint with the banking ombudsmen appointed by the RBI. The other option, which is available to individuals, is to appeal to the consumer courts.