Credit card: Devil is in the fine print

When Sandeep Lakhotia met with a road accident last year and broke his leg, he was secure in the knowledge that the medical expenses would be covered under the accident insurance provided free with his credit card issued by a foreign bank.

However, when he made an accident claim with the bank, he was in for a major shock.

He learnt that according to the terms of the insurance policy, he could make claims for accident insurance if only he had been travelling on a ticket purchased using the credit card of that particular bank - effectively ruling out any claims in this case.

And Lakhotia's is not an isolated case. Most of us, while filling up a credit card form, ignore going through the details.

A typical situation is like this. After being inundated by calls from a direct selling agent (DSA) or after approaching a bank for a card, someone from the agency/bank comes to get your form filled.

There are several places in the form where you simply sign. The rest, the agent assures, will be filled properly.

There are several clauses in that document -- those innocuous boxes, which are tick marked by the agent. And the devil lies in those details.

Here is a list of things you should watch out for in your credit card document.

Free insurance cover: Like in Lakhotia's case, a majority of such policies will have a large number of riders attached to them, rendering them quite ineffective in times of need. For instance, some policies only provide you cover when you are travelling by air.

"A lot of these sops with credit cards are simply an eyewash. There are so many conditions attached with them that they are rendered ineffective," said Suresh Sadagopan, a certified financial planner.

Approaching your boss: Don't be surprised if your credit card-issuer comes calling at your workplace -- something that is new and banks have inserted this clause in the credit card form. Usually the clause reads: "I authorise the bank to contact my employer to obtain any information to maintain my account in good credit standing."

If your employer plays along, dues could be deducted from your basic salary.

Credit card cancellations: Most credit card terms contain a clause in which the customer agrees to the condition that the bank can cancel his or her credit card at any time without assigning any reason.

Marketing calls: Customers inundated with marketing calls would be surprised to know that they might have actually consented to receiving those calls.

A lot of credit card agreements ask if you consent to receive marketing calls. However, the agreement also contains a contradictory clause, "I authorise the bank to disclose any information relating to my card to any other card issuer, credit bureau and third parties for purposes such as marketing of services."

Debiting dues from savings account: This is a common complaint of customers who have savings accounts and credit cards at the same bank. Often, the minimum balance is debited even if they have not opted for the direct debit facility. Sometimes, customers sign on the agreement wherever indicated by the DSA without ticking any options. However, customers have no control over which option is ticked, once the agreement is signed.

Written proof of additional features: When Jignesh Thakkar got a phone call from his credit card-issuer offering him an insurance cover free, Thakkar said he would not agree to it unless given proof in writing that he would not be charged for it. The sales executive told him that the phone call was being recorded and that would itself serve as a proof.

However, the credit card company started charging him for the insurance premium. When he called up to protest, he was told that there was no recording of the phone conversation.

"A lot of banks advertise additional features such as insurance to lure customers. However, customers should insist on a written proof whenever they are offered additional features," said Gaurav Mashruwala, a certified financial planner.