FOR MORE USE OF DIGITAL PAYMENTS BY CREDIT CARDS THE GOVERNMENT AND RBI MUST PLAY GREATER ROLE TO PROTECT CONSUMERS AND FOR BETTER ACCOUTING AND REPORTING ETC.

[CA DEV KUMAR KOTHARI]

Digital payments and credit cards:

GOI is promoting digital payment for transparency, safety and better reporting and also to curb black money in high spending.

Credit cards play major role in digital payments. However, it seems that credit cards do not have any reasonable standard practices on many vital aspects affecting its users and consumers. Many practices differ significantly even from card to card issued by same card issuer in respect of different cards under different brands or in collaboration with some popular brands/ merchants. Billing periods, credit periods, late payment charges, financial charges etc. are major aspects which need to be standardised and regulated. 

Credit cards – unreasonable and some unethical practices:

It can be said that most of credit card issuers are adopting unreasonable terms and conditions and sometimes unethical practices or malpractices like:

a.  Very high rate of interest on delayed payment

b.  Late payment charges in addition to interest, even if there is delay on part of credit card to realise money through cheque tended by card holder.

c.  Wrong method of calculation of interest   - even if major amount is paid within due date, and small amount remain outstanding, interest is charged on entire amount.

d.  High charges from merchants.

e.  Different reward point policies and different value per reward point.

f.  Arm twisting practices adopted for recovery like sending adverse credit report, sending collection man to home of card holder, continuing to levy charges in compounding manner etc.

Different statement periods and due dates.

Credit cards adopt different statement periods and different due dates.  Due dates are also effected due to change in number of days in a month 28, 29, 30 or 31. This can also cause delay in payments because standard period of payment is not adopted and there can be inadvertent delays because most of card users are also busy persons. Delay in payment is very costly for car users.

 All credit cards can be directed to adopt monthly billing period as from 1st to last day of month and allow at least 15 days period for payment. This will be reasonable and fair. By 15th day most of people would have realised their monthly payments, so it will be easy to pay. If due date is between 1- 10th  day, many people do not  get monthly payments like rent, salary, pension , monthly commission, royalty etc. Therefore earlier due dates are difficult to be complied with by many people who have only monthly receipts.

Standard billing period will go a long way in simplification.

 There seems lack of effective control:

It seems that there is no effective control by the GOI and RBI. Otherwise high late payment charges and financial charges/ interest would not continue. Rates of interest have fallen on deposits and loans but rate of interest charged by credit cards are very high. 

GOI and RBI must look into various aspects of credit card and ensure that consumers/ credit card holders are not charged excessively. Directions can be on following lines:

a.  Terms and condition for issue, admission charges, annual charges, late payment charges, financial charges / Interest etc. It must be ensured that reasonable terms and conditions in clear terms are provided and charges are reasonable.

b.  Billing period should be monthly from the first day to last day of any calendar month.

c.  Statements should be provided by email in PDF format and Excel format statement in .Paper form should also be provided, at a reasonable charge if requested by card holder.

d.  An annual statement in PDF format and Excel format shout be provide to credit card holder. PDF format is for authenticity and Excel formats can be saved intact and copied for working for accounting purposes. Annual statements will be helpful in furnishing information to tax department also as and when required.

Author hopes that credit card users and concerned authorities shall take a note of the above observations and suggestions for better use of credit cards and to protect interest of credit card users.