Thread by @Ravisutanjani

All about Credit Cards 💳⬇️

A Thread that will help you understand how it works? How to use them effectively so that you can beat 90% of people who fall into the debt trap?

Long 🧵 (Part-1)

#CreditCards #PersonalFinance #Startup #Money #CreditScore #Banking

Statistics say there are around 60Mn credit cards users in India 🇮🇳 and we are an underpenetrated market as compared to western countries. Millions of new Credit Cards get issued by leading Indian banks every year but the concern is do they promote any formal education about it?

Credit Cards are one of the most profitable businesses for banks, just check the annual reports of HDFC and SBI Cards.

v1.hdfcbank.com/assets/pdf/inv…

sbicard.com/en/who-we-are/…

https://twitter.com/Vynyth/status/1409555233575890948?s=20

The banks expect that customers would read so-called poor MITC but this is not how it works. So how does Credit Card issuance works?

·Based on existing banking relationship (Pre-approved)
·FD Based Credit Card (Secured)
·Income & Financials (Unsecured)
·Credit score (Unsecured)

In case of 1, the cards get issued basis on the existing banking relationship of the customers.

Bank triggers pre-approved offers and you can get the credit card delivered by just sharing an OTP.

Nice! But is it good for uninformed customers?

Now FD-based credit cards will be issued post marking a lien against your fixed deposit and you will get a 70-90% credit limit depends on your FD amount.

But what if you misuse your card or didn’t pay?

The bank will simply liquidate your FD and adjust your outstanding along with destroying your credit score.

(Isme tera ghata Bank ka kuch nahi jata so use them properly!)

Bonus Read here -

https://twitter.com/Ravisutanjani/status/1375469451546480643?s=20

In the case of 3 and 4: Bank gives you a limit based on your existing credit card limit,

They assume that the exiting bank that has issued a CC to you must already have done the required due diligence. Makes the job easier for banks.

They will also check your credit score (age of credit card, limit, repayment history, address details etc) before approving your application.

Bank may or may not tell you how to use them properly but they will easily issue a credit card for you (Pre-Approved one).

I’ve observed many cases of mis-selling at leading private and government banks.

Customers who have salary account, pensioners, senior citizens who usually maintain high MAB or made FDs get automatic card offers. Agents get data from banks and they start selling you.

@suchetadalal @dmuthuk @IndiaEtfs @passivefool your inputs and amplification requested.

Now the actual problem starts here, you got a fancy card with a good limit but without any proper guidance. Most people would treat it just like a bank ATM or debit card,

They would withdraw cash💵 (Yes). Make large impulsive purchases, max it out till the limit exhausts.

Okay, the month is over and you have received the card statement. You might see some unfamiliar charges e.g. Card Advance, Interest, Overlimit fee, etc. If paid (I’m rich) fine.

if not you will contact the agent who wouldn’t respond probably. You will reach out to customer care.

They may or may not give you fee waivers but they would tell you to pay the outstanding or minimum dues at least.

Now you’re more frustrated and you didn’t pay. The next statement generated, 36% ARR with many penalties and taxes. (Bigger Problem)😤

Till this time you haven’t even realized that it has already started damaging your Credit Score, more ignorant acts or late payments, and higher the chances of your credit score getting sucked for life. ❌

People understand and actualize their mistake after 2-3 years when they need the next credit card or loan etc.

(You’re a real bad guy in the eyes of financial institutions now.)

So what are my options? Where do I learn?

Well, there are plenty of resources available online, you can read blogs, watch videos but no curated or concrete information for the absolute beginner or less digital-savvy people.

So how do we solve this?

In the next 🧵(2), I will simplify more and we will cover:

Fees & Charges
Grievance Method
Fraud Protection
Fact and Myths
Process for CIBIL Dispute
Different kinds of penalties
Reward Point and Cashback
And many more such things!

Follow @MidnightMillenn for deeper insights.

Meanwhile, Feel happy to tag or DM me if you need any help with specific problems related to Credit Cards.

Please show some love❤️ if you like the thread. RT and help us increase awareness for more people. Thanks for reading. End of the thread. 🙏