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Old 28th February 2014, 11:40   #1546
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Default Re: The Credit Card Thread

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Originally Posted by iliketurtles View Post
Why pay interest for nothing ?
Nothing? OP has taken a loan from a bank via means of a credit card.

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Originally Posted by iliketurtles View Post
Why pay interest for nothing ?
and perhaps more importantly, why tarnish your credit history?
This does not tarnish credit history at all. As long as you pay the minimum amount due every month, your score is unaffected. In fact some North Americans are often misguided into revolving credit to boost their credit score!
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Old 28th February 2014, 11:46   #1547
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Default Re: The Credit Card Thread

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Nothing? OP has taken a loan from a bank via means of a credit card.
When I say "interest for nothing", you are essentially paying money for nothing. I understand OP has taken a loan from his card provider, but paying interest should be avoided by paying in full. That was my point.

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This does not tarnish credit history at all. As long as you pay the minimum amount due every month, your score is unaffected. In fact some North Americans are often misguided into revolving credit to boost their credit score!
That's news for me. Surely your not paying up in full is recorded and goes against you somewhat? There can't be zero repercussions for not paying up in full.

Even so, paying only the Minimum Due is not advisable at all. The interest charges you get hit with can get quite hefty. When I was younger (and more foolish), I burned my fingers by paying only the minimum due and was slapped with massive charges on my next bill. Harsh lesson, but one I learned from. I've been paying up in full ever since, which is what I'd recommend OP does.
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Old 28th February 2014, 12:05   #1548
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Default Re: The Credit Card Thread

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Originally Posted by iliketurtles View Post
That's news for me. Surely your not paying up in full is recorded and goes against you somewhat? There can't be zero repercussions for not paying up in full.
No repercussions on your credit score if you've paid anything above the minimum amount due. The financial repercussions you'll have to bear, of course. No getting around that.
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Originally Posted by iliketurtles View Post
Even so, paying only the Minimum Due is not advisable at all. The interest charges you get hit with can get quite hefty. When I was younger (and more foolish), I burned my fingers by paying only the minimum due and was slapped with massive charges on my next bill. Harsh lesson, but one I learned from. I've been paying up in full ever since, which is what I'd recommend OP does.
Agreed. Revolving credit is never a smart idea. But if you're in dire straits, the least you could do is pay the minimum amount. This saves your credit score from a beating as you are not reported as a defaulter.
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Old 28th February 2014, 12:41   #1549
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Default Re: The Credit Card Thread

Complex machinations aside, isn't the basic premise of the entire credit card business built around customers who can't or won't pay in full on-time? If everyone repaid their credit card bill within the interest-free period, where'll the bank's income come from?

Last edited by Chetan_Rao : 28th February 2014 at 12:42.
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Old 28th February 2014, 12:47   #1550
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Default Re: The Credit Card Thread

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Complex machinations aside, isn't the basic premise of the entire credit card business built around customers who can't or won't pay in full on-time? If everyone repaid their credit card bill within the interest-free period, where'll the bank's income come from?
You missed the transaction charges that the bank levies on merchants (small merchants, maybe.).
Also, you missed that, the merchant's bank account will be with the bank. More liquid money. means more business. (No merchant withdraws money everyday and stores it in his outlet.)
And many other reasons.
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Old 28th February 2014, 12:58   #1551
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Default Re: The Credit Card Thread

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Originally Posted by iliketurtles View Post
That's news for me. Surely your not paying up in full is recorded and goes against you somewhat?
The only negative of not paying up fully (revolving credit) is that you end up paying interest charges. As long as you pay the minimum balance your credit score does not get affected.

Though your credit card outstanding is taken into account when computing your credit eligibility (eg: if you are eligible for a 50L home loan but has 1L outstanding on your cards, your sanctioned loan may be 40L or even lower).

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Originally Posted by Chetan_Rao View Post
isn't the basic premise of the entire credit card business built around customers who can't or won't pay in full on-time? If everyone repaid their credit card bill within the interest-free period, where'll the bank's income come from?
The basic premise of credit card business is to charge the merchants for the service. Each merchant pays a fee to the acquiring bank (< 2% of the transaction value) per transaction - ostensibly the merchant benefits by higher ticket size leading to higher revenue per customer and less cash handling costs. The interest charge is supposed to cover the cost of risk taken by the issuing bank (risk of extending unsecured credit to the cardholder).
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Old 28th February 2014, 12:58   #1552
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Default Re: The Credit Card Thread

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Originally Posted by gemi_kk View Post
You missed the transaction charges that the bank levies on merchants (small merchants, maybe.).
Also, you missed that, the merchant's bank account will be with the bank. More liquid money. means more business. (No merchant withdraws money everyday and stores it in his outlet.)
And many other reasons.
I think I covered that with the 'complex machinations aside' bit. My bad, should've been clearer.

Of course they earn money elsewhere, but interest on customer credit must be a big source of income for the industry, surely?
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Old 28th February 2014, 14:16   #1553
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Default Re: The Credit Card Thread

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Originally Posted by Chetan_Rao View Post
Of course they earn money elsewhere, but interest on customer credit must be a big source of income for the industry, surely?
I'm sure it pays a large chunk of the bankers' bonuses, but they argue that the interest is only "just sufficient" to pay for the risk - defaults (people who run up huge credit card bills and then don't pay up at all) and fraud (cash withdrawal using duplicated cards, for example).
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Old 28th February 2014, 14:31   #1554
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Default Re: The Credit Card Thread

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Originally Posted by Chetan_Rao View Post
I think I covered that with the 'complex machinations aside' bit. My bad, should've been clearer.

Of course they earn money elsewhere, but interest on customer credit must be a big source of income for the industry, surely?
Hmm... I cant say how much these companies make on Credit cards, unless i have access to their internal accounts.

You are correct with respect to credit card companies, but the catch is, it applies to only those companies which issue only credit cards. Like barclays, which doesn't operate in retail banking. What ever they make on these cards is the profit. If all customers pay their bills on time, its an operational loss, with which the company cannot sustain long.

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isn't the basic premise of the entire credit card business built around customers who can't or won't pay in full on-time? If everyone repaid their credit card bill within the interest-free period, where'll the bank's income come from?
How about an example ?
Say i am HDFC. and i issue 1 Lakh credit cards. (Say i am the #1 in market with highest number of credit cards issued.)
Being a leader in credit cards (# of CC's issued) obviously i will get More requests from merchants to take my swiping machines. And I issue them promptly. Everyone happy.
Advantages for vendors: Low/Nill processing charges, if HDFC cards used.

Technically, i have created 1 lakh 0 balance accounts with overdraft facility (With actual credit card limit.)
Often 80% of the funds from overdraft accounts (credit card accounts) move to savings account of another customer account (vendor/shop account) in my bank only (As i am the leader in market) The money is not going anywhere. its with me. In my bank. and i have 2 new customers. 1 is for credit card and the other is a vendor/merchant.

As i have 1 lakh overdraft accounts, (credit cards) i have to approve all transactions. so i get a slight rebate/comfort in maintaining actual CRR, SLR and Repo ratio's. So i have more cash in bank and i can go ahead and issue more loans. If required, i can borrow from other banks at Repo/RBI rates.

Assuming the fee amounts/transaction costs/dollar exchange margin, etc generated by credit cards. if this amount can meet the cost of insurance of all credit cards & CC Operations, then that should be sufficient. Often, they make much more than this.

I see all advantages to banks issuing credit cards. Any disadvantages?
poke me, if i am wrong.

Last edited by gemi_kk : 28th February 2014 at 14:33.
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Old 28th February 2014, 14:32   #1555
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Default Re: The Credit Card Thread

Thank you for all your valuable advices. As advised, I have asked for some cash from my friend, who has kindly agreed. It looks like I will be paying in full.

I gave a call to CC helpline and told him that i would not be able to make full payment. He informed me that there would be a charge of about 1100 as interest if i make partial payment.
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Old 28th February 2014, 17:49   #1556
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Default Re: The Credit Card Thread

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Originally Posted by gemi_kk View Post
.......
I see all advantages to banks issuing credit cards. Any disadvantages?
poke me, if i am wrong.
I know nowhere near enough about this stuff to judge, just musings of a layman.

Thanks for the explanation though, always nice to learn something new or in more detail
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Old 1st March 2014, 08:40   #1557
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Default Re: The Credit Card Thread

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Originally Posted by gemi_kk View Post
....
I see all advantages to banks issuing credit cards. Any disadvantages?
poke me, if i am wrong.
The only disadvantage is the risk of customers (credit card holders) not paying and running away/disappearing. That's a business risk they have to take.
Some banks want to take it, some don't. For example ICICI and Stanc are aggressive in pushing credit cards. But Yes Bank is not in this business. They didn't have cards till recently (now they have started issuing yes bank - amex cards).
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Old 1st March 2014, 09:13   #1558
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Default Re: The Credit Card Thread

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The only disadvantage is the risk of customers (credit card holders) not paying and running away/disappearing. That's a business risk they have to take.
Some banks want to take it, some don't. For example ICICI and Stanc are aggressive in pushing credit cards. But Yes Bank is not in this business. They didn't have cards till recently (now they have started issuing yes bank - amex cards).
Would you please re read the paragraph which is exactly above the quoted text and then make a comment ?
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Old 7th March 2014, 14:30   #1559
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Default Re: The Credit Card Thread

While looking at foreign currency fees of HDFC after transacting via Paypal, I realized that they charges are 3.5% + 1% = around 4.5% which is slightly better than letting Paypal handle the currency conversion.
I used my World Master card from HDFC.

That led me to search for cards which have lower foreign currency fees and it turns out HDFC Regalia is the best.
That requires me to spend Rs. 4 lac each year, if I want to avoid the annual fees - so that is a "no go."

Anyone can suggest a better option?
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Old 7th March 2014, 17:27   #1560
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Default Re: The Credit Card Thread

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Originally Posted by S_U_N View Post
While looking at foreign currency fees of HDFC after transacting via Paypal, I realized that they charges are 3.5% + 1% = around 4.5% which is slightly better than letting Paypal handle the currency conversion.
Since you did your bit of digging, is it universally true? As in, is PayPal conversion charge more than fees levied to all the usual credit cards by their respective Banks?
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