How credit card companies make money?
Main source: they charge 2.5% of the transaction value >>> transaction charges (ex: if you purchase 10000 credit card companies charge 2.5%* of 10,000 250 INR, however, the seller adjust 2.5% in his in profit margin 10-30% in merchandise.
Fees: Annual Fees or membership fees, joining fee, Overlimit fee, overdue fee, credit card loan or EMI 24-36% on overdue, etc others Redemption fee GST
Fuel surcharge: Fuel dealer profit margin very less, unlike retail stores, the transaction charges called surcharge 1% previously 2.5%. now many cards allow surcharge waiver 1% up to 100 to 150 per month.
How we get Most Benefits from credit cards?
1. Compare Membership fees mostly annual charges vs Benefits.
Ex: RBL World Super prime card has an annual fee of 3000+GST (benefits 4 times airport lounge access, and 1+1 bookmyshow offer once in a month) if don’t need airport lounge access you can get lifetime free credit card with bajaj fine serve rbl credit card.
2.Aware of Usage oriented Credit cards
Fuel cards, Travelcard “(hotel, airport, benefits), Shopping Cards rewards points as cashback, etc.
3. Credit card Limit (cash withdrawal limit & charges)
4. Reward points membership benefits and welcome gifts
Credit card Charges
All charges included in your statement just check right below the statement. some of them
Over limit fee:
overdue fee or interest: if you paid the minimum payment, the remaining amount will be charged as 3.5% per month or (48-50% interest per annum)
late fee payment: if delayed 1 day in making payment (sometimes payment gateway delay 1-3 days may result in late payment) charges minimum 500+GST.
a grace period in Credit card
Reward points in a Credit card?
Credit card companies make a profit of 2.5% on the transaction, however, they give you 1%* onwards to the customer in the form of reward points or cashback.
some offers available with merchants & card agencies affiliation.
Ex: paterntship cards
- Amazon pay & ICICI,
- HPCI & ICICI,
- RBL & Bajaj Finance etc.
Case 1: SBI Simply click card (annual fee 500 reversal on 1 lakh spent)Offers 1 reward Points on every 100 Spend (1%), however 10x rewards when spending with their partner’s amazon, bookmyshow, woodland, etc.
Case 2: RBL world prime super card (Annual fee 3000) offers 2 reward points on every 100 spends (2%).
Case 3: Amazon pay ICICI Card: 5% for amazon.in shopping for prime customers, 3% for nonprime customers.
bill payments with Amazon 3% return or cashback to amazon pay balance, 1% return on other spendings lifetime free card. (its benefit when we use amazon.in shopping). no redemption fee.
Redemption of reward Points
99+GST redemption fee all credit card charges once in a day when redeem or convert your reward points o purchase shopping or vouchers etc.
Ex: I have used 14000 reward points to buy 500 INR Amazon e-voucher
2000 Reward points (200000 lakh spent offline or 20000 spent online applies for this card only) = 500 INR Amazon voucher >>added 500INR to amazon pay balance.
redeemed 10000 points in 2 days the first day 3 vouchers worth of 1500 and 2ndday 2 1000 total 2500 INR added to amazon pay balance. But redemption fee 100+18 2 times = 236 charged.
another case on RBL Card purchased amazon e-voucher worth of 2000 for 8900 reward points.
Biggest Mistakes while using credit cards
- no idea of Reward Points
- Blocked SBI Simply save Credit card with 40000+ reward points without redeeming.
- Closed HDFC Credit card without using welcome gift and reward points.
- CIBIL Score score affected on 2 delay payments (no idea of late payment)
- charged 500+GST on late payment
- Overdue fee: charged extra 3% on overdue on minimum payment.
- ATM withdrawal charges: charged for 300-500 on or using the credit card for cash withdrawal etc.
- Upgraded accidentally due to the nonclear voice of telecaller now paying annual fees.
- Giving credit card & PIN while purchasing especially in Bars (someone tried to add my credit card balance to paytm). I don’t know why every bar & restaurants waiters ask pin & Credit card in Hyderabad. at least erase the CVV to avoid foreign transactions in the hands of others.
Note: Credit card agencies to report income report to incase of total transaction in a year more than the prescribed limit
more than 2.5 lakh*