October 1, 2024 · 22 mins read
Santosh Kumar
Obtaining a Credit Card can be a convenient way to manage your finances – from funding your day-to-day expenses to financing minor and major purchases. Credit cards have made short-term loans easier and more accessible for everyone. However, credit cards should be used with a clear understanding of the liabilities and the repercussions that come along if the holder fails to use them responsibly. The convenience of having an easy access to funds should not be taken for granted and every holder should be responsible about the management of their card. This is why, in this article, we discuss the guidelines laid down by RBI for every Credit card holder, RBI guidelines for credit card swipe charges, and RBI guidelines for credit card payment recovery.
The Reserve Bank of India, or RBI, is India's banking institution that supervises the country's monetary policies and the entire financial system. It is an authority on money matters and formulates and implements rules, guidelines, and policies to regulate the nation's economy. It is also the organisation responsible for issuing currency and is the foreign exchange manager. It overlooks all monetary and banking sectors, and that is why all card holders need to be aware of the rbi guidelines for credit card. These guidelines act as the framework for all credit card holders and issuers. These have been carefully formulated to make sure that both the parties involved do not over step any boundaries and everyone desirous can make use of the basic function of credit cards.
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1. Card issuers must be transparent about charges and fees levied on cardholders: The first mandate provided by RBI is that all charges, such as annual fees, maintenance fees, late fees, cash withdrawal fees, interest rates, etc., should be clearly mentioned. Cardholders should be aware of these charges; any discrepancy or irregularity will have legal repercussions.
2. Lending Practice: The issuing bank or Institution should follow responsible lending practices. This should include assessing the borrower's credit limit and their ability to repay their loan. They must also assess basic income and existing debt before issuing a credit card.
3. Consent and Customer Protection: The RBI emphasizes the importance of customer consent and protection. This begins with consent while issuing or obtaining a credit card and continues to play a pivotal role during various transactions, additional charges and transactions, etc., related to the card. It is to be made sure that customers have consented to added services, added costs and promotional offers themselves with a clear understanding of the services and costs. Another important aspect of this credit card rules and regulations is protecting customer identity and providing customer confidentiality. Issuers should never indulge in divulging the customer's details, including personal information, to any entity outside of the bank.
4. Providing Customer support and proper grievance redressal: Banks and issuers are required to have a proper grievance redressal cell and customer support for all credit card holders so that issues can be addressed and solved as quickly as possible. This is done to ensure that consumers do not face unnecessary hassle when using their cards.
5. Safety and Security: Another important aspect of credit card usage is protecting cardholders against fraudulent activities and security threats. Specific protocols, like EVM chip technology, provide an additional layer of security. Other security measures include transaction alerts, multiple verification steps, pin codes, and passwords that are unique to all holders.
6. Proper steps for issuing and cancelling: Proper guidelines must be followed for both issuing and cancelling a credit card. A clear process should be dictated while issuing, such as proper verification, assessing financial data, etc., and the cancellation process should also be seamless and straightforward without causing any undue stress or delay.
7. Issuing authority: It is generally not required for banks to seek prior approval from RBI for undertaking the credit card business in their banks. However, banks need to have a minimum net worth of 100 crore to be able to undertake the credit card sector. Any bank fulfilling this criterion can be eligible for issuing credit cards either directly or through a third-party subsidiary company that has been set up for this purpose.
8. Repayment and interest: The RBI guidelines for credit card payment recovery states that issuers should provide timely information about repayment and rates of interest to the consumer. They should ensure that the consumer has a sufficient number of days to pay before being charged a late fee or interest on the amount.
9. All KYC, AML, and CFT-related information should be complied with: Issuers should comply with Know Your Customer (KYC), and all norms and regulations regarding Anti-Money Laundering (AML) and Combating Financial Terrorism should be properly addressed with the cardholder. They should be fully aware of their rights, responsibilities, and the risks of holding a credit card. These are important instructions and guidelines applicable to all banks and issuing authorities that should be complied with without fail.
All these new rbi guidelines for credit card should be mentioned in the terms and conditions, and the customer is to be made fully aware of them. These mandates have been laid down so that cardholders can use their credit cards hassle-free. Every step makes sure that credit card holders aren't taken undue advantage of by the issuing authority. These should be clearly discussed by the agent responsible for issuing the credit card, and proper care should be given so that the consumer knows these details.
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Here is the list of new rbi guidelines for Credit Card (GCC) scheme:
1: GCC scheme will be called GCC Facility and banks must have their own GCC scheme which are within RBI guidelines
2: The GCC facilities should be at par with the framework of RBI and board-approved policies of the bank.
3: Repayment period is 12 months for PNB GCC credit facility and is provided without collateral at all branches.
4: Depending upon the household income, Federal Bank will provide GCC credit up to 40% of the annual family income.
5: Individuals will be issued with GCC, if sanctioned working capital facilities for non-farm entrepreneurial activities are eligible under the priority sector guidelines for classifications.
6: GCC will be issued in the form of credit cards and all the directions regarding credit cards will be applicable for GCC.
The following is the list of credit card rules by the Reserve Bank of India:
1: The interest rate on credit cards will be in line with other unsecured loans including processing charges as per the board-approved policy of the credit card issuers.
2: Transparency will be maintained in levying differential interest rates, in case the interest rates vary as per the payment history of cardholder.
3: Credit card account remaining in 'Past due' status for more than three months will be levied with penal charges
4: As per RBI, customer confidentiality and integrity of the credit card issuing company should be maintained during recovering dues by the third-party agents.
5: Card issuers or the agents should not interfere in the privacy of the policyholder or intimidate them.
The Reserve Bank of India (RBI) issued new rules regarding credit cards and debit cards on 1 April 2022 which has come into effect recently. Here are the new regulations:
One-Time Password (OTP) to be asked for by card issuers Banks or companies issuing credit cards will have to ask the cardholder for OTP if the latter has not activated their card after 30 days of its issuance. If the cardholder does not provide their consent, then the credit card account is to be closed within seven days and no amount must be charged whatsoever.
Approval of credit limit the credit limit approved by the card issuer to the cardholder must not be breached at any point in time unless the latter's consent has been taken.
Interest RateNo unpaid charges, taxes, or amount charged must be capitalised by the bank or card issuing companies.
RBI made it mandatory that all the credit card data used for online, in-app, and point-of-sale transactions must be replaced with tokens by 30 September 2022. This is a layer of security added to ensure that the customer's digital payment experience is safe and secure and also lowers the risk of any fraudulent activity.
MITC is a document that holds crucial information regarding a product. For credit cards, MITC is to help customers understand interest rates, billing information, penalties and other charges.
As per the new rules given by RBI, it will be mandatory for credit card issuers to send the MITC separately to all the customers along with the credit card welcome kit. Moreover, the credit card issuers will have to provide a new copy of MITC to all the customers each time a condition is modified. The credit card customers are also entitled to receive a signed copy of the agreement between them and the credit card company, and a copy of MITC at the registered e-mail address or on the registered postal address.
The following are the stages through which MITC can be disclosed to the customers:
1: Marketing stage: While marketing the credit card, the card issuing company will update the customer about the various fees and charges related to the card.
2: Credit card application stage: While applying for the credit card, the card issuing company will update the customer about other important information such as withdrawal limits, billing information, etc.
3: Welcome kit stage: At this stage, when the customer has acquired the card, the card issuing company will update the customer about information such as termination of credit card membership, grievance redressal, lost/theft of card, etc.
4: Credit card billing stage: At this stage, the card issuing company will communicate to the customer about information such as billing statements, other fees and charges, withdrawal limit, etc.
5: The credit card issuing company also has to update the cardholder about any changes in the terms and conditions on a regular basis.
In order to make things easier for customers to understand, the MITC should contain specific examples.
The RBI has given directions to credit card issuing companies to explain to the customers about the information sharing procedure with credit bureaus in MITC. This will make the entire procedure more transparent and understandable for card holders.
According to the directions given by RBI, the MITC must contain the below mentioned information:
1: Joining fees of the credit card for both primary as well as add-on card holders
2: Annual fees of the credit card for both primary as well as add-on card holders
3: Cash advance fee
4: Any service charge applied on transactions
5: Interest-free grace period (with illustrated examples)
6: Finance charges for both cash advances and revolving credit
7: Defaulter charges
8: Overdue interest charges
1: Available credit limit
2: Actual credit limit
3: Cash withdrawal limit
1: Mode of sending bill statements
2: Periodicity of bill statements
3: Method of payment
4: Resolving billing dispute methods
5: Complete postal address of the credit card issuing company
6: Customer care numbers and other grievance redressal services
1: Complete procedure including notice period for reporting a cardholder as a defaulter
2: Complete procedure for withdrawal of default report and the period within which the default report would be withdrawn after settlement of dues
3: Recovery procedure in case of default
4: Recovery of dues in case of death/permanent in capacitance of cardholder
5: Available insurance cover, if any, for cardholders and date of activation of policy including nomination details
1: Detailed procedure to surrender the credit card by cardholder
2: Link to website for credit card closure
3: Card holder's contact details to initiate closure
4: Detailed procedure of credit card closure if unused for more than a year
1: Detailed procedure that needs to be followed in case the credit card is misused, lost or stolen
2: Mode of intimation to card holder in case of lost/theft/misuse of credit card
3: Credit card holder's liability in case of lost/theft/misuse of credit card
4: Website link, SMS, phone banking, e-mail, IVR, a dedicated toll-free helpline, reporting to home branch, etc. for reporting unauthorised transactions and initiating blocking of card
1: Escalation process and grievance redressal
2: Timeframe to address grievances
3: Detailed framework to compensate for unsuccessful/failed transactions, delay in the redressal of grievance, delay in the closing of account/blocking of lost or stolen cards, etc.
4: Contact particulars of card-issuer - 24-hour call centres, email-ids, helpline, other important telephone numbers
Disclosure: Any type of information related to the credit card or card holder to be disclosed without or with cardholder's approval
While issuers have to follow the above guidelines, certain practices are also expected of credit card holders, ensuring that they behave financially responsibly and manage their credit cards better to use them for their benefit and not misuse them. The guidelines are to ensure that credit card holders get to make optimum use of their card and fully enjoy the perks and privileges that come with it. By following these guidelines, card holders will be able to maintain healthy financial habits as well as a good credit score.
Let us take a look at these practices as well-
1. Cardholders are expected to regularly monitor their activities, which includes reviewing their monthly statements, tracking their expenses and purchases, and checking for any unauthorised transactions. This ensures that you are responsible with your card and can make the maximum use of it. They are expected to timely report any irregularities or discrepancies that they may find in the activities pertaining to their card.
2. Ensure that you have a timely payment schedule that you do not miss. You can track and time your payments through reminders and alerts or consider setting up an automatic payment system for convenience. Setting up a payment cycle and sticking to it is expected of the card holder.
3. Read the terms and conditions thoroughly to understand your rights as a consumer. This includes understanding the RBI guidelines and reading the fine print of your issuer's card details before obtaining your card. It is better to be well informed about your rights, perks, privileges and your limitations as a card holder.
4. It is advised to use your card limit wisely so as not to exceed or overshoot your limit. This also ensures that your credit score remains intact or increases. Generally, you should use 30% of your card limit to balance your credit score.
5. Always clarify your confusion or seek help when you have a question. Use customer support fully and try to solve every issue under the guidance of an expert or a professional. These are some best practices that credit card holders should follow to maximise their credit card use. Following these will ensure that you get the most out of your card. This is also a great way of building a strong credit portfolio and strengthening your credit score. These practices will help you build very disciplined financial habits, which will be very beneficial for you in the long run. Inculcating these credit card habits will definitely be helpful for your personal finances.
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The RBI guidelines for credit card swipe charges 2024 are to be abided by all banks and non-banking credit card issuers. Here is a list of them
1. Maximum Cap on Swiping Charges: The Swiping charges, also known as Merchant discount rates or MDR has been set for a certain limit for all credit card payments. This limit varies based on the amount of transaction but it cannot exceed the maximum allowed rate. Normally, credit card swipe charges range for a minimum of 1% of the bill to about 2.5% of the bill for any domestic transaction.
2. Diversified limit on merchant categories: different limits have been set for different types of merchants and business.
3. Customer service charge: businesses and merchants are prohibited from charging additional charge to customers for using credit cards.
4. Transparency and honesty: merchants and credit card issuers must clearly state the terms of rbi guidelines for credit card swipe charges applicable to the user from the very beginning and additional hidden costs should not reflect at the time of using the card. The user should be made aware of the terms and conditions for domestic and international credit card swipe charges across all platforms.
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Key Takeaways
1: Debit cards allow you to access funds in your bank accounts anytime.
2: Banks levy various types of debit card charges.
3: Standard charges include debit card transaction charges, annual charges, reissuance charges, etc.
4: Charges may depend on the average balances in your account.
5: Find out DBS Bank debit card charges in this article.
A debit card is perhaps the most useful of all banking products. It allows you access to the funds in your account 24x7. Its sleek design also makes it very easy to carry with you anywhere. You can easily tuck it in one of your jeans’ pockets or carry it in a card wallet. Let us understand what debit card charges are and break down the various charges associated with them.
Your debit card can do a lot of things. It helps you withdraw cash at your own bank and other bank ATMs. You can swipe it to pay for expenses at retail and online stores. Furthermore, you can access your bank account even when you are abroad with your international ATM cum debit card. For all these services and facilities, you get with your debit card, your bank levies a charge. These rbi guidelines for debit card swipe charges associated with the usage of debit cards and the convenience you get from them are known as debit card charges.
1. Do not overspend your limit. It is always suggested that you use about 30% of your credit limit to maintain a good credit history and build a strong credit score.
2. Never miss out on your payment cycle, always pay on time and clear your bills on time each month. This is reflected in your credit history and affects your credibility as a borrower.
3. Always keep your credit card details private and never share details with anyone else. Frequently change PIN codes and passwords.
4. Always stay updated on the history and transaction details of your card.
5. Do not obtain credit cards at random, even if you are eligible. Only obtain and use your required cards; do not issue credit cards randomly.
6. Always read the terms and conditions of your issuer in detail – know your rights as a consumer to avoid unnecessary hassle and incur loss.
The financial ecosystem is a complex place where everything is correlated. The main purpose of these guidelines is to ensure that the consumer is protected and the issuers safeguard the rights of their consumers. In turn, this is also beneficial for issuers in case of faulty behaviour by the cardholder, wherein they can take legal recourse to reprimand the cardholder and exercise their own rights as an issuer. This is a vice versa situation where RBI mandates protect the rights of both parties involved.
However, apart from this, credit card portfolios are directly related to the economic system of a nation; there is a strong relation between the quality of credit portfolios and the quality of the nation's economy. This means that when issuers are relaxed and lackadaisical, it directly impacts a country's financial state. Hence, it is required that issuers like banks and other financial institutions have more stringent policies and adopt the best practices to avoid risks that are a very crucial aspect of the credit card business. These guidelines set by RBI have been carefully curated to ensure that they positively impact cardholders and issuers whose credit behaviours will trickle down and reflect on the nation’s economy.
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These guidelines help cardholders make an informed choice as consumers. Credit cards and personal finance can be a risky trajectory if one is not well-informed. Understanding the rules and guidelines by looking into rbi guidelines for credit card swipe charges pdf will help you stay safe, aware and responsible. In a day and age where banking scams, frauds, and irresponsible use of credit cards have led many to their financial downfall- keeping these guidelines and best practices as the cornerstone of your credit card habits will certainly ensure maximum usage with minimal risks. All credit card holders should be able to read the guidelines, understand their rights, and make responsible choices and decisions afterwards.
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Does credit card defaulting lead to legal outcomes?
Credit card defaulting is liable to a legal outcome, and one can be taken to court accordingly. Credit card defaulting definitely has legal repercussions.
What information should issuers always disclose to customers?
Issuers should always be transparent about all fees that may be levied on the customer and the rate of interest. There should be no hidden costs or in-service additional costs that the customer is not made aware of prior to obtaining the card.
What is the best security measure for ensuring credit card security?
EVM technology is the best security measure for ensuring credit card safety. You can also opt for transaction alerts to be informed about all transactions happening on your card. This will alert you in case of fraudulent transactions, and you can take action accordingly.
Can I cancel my credit card at any time?
Yes, RBI has mandated that the cancellation process be seamless and not delayed. Anyone can opt to cancel their credit card at any time that they want.
What can happen if I fail to make a payment?
Missed payments lead to a late fee and an increased rate of interest. In this case, the amount and percentage will depend on your amount and the issuers.
The RBI guidelines state that card issuers are required to provide customers with their invoices & statements promptly, and to have at least a fortnight's notice before interest is applied.
MITC stands for the Most Important Terms and Conditions related to credit card.
All banks in India can issue debit cards without the RBI's approval for the time being. However, debit cards can only be issued to customers with Savings Bank/Current Accounts and not to cash-credit/loan account holders.
According to the CFPB, keeping your credit utilization below 30% of your total available credit can help improve your credit scores. If a rate too high has been hurting your scores in the past, you may see an increase in your scores if you can decrease that balance or raise the percentage.
Paying your balance more than once per month makes it less likely that you'll have a high credit utilization when the credit bureaus receive your information.
The guidelines mandated by the RBI guidelines on credit card late payment charges includes written notice to be provided by the bank to the defaulters mentioning the default amount and repayment period before taking legal action. The bank may also need to provide the repayment plan if requested by the defaulter.
MITC is Most Important Terms and Conditions, which is documents that specify significant information about a certain product in terms of credit card. This contents information, such as interest rates, associated charges, functions, billing details, penalties, and other offers.
Yes, credit card companies can take you to court in case of non-payment of credit card dues, but only 15% of collection cases are taken to court. If the account becomes 180 past dues, then debtholders must worry about lawsuits.
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