Common Issues With Credit Cards

There are several problems related to credit cards. Many of these can catch a person on the wrong foot and the consequences can be high in financial terms. In many cases, there are disputes arising out of these problems which can take considerable amount of time to resolve.

• Misuse of cards : When an individual is issued a credit card without him/her asking for it there is another risk that arises. This is the possibility that the card can be intercepted before it reaches the individual and is then misused by some other person. Since the individual has not applied for the card he/she has no idea that there is a credit card floating in the market. The only time the individual realises that there is a problem is when he/she actually receives a bill for the amount spent on the card. This will result in a situation where the individual is asked to pay for a card that he/she does not have and which he/she has never used.

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• Cross-selling of products : There are several cross-product sales made by credit card companies in a complex manner. In this situation cardholders are offered a specific product and then if they do not want it they have to intimate the bank. This puts the onus of the entire process on the cardholders and they can be saddled with a product even though they might not want it. Often lack of action in such issues either because the person has ignored the mail or he/she is not aware of the actual position can lead to a problem for him/her because this can put a financial burden.

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• Details of charges : There are different kinds of charges that are put on a credit card for a cardholder to pay. The terminology used to indicate the charges is confusing for an individual. Often there is no consistency among the terminology used by different banks, and the cardholder is left wondering about the nature of the charge that is levied. Finding out the exact nature of the charges often takes up a lot of time and effort, and due to this reason a person has to be very clear about what he/she is paying. Sometimes there are even charges that the individual is not supposed to pay and in such a situation questioning the nature of the charges and why they are levied is vital to ensure that they have been billed for the right amount.

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• Disputes : Often some dispute arises with respect to the amount to be paid on the credit card. This can relate either to some charges or it can be linked to the misuse of the card. The cardholder is at a disadvantage because the amount becomes an outstanding against his/her name. Resolving the dispute takes a very long time and often involves a big procedure. There have been various examples where the same issue or problem keeps on recurring for the individual even when he/she has resolved the issue once with some executive of the card issuing bank. This can often lead to a sense of frustration for the cardholder.

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Another thing to watch out for is revolving credit. Revolving credit is the most dangerous trap a cardholder can fall into. Just how dangerous it can be is seen from the following example:

Suppose you have an outstanding balance of Rs 10,000 on your card. The interest on your card is 36% p.a. You pay a monthly amount of Rs 500 towards the bill. In this case, it will take you 32 months to pay off your bill and you will have paid a total of Rs 15,523, with Rs 5,523 being the interest amount. As you can see, you’ll end up paying more than 50% interest in less than 3 years.