Rishabh Thukral, from Dhanbad, communicated his discontent towards services provided by HDFC Bank. He opened a Savings Account at HDFC Bank, and the bank executive insisted on accepting the credit card as part of their "welcome kit", even though Rishabh clearly said he didn't need one.
This was the beginning of what Rishabh termed as 'Harassment' from the bank. Firstly, the bank said he wouldn't be charged even if he didn't use the card. However, Rishabh was charged hefty membership fees for the same.
Next, the bank did not make him fill up any form while issuing the card. They only asked for id proof, and the process was completed. Consequently, he didn't know they gave him a credit card with unnecessary perks and the highest credit limit, which in turn cost him a huge membership fee, which was disclosed later on.
At last, the bank's customer care became unresponsive to such complaints by giving blatant excuses.
Many credit card users in India have shown disappointment towards banks for excessive and abnormally high-interest rates, false promises, hidden policies, etc. Credit card holders have emphasized that the terms and conditions of these cards are unfair and unilateral.
So, What Exactly Is A Credit Card?
With a credit card, customers can borrow money to pay for goods and services from businesses that accept cards. Credit cards require cardholders to repay the borrowed funds, plus any applicable interest and any other agreed-upon charges, in full or over time, either by the billing date or at a later date.
As per the Reserve Bank of India, there are almost 77 million active credit cards in the country. Millions of people in the country use credit cards, but there are also millions who believe that credit cards are bad. It can be challenging to relate to the idea that credit cards are bad for someone who has used them for a long time and reaped their benefits. Credit cards won't actually hurt your budget unless you postpone or forget to make payments.
For banks, interest is a reliable source of sizable income. In India, credit cards have the highest interest rates, with rates ranging from 30% to 45% per year. This explains why only people who don't make their payments on time see credit cards as bad. Additionally, since interest accrues every day, you are charged interest for each day the outstanding balance is not paid. The daily fees might not seem like much, but when added up, they can have a disastrous impact on both your finances and credit rating.
Here's An Example
Manan Singhal, the Founder of Workafy, shared his experience of paying 37.7% interest (including GST) to ICICI Bank because he was late by one day in clearing his dues of Rs. 27,100. The bank blessed him with interest charges of Rs. 10,220+590, which was auto-debited from his account without giving a single alert beforehand.
Manan expressed his disappointment on LinkedIn, where he added that he had an outstanding of Rs. 1.3 lakhs, out of which he paid Rs. 1.03 lakh within the due date, while Rs. 27,100 was still unsettled. Although some additional charges were expected for the 24-hour delay in clearing the remainder, 40% for only one day is unreasonable, expressed Manan.
You can argue that we must only spend the amount that we can afford. But, there are other factors which are not in your control like:
Your rate of interest can change at any given point. The card issuer might reveal an Annual Percentage Rate (APR) just for the introductory phase, which might change after the period ends. In other cases, the issuer might increase the APR only due to the low credit scores.
The issuing bank offers a lee-way to pay the minimum amount on the due date to avoid late fees. It sounds like an escape, but it's a trap. The issuer does not remind you of the 3% interest rate charged on the outstanding balance.
It is safe to say that financial stress can cause us to act injudiciously and make the wrong decisions, like issuing a credit card, because it seems to give you an easy cash flow. However, be it for personal or business reasons, never use your credit cards off-limits, or you might end up in a debt spiral.
So, What To Do If You Need Immediate Financial Aid?
Financially stressed employees are more distracted and less effective at work. Unexpected expenses can force people to use an overdraft, short-term loans, or credit cards and access the needed funds. But these methods of seeking financial help cost a lot later on.
On-demand pay is a way for the salaried class to get paid, allowing them to get their money as they make it. Employees frequently only have access to a portion of their money each pay period, with the remaining amount being paid as usual on the following regular payday. Payroll processors and businesses solely dedicated to providing on-demand pay services to employees provide this service.
While the cost of using on-demand pay alternatives is frequently covered by the fees a payroll provider levies, businesses that provide this service typically charge a fee. In contrast, these businesses charge the employees for the service, not the employer, as is the case with payroll processing.
With on-demand pay systems, employed people can choose whether to get paid for the day they worked or the days since their last paycheck following each shift. Employees have the freedom to choose how they want to be paid using on-demand pay services, which also gives them some peace of mind in case an unexpected need arises.
Instant Financial, which is used by restaurant companies including McDonald's, Taco Bell, KFC, and even Walmart, is one of the programmes giving employees more choice over their compensation. With these services, workers receive a smartphone notification when their shift is over and can choose whether or not to pick up their payment that day. If they do, either a prepaid debit card or a direct bank account deposit is made.
Numerous payroll companies provide this feature. Among the payroll providers that provide on-demand pay are PayActiv, FinFit, Even, FlexWage, Rain, Gusto, Paychex, and Paylocity.
These on-demand paying companies offer instant access to earned salaries whenever the employees need it. If businesses start investing their time and energy in on-demand pay, they will no longer have to worry about the hassle of employees' payroll advances, repayment, etc. On the other hand, employees can get immediate funds from their future salary without needing to borrow, sell or mortgage their stuff to afford emergency expenses. Hence, it can also help avoid the debt trap of credit cards.
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