Banking on cards
Almost all banks and credit card companies are offering benefits to their customers and luring them to use plastic instead of cash or cheques to even fulfill their day-to-day basic needs. Akanksha Saxena elaborates on how today a retailer would be more interested in collaborating with such credit card companies to earn profit and build up on the brand loyalty The 21st century has brought along with it financial freedom to spend money with no bondage of time and place, thereby answering the financial needs, and personalising the spending pattern of an individual. With plastic money now emerging as a widely accepted currency for day-to-day transactions, a range of cards are available for a person to fall back on. Keeping in mind the expectations, these cards are tailored for every individual. More then 50 cards from different banks are available, giving a wide range of choice. In such a scenario owning a credit card becomes essential. Choice of card Choice of the card has to be in line with your lifestyle and requirements. There are exclusive cards for doctors, women, frequent travelers, and cards providing entertainment get-away. Some cards also give you reward points for flight travels, hotel stays, refueling, shopping, besides assisting in numerous other ways. Many cards provide considerable discounts on these kinds of services through your affiliation with their business. If you are a person on the move, or your job requires you to travel frequently, then these services can be great perks, offering convenience and saving you a considerable amount of money each year. Cards to consider in this category are mostly premium cards such as Citibank, Jet Airways Card, HSBC Gold, American Express (Amex) Gold, Standard Charted Gold, ANZ Grindlays Gold card and almost all major public and private banks debit or credit cards. Besides, a common feature offered by almost all cards is the insurance cover. If you are a frequent traveler, then opt for a card, which provides insurance cover for your baggage too and gives you the liberty to excess the special lounges on the air port. The following are some of the important pre requisites and considerations, which cannot be sidelined by the consumer while choosing a credit card. The acceptability of the card is a very important aspect as more widespread the distribution and branch network of the card, the better for the consumer and the retailer, and to a larger extent, the banks Taking care of the financial needs of the consumer, the card should cater to every financial need possible. Some needs include high lines of credit, low balance transfer rates, low annual payment rates, no annual fees, and long credit periods Other classifications include gold, silver, and platinum accounts, signifying different perks for different needs. Perhaps the most important criterion is to understand the spending behavior. The credit payment has to be planned in such a manner that the interest rates and money holding period offered by the bank on the credit provided to the consumer does not hamper his financial position. The important features to be considered in such cases would be: Prompt service Customer oriented response Acceptability Branch network Cards that have tie-ups with shopping establishments and give discounts at merchant establishments. The moment you realise that you cannot settle your entire bill, you start revolving credit. That means you only pay a part of the credit card bill. The balance you roll over till the next settlement. And if you are someone who likes to revolve credit, then take care to clear your bills within a short time. It would also make sense to revolve credit for big purchases, as that would give time of about two to three months to pay up. The credit period and the interest rates charged by the card would be of utmost importance in such cases. Look for cards that offer low interest rates and allows a person to pay through a flexible payment plan. Convenience and flexibility Yes, credit cards do offer convenience and flexibility, but at the same time they must be chosen and used with care, to reap their benefits. The onus is on the consumer to pick the right card. Credit cards does enable the holder with lot many facilities and the liberty of impulse buying. This comment relates more to lower priced products than the higher priced ones. However, one should never forget that inferior quality products would suffer high return rates. Therefore, impulse buying of good quality product should not significantly impact upon the return rates. Instead, the sales should increase along with your profits Co-branding: The latest boom The latest product and technological developments in the international credit card scene are briefly replicated here for the Indian market. The newest kid on the block is the co-branded credit cards. What are these and what benefit do they offer to you as a customer? Co-branding is essentially two major brands converging to enhance the usefulness and image of the product. In the case of a credit card, it is a partnership between the issuer, say, Citibank, and a retail service-provider, or a goods provider to meet customer demand more efficiently. A card issued through a partnership between a bank and another company or organisation is called a co-branded card. The card would have both the bank name and the store name on it. Many co-branded cards are also rebate cards that provide the consumer with benefits such as extra services, cash or merchandise every time the card is used. Obviously, the aim of the co-branders is to gain market share, promote loyalty to the brand, and promote more usage. Due to the MasterCard and VISA connection, co-branded cards find wide acceptance, unlike proprietary cards that can only be used at the sponsor's premises. Co-branders get to a wider customer base that is better defined and that could not have been targeted by one partner alone. As for the structure, the credit-card issuer is responsible for distribution, while the partner offers the benefits that differentiate between the cards and the target customers. The benefit to the cardholder comes mainly in the form of reward schemes and discounts offered by the credit-card company. Co-branding, apart from the reward schemes with a number of redemption options, also allows for discounts at specific outlets. This enables the consumer with benefits like free merchandise, frequent buyer programme something similar to frequent flyer points. Worldwide experience has shown that some industries lend themselves better to the co-branded card culture. Travel-related rewards and rebate programmes remain hot ticket items. People find travel and ways to earn free travel very appealing. Everyday savings is also popular, and issuers have carved out a place for themselves with co-branded products that offer consumers savings on products that they use everyday, for example the Shoppers Stop card and Big Bazaar have a similar tie up with ICICI. An entertainment and lifestyle-related card is another niche, for example, a music retail store, and a bookstore. Normally these cards offer rebates usable with the shop purchases. The most recent couple to catch the co-branded bug is Dutch bank ABN AMRO and coffee retail major Barista. Known as Barista Card, it gives the advantage of fuel surcharge discount, or a 10 per cent off at the Corner bookstore. Some major cards: The major co-banded cards on offer in India are: the ANZ Grindlays' STAR TV World card, Indian Oil Citibank International Card, Maruti Citibank International Card and the International Times Citibank Card. These international cards have a common feature, they can be used globally and billed in Indian rupees. Wide acceptability due to the tie-up with MasterCard or VISA is a standard feature. Other features include, flexible payment plans and 24-hour assistance. Schemes offered: Another common feature to all these schemes is the reward programme. The cardholder earns points every time he uses the card. This is to induce loyalty in the customer. The points can be redeemed for goods or services. The problem with reward schemes is that their usefulness depends on how often one uses the card and the usefulness of the gifts on offer. It may be something for nothing, but it will also probably take a long time to acquire enough points to use them. The differentiation: The main differentiations between the cards are the costs, special benefits and eligibility. Eligibility is an important issue. For instance, the ANZ Card sets a higher minimum salary than the Citibank co-branded cards at Rs 1.2 lakh and Rs 72,000 per annum for a public sector employee, and Rs 96,000 otherwise respectively. The annual fee for the ANZ Grindlays card is higher at Rs 1,200 compared to Rs 750 for the Citibank co-branded card. Petro-cards: In the co-branded petro-card segment, the main tie-ups are between ICICI-HPCL, American Express-HPCL and Citibank-Indian Oil. The ICICI-HPCL card offers two points for every Rs 125 of fuel at any HPCL outlet, while the other two waive the transaction fees for cardholders. Another particularly attractive reward scheme is that offered by the Indian Oil Card, where the points can be redeemed against fuel instead of the arbitrary gifts that most other offers. Other cardholders would have to pay a transaction fee of 2.5 per cent when buying fuel. For those using the card to regularly tank up their vehicles, the IOC Card could lead to substantial savings. Airline cards: In the co-branded airline card segment, the few popular cards are Standard Chartered-Air Sahara, American Express-Indian Airlines and Citibank-Jet Airways. While Standard Charted and American Express offer discounts ranging from 5 to 15 per cent on air tickets, Citibank gives four-mile points for every Rs 100. Every time the card is used, air miles accrue which can be redeemed for free flights. Being equivalent to a gold card, the tradeoff for all these free flights will be an annual fee of Rs 2,000 and a salary requirement of Rs 1.56 lakh. Therefore, a user needs to be a frequent flyer to get the card's full value, and also an automatic membership is given under the Jet Privileges scheme. Note of caution While advertising the benefits and details, the companies normally do not reveal what all is covered under such deals. While all these cards offer insurance cover, the promoters do not hold themselves responsible for arranging such cover. The cardholder most of the time is unaware that when using their credit cards at the ATM of the bank, a hidden cost is charged. A minimum of Rs 50 is charged and also includes a 2.5 per cent transaction fee for every use at the ATM. Taking all such facts into consideration a question may arise: Are co-branded cards worth it? The answer boils down to cost. If the cost of owning a co-branded card is the same, or nearly so, as that of a normal no-frills attached credit card, then, the former is worth it, as one gets that little bit extra for nothing. If the co-branded entity has the rational appeal of saving money and the emotional appeal with the consumer of the lifestyle the retailer represents, then it could be a really strong value proposition.
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