Credit Consumers Association of India Customers Advisory

CCAI (Credit Consumers Association of India) wishes to issue an advisory to all Indians who hold one or multiple credit cards and are having personal, vehicle or other loans from banks.

1. Whenever possible refrain from doing cash withdrawal on your credit card. Doing cash withdrawal attracts immediate transaction charges of 2% to 3%. Also, if the card is used for any purchase after a cash withdrawal, that purchase attracts finance charges because as per bank’s terms and conditions you now have an outstanding on your card therefore you do not get any free credit period once you have made cash withdrawal.

2. In case of cash withdrawal, settle the amount in full in the next billing cycle before the due date.

3. You need not wait for due date to make payment on the outstanding on your card. In fact you can make as many payments as you deem fit and whenever you want without waiting for due date. The bank is charging you interest on a daily basis and therefore payments that you make force the bank to reduce the interest burden from the date they receive the payment. We advise you to make payments as and when even 200 to 500 rupees become spare with you.

4. Do not wait for the due date. Cheques deposited around the due date have a strong propensity of getting lost mysteriously saddling you with late payment charges and other fees.

5. Remember on all fees that you are charged by your bank, the government is taking 12.24% cut. Over a period of time, this too will add up to a handsome amount.

6. Pay your credit card outstanding amount in full before the due date. This protects you from any finance charges.

7. Never ever hand over your credit card to any person claiming to be a representative of the bank and offering you increased credit limit on your card. When banks want to increase your credit limit, they will intimate you about the same via a letter sent to your mailing address.

8. When using your credit card in a hotel or restaurant, ensure that you get your card back. Often when returning the card, the staff will return you a similar looking but expired card and use your card in the meanwhile for making fraudulent purchases.

9. Never ever give a photocopy of the front and back of your credit card to any person as doing so can lead to your credit card being used for making online purchases on the Internet.

10. Go for a credit card that is free for life. There are many such cards available. There is absolutely no reason that you have to pay an annual fee on your card. If charged, refuse to pay such fees and ask the bank to cancel your card. Also when acquiring a free for life card be cautious about conditions that may apply as some banks offer you a free for life card but want that you use it within a certain period for it to be free or want you to spend a minimum amount on the card within a given date for it to become free for life. Avoid such cards and be careful of scams that the banks may foist on you.

11. Do not go for multiple cards. A credit card should be there only for emergencies and not for funding conspicuous consumption. If you want to buy an expensive item on your credit card, do so only if you have money in the bank to pay the bill when it comes to you. Banks charge up to 60% interest on money outstanding on credit cards. Add to this late payment fees, over credit limit fees and service taxes and you will end up paying 100% extra over your spending.

12. If you are making minimum payments every month on your credit card outstanding, you are in deep trouble. An outstanding of 100 rupees if paid at the minimum rate of 5% per month will get cleared in 51 months and by that time you will have paid 255 rupees. That is in effect on an outstanding of 100 you will pay 155 extra in a period of 51 months. Banks will surely love you for doing this!

13. Do not transfer your outstanding from one credit card to another even if the same is offered to you at 0%. Often banks will have a set-up fee for such a transfer which ranges from 3 to 5%. Also, whatever payments you make after doing such a transfer will first be adjusted against your transferred amount and you will be charged interest on your purchases that you made during the period. For example, if you transfer 20,000 from a credit card to another credit card, you will pay 1000 as set up fees. If you make a purchase of 5000 after this transfer and then decide to pay 8000 on the due date, the bank will adjust the entire 8000 against your transferred amount and charge you interest on the 5000 rupees purchase that you have made. Thus in effect you will be thinking that you have paid for the 5000 rupees purchase and 3000 towards the transferred amount but the bank will adjust the 8000 against the 20,000 transferred amount and charge you interest on 5000 at your prevailing interest rate of 3 to 4% per month!

14. In case of genuine default on your part due to extraneous circumstances such as loss of job, income, illness in the family, accidents or such unfortunate circumstances, communicate to your credit card company about the same.

15. If you are going for a one time settlement of the entire outstanding on your card please ensure the following
a. That you receive the settlement offer in writing from the bank before you make any payment.
b. That you do not make any cash payment.
c. That if you are offered an installment plan for settlement, you ensure that all the cheques issued by you are honored as the banks are waiting for you to fail such that they can legitimately cancel the settlement and adjust all that you have already paid against your outstanding. They will then also levy interest and other charges for the period in which you were making the payments towards the agreed amounts.
d. Do not trust anyone in the matter of one time settlement. It is important to get every word that is being told to you in writing from the bank.
e. Remember recovery agents are paid on commission basis, the more they collect the more they get paid. They will therefore lie and mislead you at every given opportunity.
f. While talking with people over phone keep track of phone numbers and names. Also check whether the person who you are talking to is from the bank or from a recovery agency or from a direct sales associate of the bank. In all cases insist on an identification card and if possible make photo copies of all such identifications cards that are presented to you.

16. In case of vehicle loans, the banks can not recover your vehicle without a proper court order. Do not hand over you vehicle to the recovery agents no matter what settlement that they may offer to you. Do not get tricked into parting with your asset. Banks have a tendency to sell of your asset at a heavily discounted price to people who are hand in glove with them and profit at your cost. As per RBI and IBA (Indian Bank’s Association) guideline, banks are under obligation to offer the asset first to you at their determined upset price. Remember sale of your asset at a discounted price will lead to loss of money already paid as margin, loss of installments that you have already paid and the loss incurred by the bank in selling your asset will still have to be paid by you. In effect the criminal elements of recovery departments of banks are profiting at your cost.

17. In case of personal loans, ensure that you are being charged interest on reducing balance method basis. Do not fall into the trap of seemingly low interest rates of 18% offered by the bank if the same is on flat basis. Interest calculated on flat basis leads to you paying interest on the entire loan amount for the tenure of the loan. Thus if you have taken a 30,000 loan for 30 months @ 2.5% interest rate (30% p.a.), you will be paying 1750 as installment for the entire 30 months leading to a total payment of 52500. That is on a loan of 30,000 you would have paid 22,500 as interest.

18. In case of personal loans, banks will offer you loans within 48 hours provided you give them all the documents. In fact such schemes are framed to lure you. When you give them all the documents, they will often require some more documents thus leading to a delay of more than 48 hours in which case they will not waive the promised processing charges. Also, banks will often delay the sanction of loan such that they can soften you in the process. As you anxiously wait for your personal loan, they will delay it so that they can then force an interest rate higher than what you had been promised initially. As the waiting has made you desperate, you will opt for the loan even though it is at a higher cost.

19. In case of personal loans, it is often a good idea to negotiate with multiple banks and take the best offer available.


CCAI is a non-profit organization working for educating the common masses against exploitative practices of foreign banks and fighting for consumer rights in the area of finance.

If you are being harassed over telephone or in person at your office or residence, you can immediately get in touch with us over phone at 91-22-26471908, 91-22-26474857 during normal working hours and on 91-9870236336 or write to us at
Credit Consumers Association of India,
3/141, M.H.B. Colony, Ram Mandir Road,
Kher Nagar, Bandra (East), Mumbai 400051

You can also send us your complaints in writing to the above address. In case you want to meet us in person, you can come to our office on Saturday’s between 11 am to 5 pm and discuss your issues with us.