Though the whole Banking System is exploitative, Credit Card has left every other scheme of exploitation far behind. Through Credit Cards, banks can charge up to 48 per cent per annum and yet none in the political or social world seems to be concerned about this loot. How on the earth a 4 per cent per month interest can be tolerated, is beyond understanding. The irony is that masses have hardly any clue to what is happening.......... Is anyone in the political world listening? Can the Finance Minister step in to stem the rot without delay and prove that the Government is indeed interested in “Sabka Vikaas” and not just of the privileged few? Is anyone keen to file public interest litigations ready to move?
I have been writing for long that Banks are the biggest devils in the devilish world of economic Fundamentalism, the other two major partners being the Corporate World and the Governments. The three together are responsible for ever galloping Economic Equality, for industrialisation of not only the needs of human beings but also their susceptibilities leading to physical and mental diseases, disintegration of family peace and ever increasing chaos at the social level. The Banks are the biggest devils because it is through them that the other two sustain the flow of money from the less-moneyed to the more.
When banks take money, they pay little to the owners of the money, and when they pay to the common people, they charge two to three times. Of course when they pay to the Corporate, it enables the latter to earn much more than what they return to the Banks. Banks and other financial institutions make it possible for the Market to sell what they would not have been able to sell in next 1 to 10 years. So they are happy to share some amount with Banks.
Though the whole Banking System is exploitative, Credit Card has left every other scheme of exploitation far behind. Through Credit Cards, banks can charge up to 48 per cent per annum and yet none in the political or social world seems to be concerned about this loot. How on the earth a 4 per cent per month interest can be tolerated, is beyond understanding. The irony is that masses have hardly any clue to what is happening.
If you have used Credit Card only for shopping and are able to repay within the prescribed time, you are safe. Your only loss is that you have already spent part of your next month’s salary. And this is mostly done to satisfy your luxurious self which has been so laboriously transplanted into you by the market through their marketing skills. But if you need money for some other purpose, which requires you to withdraw money against Credit Card, you immediately pay 3 p c of the amount as interest, and if you are not able to repay within the stipulated time, you will be charged 4 percent per month till you are able to pay back the full amount.
An article sums up the whole picture:
“Imagine this, the banks get typically 9%-11% on home loan per annum. The same is 15% for personal loan. However for a credit card it is anywhere between 24-43% per annum on outstanding amount. This is without the fine amount or late payment fee as they like to call it.
“Every bank in India calculates the interest rate as a monthly percentage (that changes according to the RBI instructions) and on the average daily balance method. The formula to calculate the interest is as follows:
Calculated interest = (outstanding amount x monthly percentage x 12 months) x No. of days/3653.....
“The interest rate is applicable for withdrawing money from ATMs using the credit card. There is no grace period applicable to this transaction, and every bank charges the interest rate right from day one.....
“The addition of the interest rate continues until you make the repayment. You will have to be careful while withdrawing money from ATMs. The interest rate is usually 3.5% interest per month and a onetime fee of Rs. 300 or 2.5% of withdrawal amount(whichever is higher)......
“The late payment fees add to the already debt and increases the overall payment. Banks charge the credit card late payment fees if you neglect to make the payment before the due date. The price varies according to the card, bank, and the outstanding amount.....
“For instance, HDFC bank charges Rs. 500 as late payment fees for credit bills worth between Rs. 5,001 and Rs. 20,000. It goes to Rs. 700 if the credit bill is above Rs. 20,000. For this reason, the late payment fees change according to the debt amount you possess on the card......
“Considering a credit card late payment fee of Rs. 400, sales tax at 12.36%, additional charges, and principal balance amount, you will pay:
Total Amount Due = Total interest + Late payment fee + Service tax + Outstanding amount
= Rs. 933.828 + Rs. 400 + Rs. 115.421 + (Rs. 3,000 +2 Rs. 7,000)
= Rs. 11,449.249 = Rs. 11,449.25 (round-off) + additional charges”
The credit card industry is already a big global business and it is dominated by a handful of companies. Another report about the United States says:
“American consumers collectively are approaching $1 trillion in credit card debt in mid-2016, according to the Federal Reserve consumer credit report. The top four issuers provide more than 57 percent of all the cards issued by 5,231 banks. The top 10 issuers issued nearly 90 percent:
“There were some 14.5 billion U.S. general purpose credit card transactions in the first six months of 2015, accounting for more than $1.4 trillion in purchase volume. General purpose credit card spending has risen as a proportion of gross domestic product, rising from 10 percent of GDP in 2000 to 15 percent in 2014......
“The total number of credit card transactions in the U.S. was 26.2 billion in 2012, up from 21 billion in 2009, according to the 2013 Federal Reserve Payments Study. Other findings from that report:
- The number of general purpose card transactions in the U.S. was 23.8 billion in 2012, up from 19.5 billion in 2009.
- The total number of private label card transactions in the U.S. was 2.4 billion in 2012, versus 1.5 billion in 2009.
- Credit card transactions accounted for 21 percent of the total number of noncash transactions in 2012.
- The total value of general purpose card transactions in the U.S. in 2012 was $2.21 trillion.
- The total value of private label card transactions in the U.S. for 2012 was $270 billion.”
According to reports, India had 24.5M credit cards, 661.8M debit cards in March 2016. “The number of credit and debit cards in India is steadily rising but Indians still prefer debit cards over credit cards. In March 2016, a total of 24.51 million credit cards and 661.8 million debit cards were in operation, according to the Reserve Bank of India.....Between March 2015 and March 2016, India added some 0.38 million credit cards and added 3.44 million debit cards. While the number of cards is increasing slowly, people are gradually becoming more comfortable in using them as well, and there’s an increase in their usage.”
Around 3.3 million people are in "persistent debt" across the UK - defined as paying more in interest and charges than actually repaying the loan over an 18-month period.
The young generation, out of their natural desire to enjoy life, are the most exploited lot. Describing the horrific consequences of Credit Card, a report says,
“In only her second month of college, Sadie Hayes walked by a credit card display set up on campus. She liked the funny slogan on the free T-shirt she’d receive for signing up (“I will never again sign up for an 8 a.m. class”), and within a week she had received her first credit card in the mail.
Fast forward 15 years, and Hayes is 33, working to pay off nearly $25,000 of credit card debt from her first card.....Almost 900 colleges have lucrative debit and credit card partnerships with financial firms, according to new findings by the United States Public Interest Research Group, enabling banks to target and profit from over 9 million students across the nation....
“Studies have shown that, after students are repeatedly exposed to marketing by a certain bank or financial institution over time, a whopping 70%-80% will end up opening debit or credit cards with that company.
What’s more, most of those students don’t know how to manage the debt: 90% of students polled in one Credit Sesame survey carried a credit card balance month to month, yet under 15% knew their card’s interest rate, and over 75% had “no idea” about late payment charges on their cards.
Though you might have sworn your friends to secrecy about that frat party freshman year, when it comes to credit card debt, what happens in college does not stay in college. Credit mistakes can haunt students for years to come, impacting their ability to get loans and reasonable interest rates.
According to a nationwide survey conducted by LearnVest and Chase Card Services, a division of JPMC, 35% of women between the ages of 25-32 say that credit card debt keeps them from reaching their financial goals. How many of them knew what they were getting into when they opened their first cards?”
“When schools are in need of extra revenue to balance their budgets, they often strike deals with financial institutions to turn school ID cards into debit cards. The student IDs are often branded with the logo of a bank or company, making it appear as though the school is endorsing the product.
“Many universities have begun handing over control of financial aid disbursement to their partnered banks and lending institutions. These partnerships give banks an unrivalled opportunity to market the rest of their financial products, some with hefty hidden fees, to college students. In many cases, university IDs double as campus debit cards; having the bank’s logo next to the university’s insignia can give the impression that the school endorses the bank and its products.
What’s more, some schools have handed off the admin task of disbursing student aid money to the banks. So, if a bank handles giving you the scholarship money you’ve earned, that bank has exclusive access to market to you.
The New York Times reports that Higher One, the leading financial service company on college campuses, levies debit card overdraft fees of $29 for the first offense, and $38 for every other one. Higher One charges an additional 50 cents every time you purchase something using a debit card, plus a $2.50 charge on withdrawing money from an out-of-network ATM. So, supposing a weekly cash withdrawal and a couple charges a day, students could lose around $10 from their financial aid balances every week. “
What has already become a big trap in the Western world is all set to capture India too. The control of the forces of economics is so big however those issues like this would never crop in the media. The people will continue to be looted, and the bosses of the market and their minions in the political world will continue to become richer.
If at all the issue attracts the attention, the solution that would be offered by the same forces would be to create “awareness” about the possible consequences of Credit Card. Nobody will suggest that to charge more than the interests charged on personal loans in any of their products should be made illegal for the Banks and the Banks should repay what they have already got. The government and the political parties will not show any interest similar to the ones they show on the emotional issues. Emotions after all bring votes. Running mass movements on the issues of Economic Disparity can bring votes for the politicians but no money. Votes without money are of little use.
Is anyone in the political world listening? Can the Finance Minister step in to stem the rot without delay and prove that the Government is indeed interested in “Sabka Vikaas” and not just of the privileged few? Is anyone keen to file public interest litigations ready to move?
[Head of Chair in Islamic Studies & Research, Yenepya University, Mangalore, DR JAVED JAMIL is India based thinker, and writer with over a dozen books including “The Devil of Economic Fundamentalism”, “The Killer Sex”, “Rediscovering the Universe” anhd “Islam means Peace”]. He can be contacted at firstname.lastname@example.org.]