It is surprising how many card users are unaware that the minimum amount payable is only to check your credit worthiness and helps you avoid a default. The outstanding amount as well as every new expense incurred on the card becomes eligible for payment of overdue interest, making the use of this credit extremely expensive. A new billing cycle does not start with a clean slate plus outstanding.

Most people learn about the billing practice only when they have been slapped with high interest charges. If the amount is not too high, most people simply pay up and vow to pay their card bills in full. In fact, card users are slowly beginning to realise that flashing a wallet full of gold and silver may look impressive but can have serious downsides.

For instance, card companies, especially those attached to banks allow people to use credit cards to withdraw cash from their ATM machines. How many people know that such cash is not always adjusted against any credit lying in the customer’s card account and has to be repaid separately? Banks have learnt to cash-in on such ignorance.

The central bank is especially concerned about banks threatening to damage customers’ credit by reporting to credit information bodies. In many recent cases, customers who asked for their cards to be closed almost five years ago have received notices asking them to pay money (usually some debatable interest or card fees) to close the card or risk being reported a defaulter. This is sheer blackmail by the issuers and requires stringent punitive action by the RBI.

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