You use payment cards for all your shopping needs. Whether it is for paying at fuel refill centres, clearing electricity dues, watching your favourite Hollywood movie on NetFlix, or depositing your child’s school fees, you make payment through card.
There are times when you end up spending all your monies in your debit card and empty your salary account. Also, at times you are faced with a situation where you don’t have any other option but to use your credit card for withdrawing money at ATMs.
But keep this in mind that using credit card for cash withdrawal at ATMs is not a wise man’s move. You will end up paying hefty cash withdrawal fee and advance payment charges.
High advance fee
Naveen Kukreja, CEO and co-founder, Paisabazaar.com, says when it comes to ATM withdrawals, credit cards should be best avoided. “They come with cash advance fee of up to 3.5% of the withdrawn amount apart from the finance charges of up to 47% per annum.”
So if you are withdrawing say Rs 10,000 using your credit card you will have to pay Rs 350 as advance payment fee which is by all measures a big amount. If you withdraw cash using your debit card even at other bank’s ATMs you will not incur such a high fee. The charges for withdrawing cash at ‘other banks’ ATMs, which bank levy, vary in the range of Rs 25-30. And you will incur bigger finance charges in a year based the amount of money you withdraw.
Assess your financial health
Before owning a credit card you should evaluate your monthly income and assess overall financial health. As credit cards come with a penchant for spending more money as you don’t have to dig out your pocket for hard cash. This habit may lead to piling up of unwanted loan burden which could impact your credit score due to non-payment of dues on time.
Play it safe online
There are a few people who prefer debit cards for all online there payments. In case of a fraudulent activity, debit cards may be safer as they have a cap on ATM limit and transaction amount per day. “Credit cards, on the other hand, can be maxed out in one single transaction, though most banks usually call customers to confirm high-ticket transactions,” Kukreja added.
Extra benefits
You also enjoy these additional benefits for of using credit cards instead of debit cards. You get an interest-free period of up to about 50 days, most of the credit card companies give 45 days as interest free period. Besides attractive reward points, cashback offers, discounts on buying particular products on ecommerce websites are other features that you don’t get in a debit card. If you are buying a product on a no-cost EMI you will have to have a credit card as debit cards don’t come with the facility of no-cost EMI.
The habit will help you save more money in the long run. “Also, regular usage of credit card, preferably within 30-40% of the sanctioned credit limit, and their timely payment by the due date would help build your credit score,” he said.
Card frauds
Ritesh Bhatia, Director, cybercrime investigations at V4Web Cybersecurity, said, if your debit card is cloned or misused then the maximum damage to a person or bank will be Rs 20,000. “We have been witnessing a huge increase in card cloning frauds. Skimming and cloning are becoming more rampant. The security at ATMs is also not up to the mark because of which fraudsters are able to install cameras and card skimmers,” he added.
Avoid more exposure
Srikanth Meenakshi, co-founder FudsIndia.com, states for the sake of safety one should use credit card for paying day-to-day expenses and also for paying utility bills. He says, “When you make a card payment, your card gets exposed to private merchants.” This makes your crucial financial data ‘leaked’ to fraudsters who are on the ‘virtual’ prowl and are at standby position. The more you use your debit or credit card the more you expose it for probable money theft. This could lead to financial loss in future if you fall prey to phishing, skimming or any other card fraud related cases, he explained. And, credit cards offer a repayment time period in the range of 45 to 50 days depending on the company.
Call back system
Some industry experts say both credit and debit cards are the same and serve the similar purpose as both enable and facilitate easy monetary transactions. Mrutyunjay Mahapatra, CEO, Syndicate Bank, says both credit and debit card appear to be same when it comes to their usage. “However, as credit card companies give loans they come along with tighter security and velocity checks.” For credit cards, banks deploy a call back system for big ticket transactions and whenever they come across a suspicious transaction. While in debit cards, there is no such facility.
According to Mahapatra, in most of the cases, consumers lose money in “multiple debits of small amounts”. “Scamsters mostly steal in the range of Rs 500 to Rs 1,000 in card fraud cases. They stel the amount of money that does not require filling of OTP, he said. “Apart from that, credit cards come with advanced algorithm to find out patterns (of transaction),” he explained.
Why frauds occur
One of the biggest reasons for occurrence of these frauds is deeper outreach of debit cards, to the lower strata of social pyramid because of Jan Dhan Yojna and other financial inclusion schemes. “In most of such cases, people are losing money through password hacks. It would be wrong to say that they are losing money through systems hacks.”
The fraudsters dupe the consumers in various innovative ways. “In most of the cases they call and pose as bank agents. They also claim that they are calling from police department, from lottery agencies or from the government’s direct benefit transfer department.”
Increased threat
Nitin Bhatnagar, Associate Director at PCI Security Standards Council — dedicated to the security of card-based payment data — believes consumers need to be prepared for increased threats of data theft as there has been substantial rise in number of digital payments. In October 2016, it was reported that security of as many as 32 lakh cards was compromised. And some consumers had back then complained that their money was withdrawn in China. Of the 32 lakh cards, 26 lakh were in the Visa and MasterCard category while the remaining 6 lakh was in the RuPay and other cards category.
