Post demonetization in the year 2016, the Indian economy’s slowdown has been the talk of the town both domestically as well as globally. The impact of the note ban, the introduction of GST, the NBFC crisis (due to the IL&FS debacle), and then the new FDI rule that debarred online marketplaces from manipulating the price of products or offering deep discounts have all played their part in the deepening of Indian economy’s growth issues.
Plus, the ongoing pandemic has thrown so many people into the cibil defaulter’s list. And the weak sentiment in consumer demand has been evident from the unwillingness of buyers to purchase discretionary items, sometimes even postponing or being unable to purchase staples as well.
A lot of economic experts have been criticizing the erratic decision making of the government during demonetization and pandemic, the result of which is clearly in front of us, not only have a lot of people lost jobs and thus arrived on the cibil defaulter’s list, but even the economy is staring at the possibility of another recession someday soon, post the year 2008. The auto sector slowdown, FIIs dumping Indian stocks, and the large fiscal deficit are all prominent indicators of the grave into which our economy is heading.
Back in October 2019, even the World Bank had lowered India’s growth projection from 7.5% to 6%, which was followed by the IMF dropping its 7% forecast from July to 6.1% recently. Similarly, as per recent data released by CMIE, the unemployment rate in October 2019 rose to 8.5%, the highest since August 2016. To make matters worse, the country’s infrastructure output fell 5.2% in September from a year earlier, and the fact that as many as seven out of the eight core industries of India saw a contraction in September output is worth noting.
The sharp contraction in consumer demand in various industries has led several manufacturers to cut down on production over the last few months, which has resulted in higher joblessness among individuals working in such sectors, especially the unorganized daily wage laborers and the lower middle class who not only hurt income but even had to fall into cibil defaulters list due to inability to repay back the existing loans due to loss of income. Such borrowers had witnessed a big downfall in credit scores when the idea to check my cibil score struck them, and they fetched their credit report to check the impact of a default.
Besides that, as far as the task of drawing investors, especially FIIs, to India is concerned, one cannot expect investors to invest here when there is uncertainty regarding regulatory and administrative measures to revive the economy. Even though the recent slashing of tax rates on companies by the government finally seems like a step towards reviving the Indian economy, the government still needs to show more signs of solid measures to deal with the ongoing economic slowdown.
Despite the economic slowdown and weak consumer demand, overall festive season sales had quite comfortably beaten expectations last year around Diwali and New year, according to analysts and e-commerce sites’ stats. The stellar sales by the e-commerce majors and the increased footfall in malls during the festive season were seen as indicators of consumption recovery, which might have possibly begun. Gradually, even those who went ahead with the practice to check my cibil score every month witnessed an increase in their score when they used their credit card with discipline and paid its bill and loan EMIs timely.
But still, even though the consumer demand rose during the festive season, desperate measures to revive the economy are probably the need of the hour and to pull borrowers out of the cibil defaulter’s list or at least prevent further borrowers from falling into it.
To sum it up, even as the government aims to achieve the sky-high target of becoming a 5trillion dollar economy within 5 years, it remains to be seen what fiscal and regulatory measures it takes to solve the grass-root level issues which still loom over in our country and economy.
Now, given that a big chunk of the cibil defaulter’s list includes credit card holders, too, let’s deep dive and understand a few lesser-known facets or aspects of credit cards that many existing users are unaware of.
-No rewards on spending on insurance premiums, loading e-wallets or fuel purchases, spending on EMIs
Credit card issuers usually state the terms and conditions associated; With the reward collection as well as redemption in their catalogs. Whether a specific transaction/type of transaction is not valid for rewards accumulation; the same would be mentioned in the catalog and vary amongst various credit card issuers. For instance- EasyEMI, smart EMI, and e-wallet transactions on HDFC credit cards; are not eligible for reward points with effect from July 2017.
-Limited validity of credit card rewards
Most credit card rewards usually have a validity of 2-3 years from the date of accrual; and user cannot redeem them once the validity expires and the points lapses. But some credit card issuers like Citibank’s and IDFC First’s rewards are evergreen and do not have an expiry date. However, even customers who continue the practice to check their cibil score and possess a high score; cannot redeem rewards once the credit card account gets closed; or some credit card issuers allow redemption within a stipulated time. After closure (Standard chartered platinum card allows user to redeem reward points within 1 month of closure).
-Limitation in use of rewards
The limitation of the use of credit card rewards is a common feature. Usually, credit card rewards are offered on specific transactions such as transactions in partner outlets or online spending; and the consumer gets reward points only for those particular spending. Also, the reward points earning rate varies and depends on the card type and type of transaction. For example, the HDFC money back card provides 2 reward points on every Rs 150 spent; however, the reward points are doubled (2X) for online spending.
-High annual fee cards usually have more features
The annual fee of credit cards varies depending upon the targeted customer segment; benefits/privileges offered etc. Cards with higher annual fees usually offer premium benefits such as complimentary airport lounge access; complimentary excess baggage allowance, low foreign currency mark up fee (which is otherwise usually up to 3.5% of transaction value). Complimentary travel insurance, concierge service (assisting in tasks such as reservations, hotel booking, transportation, etc.). Whereas no/low annual fee cards usually offer standard benefits such as cash backs, discounts, etc.
-The idea of having multiple credit cards to fetch higher and varying reward points
One should choose credit cards according to their spending habits and requirement; as most credit cards focus on specific transactions by offering higher reward points; cash-backs, and discounts on those transactions. Always analyze your spending pattern to choose a card that yields maximum benefits on your type of transaction.
As one credit card cannot provide each type of benefit for various transactions. Opt for multiple credit cards that offer rewards on the transactions which you frequently do.
If you are a credit card user who sets a monthly calendar reminder to check your cibil score; and tends to spend a sizable amount on a certain brand/service; consider opting for co-branded credit cards after taking into consideration the joining/renewal fee; complimentary benefits, etc. For instance, if you travel via Vistara frequently, you may opt for Axis Bank’s Vistara Signature Credit Card. It provides 3000 bonus Club Vistara points upon spending the milestone amount of Rs 75,000 or above. Within the first or initial 90 days of issuance of credit card, along with 1 Premium Economy ticket; upon reaching milestone spends of Rs.1.5 lakh or above within one year of card issuance.
-Rewards should be a key aspect when taking a credit card
Rewards should be one of the reasons for choosing a specific credit card. Choose a credit card that provides maximum benefits according to your spending habits. Since rewards are usually offer on specific transactions, make sure you take into consideration other factors such as joining fee; Renewal fee, cash backs/discounts offered, etc., and go for; the task to check your cibil score before finalizing your credit card.