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March 7, 2000

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Credit, Charge or Debit?

Larissa Fernand

Credit card: This piece of plastic enables you to make purchases and payments and pay for them at a later date. Within the credit card category you can opt for either Classic, Executive or Gold. The only difference being the benefits extended to each category. The more premium the card, the higher the amount of credit sanctioned with more benefits (such as higher insurance cover, accessibility to airport lounges, travel discounts and arrangements, free global calling card). Some banks may even offer a lower interest rate on revolving credit. And what's the catch? A higher joining fee, annual fee as well as income requirement.

Charge card: Credit cards with no pre-defined spending limit. If on a regular credit card your credit line is Rs 30,000 a month, you cannot exceed this limit since no payment will be made by the bank over and above this amount, unless you call and request a temporary higher limit. On a charge card, no such hassles. With no limit to your spending, your only obligation is to clear the entire amount that appears in your billing statement. With no option to revolve credit, be careful of how much you spend or it could wipe you out.

Debit card: Basically, no free credit line. A credit card requires the bank to make a payment to the merchant establishment and the cardholder has to settle the bill later. Not so in the case of a debit card. Here, the value of the transaction is deducted immediately from his/her bank account. The moment the card is swiped at a merchant's debit terminal, an electronic message is sent to the bank where a check is made to see if the customer has sufficient funds in his account. Once that is confirmed, the amount of sale is debited from the customer's account and credited to the merchant's account simultaneously. Unlike a credit or charge card, with a debit card you are required to have an account with the bank issuing the card.

Since the card allows you to have direct access to your account, you have no credit limit. You can spend till all the money in your account is wiped out. Either this will wipe you out or it will keep you in check. Neither do you have to bother about settling monthly bills. And, best of all, you will never end up in debt. If you don't have the money, the transaction won't be cleared.

And, if somebody pinches your card and is aware of your PIN- personal identification number (highly improbably), you could end up in the bread line.

So what fits you?

You: A substantial bank balance.
Card: Debit.
Reason: Since the transactions are directly debited from your account, your credit line will be dependent on the funds in your account.

You: Investments parked in various instruments with a low bank balance.
Card: Credit.
Reason: Debit is out since you don't have much funds to debit instantly from your account. Should you overspend, you can always revolve credit till you have the funds to clear the bill.

You: An impulsive buyer.
Card: Credit.
Reason: Since you cannot revolve on a charge card, your bank balance could shrink dramatically in just one spending spree. Similarly for a debit card unless you don't keep much money in your bank account.

You: No bank considers you worthy enough to issue a credit card .
Card: Debit.
Reason: Since funds have to be deducted immediately from your account, there is no credit risk to the bank.

You: The company picks up all the travel and entertainment bills.
Card: Charge card.
Reason: In this way you won't have any preset limit to hamper spending.

BANK

CARD

JOINING FEE (Rs)

ANNUAL FEE (Rs)

REVOLVING CREDIT
(% per month)

CASH ADVANCE FEE (% per transaction)

INTERNATIONAL ACCEPTANCE

American Express

Credit card

None

995

2.39

2.5/ min Rs 75

Yes

ANZ Grindlays Bank

Gold

 1000

 1500

 2.9

 2.5

 Yes

 

Classic

 100

 700

2.9 

2.5 

Yes 

Bank of Baroda

BoBCard Gold

1250

1250

3

2.75

No

 

BoBCard Exclusive

1000

1000

3

3

No

 

BoBCard Silver

400

400

3

3

No

 

BoBCard

100

100

commercial rate # 3

No

Citibank

Gold

None

2000

2.95

2.5/ min Rs 50

Yes

 

Silver

None

750

2.95

2.5/ min Rs 50

Yes

HSBC

Gold

500

2000

2.95

Rs 75

Yes

 

Silver

300

700

2.95

Rs 75

Yes

ICICI

True Blue

150

300

2.95

2.5/ min Rs 50 

No

 

Sterling Silver

150

600

2.5

 Same as above

No

 

Solid Gold

300

1200

2.5

 Same as above

Yes

 Stanchart

Gold

1000

2000

2.5

2.5/ min Rs 75 or Rs 500 (ATM or bank  transaction respectively)

Yes

 

Executive

400

1100

2.95

Same as above

Yes

 

Classic

100

700

2.95

 Same as above

Yes

State Bank of India

SBI credit card

250

500

2.5

2.25

No

# The cardholder has to maintain an account with the bank and every fortnight a bill is sent to the branch and the amount debited from his/her account. If there are insufficient funds in the account, then the rates charged on overdrafts are levied on the balance amount to be paid.

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