It helps to know exactly how a single missed payment can affect your finances and your CIBIL Score.
By Hrushikesh Mehta | Feb 23, 2018 10:10 AM IST | Source: Moneycontrol.com
If you ever wondered whether a single failed credit card payment can pull down your entire credit score, the answer is YES. While a failed payment may be a mistake or the inability to pay (we all go through financial difficulties), lenders view this negatively and it can impact your access to credit in the future. Note that this doesn’t just apply to your credit cards; it holds true for add-on cards, where you’re accountable for others’ spending habits.
Impact on your finances and your CIBIL Score
It helps to know exactly how a single missed payment can affect your finances and your CIBIL Score.
Firstly, always remember that the interest on your missed payments (including the late payment fee) is compounded daily. Monthly interest rates on credit cards can range from 3-4% per month on the outstanding balance (principal, interest and late fees). So, even though you think you missed your payment by a day or a week, your interest liability may be larger than you anticipated. Paying just the minimum due or not paying for a few months will see your amount due balloon significantly.
Let’s take an example of only paying the minimum due for 6 months. On May 1, you make a purchase of Rs. 1,000 on your credit card that has a 3% per month interest rate. You then choose to only make minimum payments due (5% of the outstanding amount at the end of the month) for the next 6 months and spend no additional money on that credit card.
When clearing your balance at the end of 6 months (December), you will end up paying Rs. 1,560 — 56% more than the original amount spent.
Even without making any more purchases on the card, opting for minimum payments will stretch your repayment period to almost 9 years!
If you choose not to pay minimums, not only will you be delinquent and affect your CIBIL Score, but you will end up paying more than double the amount you had spent.
This is why it’s critical to read the fine print whenever you avail of a credit card, and it’s even more important to always pay on time.
On the other hand, your CIBIL Score is calculated based on the last 24 months of your credit history, and the four major factors that can affect your Score are as follows:
A missed payment can impact your score for as far ahead as the next two years. While it will remain visible on your credit report for 36 months, remember that it will always be a part of your credit history. This is why a credit score is like a reputation that takes years of discipline and patience to build, and just a single instant to get impacted.
Rebuilding your Score
There are ways to get back on the road to good credit health. Here are two ways to help build your credit score:
1. Ensure you clear outstanding dues on credit cards fully. Part-payments or minimum payments indicate difficulties in repaying dues. What’s more, if your amount overdue snowballs it will not only negatively affect your CIBIL Score but you also risk falling into a debt trap. Also, if a pending credit card payment is reported as “Settled” or “Written off”, this will affect your access to credit in the future.
2. If you have amounts pending on multiple cards, taking a personal loan at a lower interest rate to pay off your cumulative dues can be an economical option to avoid ballooning debt balances. Alternatively, you can borrow money against your gold, take a loan against your fixed deposit (without breaking it), or even get a loan of 50-80% of your asset value from investments in LIC, mutual funds and securities. The lower interest rate will make for more manageable monthly payments without the problem of an exponentially ballooning debt burden.
While these measures help rebuild your credit health after missed payments, adopting a proactive approach to financial discipline is always more prudent:
1. Make sure you always pay on time.
2. Don’t take on more debt than you can reasonably afford.
Why maintaining a high CIBIL Score is important
A higher credit score can lead to better loan offers at competitive interest rates primarily because lenders are keen to reward consumers who have demonstrated financial discipline. In addition, emergencies don’t always announce themselves before they arrive and having a high CIBIL Score will ensure that you are able to secure funding quickly (especially in a medical emergency). So, while missed payments can negatively affect your score, regular payments and credit-healthy habits can improve it.
The writer is VP & Head – Direct to Consumer Interactive of TransUnion CIBIL
There are many easy ways to quickly improve your credit history and score. But if you are not careful, these measures may even jeopardise your financial security
Shaikh Zoaib Saleem | First Published: Mon, Nov 27 2017. 12 37 AM IST | Livemint.com
If you need a loan to buy something you cannot fund immediately, you approach a financial institution—typically a bank or a non-banking financial company (NBFC). When you do that, the financial institution runs a background check on you, from its own database (if you are an existing customer) and also from a credit information bureau. The credit information bureau is authorized by the Reserve Bank of India (RBI) to gather information on loans and borrowers from banks and analyse it to arrive at a score of creditworthiness of an individual. If your creditworthiness is good, you would get a loan relatively easily and at better terms. If not, either the loan will be rejected or you will be charged a higher interest rate. This is especially true in case of personal loans. The institutions’ decision to lend is based in large measure on the credit score and the credit report.
What is a credit score?
It is a number based on your credit report, which is a summary of your past and current borrowing and repayment history. If you were regular with repaying loans, including your credit card bills, your credit score is likely to be higher. This score helps banks assess your loan repayment capacity and your chances of defaulting on it. “Credit score is derived from the credit history of an individual. A consumer needs to have a minimum of 6 months of repayment track record on a loan or credit card or closed credit accounts less than 2 years old before a credit bureau can generate a credit score,” said Hrushikesh Mehta, vice-president and head of direct-to-consumer business, TransUnion CIBIL. A credit score is created as your lending and repayment relationship with financial institutions evolves. However, if you are new to credit, here are some ways you can quickly start to build a credit score.
Credit cards or personal loans
If you are new in the workforce, you can start by getting a low-limit credit card from the bank where you have a salary account, said Sumit Bali, senior executive vice president and head-personal assets, Kotak Mahindra Bank Ltd. “Based on their income, banks can give them a card with low limit. Use that card sensibly and build a credit history,” he said.
In the past, people considered taking personal loans to build their credit score. However, with a personal loan you will necessarily have to spend your money in paying the interest, whereas with credit card repayments within the stipulated time, you do not have to shell out extra money. For slightly older professionals, about 35 years old, credit history is not much of a worry if their bank account status and average balance are good, and investments and tax returns are in place. They “don’t really need a credit card to prove credit worthiness. Any bank would sensibly look at it and take a call,” Bali said.
Peer-to-peer (P2P) lending platforms are an emerging option for creating and enhancing your credit history. The RBI has recognized these platforms as special category NBFCs and has mandated them to share lending data with credit information bureaus. “Once the P2P lenders receive their licence, they will be able to begin data submission. Once that happens, P2P lending will become a viable option in helping one build a credit score,” said Mehta. However, in this case too, you will have to pay an interest on the borrowed amount.
In some cases, especially where customers have a long relationship with their bank, the banks may also look at own data to determine creditworthiness, Bali added. “Credit score by and large is a good indicator but it may not be the only indicator,” he said.
Alternative credit scoring
Evaluating someone who has never taken a loan can be difficult. This is where alternative credit scoring comes in. Here, instead of relying on a credit score, lenders consider your transactions and behavioural data like bill payments, online buying behaviour and information from your social media platforms to understand your repayment capacity.
“Often people are refused big-ticket loans like a home loan for the lack of credit history, even if their finances are in order,” said Abhishek Agarwal, chief executive officer and co-founder, CreditVidya, a credit advisory that also works on alternative credit scores.
While the RBI-regulated credit bureaus are currently not allowed to use alternative data for credit scoring; in other developed markets parameters like utility bill payments, insurance premium payments have been used for credit scoring (read more on it here.
However, financial institutions including top public and private sector banks and NBFCs in India, have started using alternative data in multiple verifications and validations across the credit value chain, Agarwal said. “Innovative offerings like pre-approved offers or instant loans are leveraging alternative data from multiple sources to provide seamless customer experience,” he said, adding that leveraging alternative data for credit risk assessment of secured loans is still distant. Banks use the alternative scores “in conjunction with other things, like data that you have about the customer. This is happening for personal consumption products like credit cards and salaried personal loans. We are putting it to use but what is the outcome from that, it is too early to say,” Bali said.
While credit cards and loans help to build a credit history and score, caution needs to be exercised. If used carelessly, these can put you in a debt trap, and ruin your credit history too.
Not just that, you should also keep your digital and transactional behaviour in check, as going forward more and more data could be used to assign you a credit score.
Source : https://goo.gl/m7Ns7g
No credit or debit card of any bank restricted for payment: IRCTC Debit and credit cards of any Indian bank powered by Master or Visa, can be accepted in any of the seven gateways on the site
Press Trust of India | New Delhi | Last Updated at September 23, 2017 10:51 IST | Business Standard
Amidst reports of IRCTC barring certain banks from using its payment gateway for debit card transactions, the railways’ tourism and catering arm issued a statement denying the reports.
The IRCTC has said options to pay through payment gateway using debit/credit card and internet banking are open for all banks.
“No debit or credit card of any bank has been restricted by the IRCTC for acceptance on any of the gateway,” it said.
Debit and credit cards of any Indian bank powered by Master or Visa, can be accepted in any of the seven gateways on the site, the statement clarified.
However, it said the IRCTC has provides a value-added service of direct integration to some banks which would allow speedy transactions and reconciliations.
“Since direct integration comes at an added cost to the IRCTC, these banks were asked to share a part of their transaction charges with IRCTC,” it said.
A senior official of the IRCTC said that it was not possible for it to bear cost of individual linkage to bank websites.
“IRCTC had asked banks to share the revenue earned from online tickets because of these value-added services but some banks refused,” he said.
The IRCTC has said that if banks are willing to give the facility of zero transaction charges on their debit cards to rail ticket customers then it will give them the facility of direct debit card integration also.
The statement has further said that banks should abide by the RBI guidelines regarding transaction charges on debit cards by charging only 0.25 per cent on transactions of up to Rs 1,000 and a maximum of 0.5 per cent on transactions of values between Rs 1,000 and Rs 2,000.
Under this new offer ICICI Bank is giving cashbacks of up to 20 per cent subject to a maximum amount of Rs. 10,000 on your credit or debit card spend.
Business | NDTV Profit Team | Updated: September 15, 2017 17:04 IST
ICICI Bank, India’s biggest private-sector lender according to assets, has introduced a cashback offer for its customers who avail a new home loan or transfer their existing home loans to the Mumbai-based lender, ICICI Bank said in a release. Under this new offer ICICI Bank is giving cashbacks of up to 20 per cent (subject to a maximum amount of Rs. 10,000) to its existing credit card or saving account customers on their spends of minimum Rs. 30,000 on their credit or debit card if they avail a new home loan or transfer their existing home loans from other banks/NBFCs. The offer is valid from September 1, 2017 to November 30, 2017.
For example, Mr. Shah, a home buyer is sanctioned home loan in September 2017 with disbursal in October 2017. Also, during the offer period, he spends Rs. 55,000 on his ICICI Bank credit card. He will get cashback of Rs. 10,000 on his credit card. (eligible for 20 per cent cashback, up to Rs. 10,000).
While both the home loan sanction and card spends needs to be within the offer period, the chronology of the two does not matter, ICICI Bank said.
In the absence of credit demand from corporates, retail loans have been the focus for most of the lenders in recent days. Banks are launching new offers every other day to entice more and more retail customers. In the first quarter of the current fiscal, ICICI Bank had reported 19 per cent growth in its retail loans compared to overall loan growth of 3 per cent in the quarter.
As of 2:39 pm, ICICI Bank shares traded 0.51 per cent lower at Rs. 292.20 compared to 0.16 per cent gain in the broader Sensex.
Mayur Shetty | TNN | Updated: Sep 12, 2017, 14:42 IST | Times of India
SBI Card customers could soon make payments by merely tapping their smartphone on a swipe machine
MUMBAI: SBI Card customers could soon make payments by merely tapping their smartphone on a swipe machine. SBI Card is updating its mobile application to enable customers make contactless payments at point of sales (PoS) terminals using a technology called Host Card Emulation (HCE) which enables dematerialisation of the card.
Cardholders of the bank already use smartphones as an alternative for cards on the Samsung Pay platform and the bank will next month launch its proprietary application which enables virtualisation of the card in a smartphone using near-field communication (NFC).”Among our recent innovations we have enabled our card for Bharat QR code by incorporating the feature in our app,” said Vijay Jasuja, CEO, SBI Cards. NFC TECH SBI Cards, which recently entered into an agreement for partner GE to exit the venture, is looking to double its base from 50 lakhs in two years. The company , which is the second largest issuer in India, has a renewed focus on SBI customers through pre-approved cards.
SBI Card has doubled its base in three years to over 50 lakhs and is recording fastest growth in issuance with 15 per cent market share of cards in force (CIF) as well as card spends.”Before demonetisation the card volume growth rate was around 60,000 cards per month which increased to over 1 lakh cards per month post-demonetisation period and has now grown to around 2 lakh cards per month,” said Jasuja.
At present, 15-20 per cent of cards come from co-branded partnerships like Big Bazaar and Tata.
Some simple and straight rules to not fall in the vicious cycle of debt and high interest payments
Retrieved on 20th July 2017 | Moneycontrol.com
Shopping or paying with cards is one of the easiest things these days. Thanks to the magic of all the apps and payment gateways, using a credit card is as simple as a few dabs on the mobile screen.
But even with all the ease and convenience, paying your credit card bills requires real money. The reason many people fall into a debt trap is because they do not realise that however long the credit cycle might be, one always has to pay every penny (often times more) that you spend.
To not fall in the vicious cycle of debt and high interest payments, there are some simple and straight rules that one can follow.
Be prompt with payments
There’s a reason why credit cards are called credit, because you owe the money spent on the card to the lender. Hence, don’t expect as leeway or grace when it comes to making payments. Credit card companies are very stringent about any delays and promptly impose late payment fees, etc. Also, any delay or missing payment is also reported to credit rating agencies like CIBIL or Equifax and impact the credit score. Hence, the need to make timely payments cannot be truly overstated.
Don’t burn the credit limit
So, your card gives you a high credit limit, say 1 lakh. Why bother with the spend? Burn it all and pay later? That is surely not a good idea, namely because the percentage of credit limit consumed every month is a parameter in accounting the credit score. Hence, you are not considered to be of sound profile, if you use up say 90% of your card every month. Also, in case you track up a big bill each month, there is a possibility that you might land in financial tight spot.
Number of credit cards
People love to flaunt the cards. There’s a common belief that the more credit cards one has, the better financially networked he or she is. Well, nothing could be further from truth. The more the number of cards, the higher the possibility for over-spending. Also, each time, a credit card application is made; it is registered in the CIBIL records hence, it is best to have 2 or maximum 3 cards. In case, you desire upgrade your card to a higher one.
Typically, there is an interest-free period on credit card purchases, which can even go up to 45-plus days. To avail this benefit, the outstanding amount has to be nil. So, if you roll over certain amount to next month’s billing, there’s no interest-free period on the new purchases.
Cash withdrawals on your card do not come with an interest-free period. There could be a one-time fee plus interest charges that start from day one till you repay the amount. Given the interest rates charges and so on, withdrawing cash from credit cards should be strictly avoided, unless there is an urgency.
In the end, the simple mantra of happy credit-card-living is simple; spend less, pay all. With prompt payments and credit management, the credit card can be a nice tool that can aid you in everyday life, right from paying for your cabs or buying a new shirt. So, follow these steps and enjoy a stress free life.
A London based fintech company, RedGirraffe, is offering a facility to pay rent through credit card using its online platform “RentPay”.
Renu Yadav | New Delhi, June 15, 2017 | Business Today
Rent is generally one of the biggest component of the monthly expenditure that you make. Now, you can not only pay your rent through credit card but can also earn reward points on the amount paid. A London based fintech company, RedGirraffe, is offering a facility to pay rent through credit card using its online platform “RentPay”. For this, it has tied up with various banks including State Bank of India, ICICI Bank, HDFC Bank, IndusInd Bank, Axis Bank and Kotak Mahindra Bank. So, if you have a credit card from one of the banks that have collaborated with RedGirraffe, you can use it to pay rent.
How you can do it
To enroll for this facility you have to visit the website http://www.redgirraffe.com and create a RG Property ID by filling up the details of the rental property and attaching the rental agreement. The tenant will mention the bank account details of the landlord in the form. After submitting the form, a mail will be sent to the tenant’s mail id for giving standing instructions to the bank. After this one time registration, your monthly rent will be deducted automatically on a predetermined date.
“Bank and RedGirraffe.com have strong processes of inbuilt compliance and other tenant verification/reference checks. All the bank accounts remain automatically linked to Aadhaar and PAN details. In cases where the accounts are not linked, such customers are not allowed to transact via RentPay anyway. Apart from this level 1 verification mode, there are another 17 point checks (carried out between the bank and RedGirraffe.com) during each tenant onboarding. The verification happens over a period of 50 working days,” said Manoj Nair, Founder and CEO, RedGirafffe.com.
Why it is beneficial
The advantages of using this platform is you get 45-60 days of credit as your rent remains in your savings bank account and you earn returns on the amount. Also, if you use credit card, you can avail reward points depending on the offer that your bank is giving. “Since rent payments are typically large transactions, such spends enable customers to earn significant reward points. These points can be redeemed against the banks catalogue of over 200 options including products, gift vouchers, e-vouchers and air miles. Cardholders can even redeem points to pay their outstanding on the card,” adds Vijay Jasuja, CEO, SBI Cards. Apart from this it will also help the tenant build a good CIBIL score which can help him or her get loans at relatively better rates compared to a person with no or bad CIBIL score.
What are the charges?
A transaction fees of 0.39 per cent with a minimum of Rs 39 per transaction will be charged from the credit card holders of ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank and IndusInd Bank. Apart from this a service tax will be levied on it. So, for every Rs 10,000 rent paid the gross transaction fees including service tax comes to around Rs 45. However, in case of SBI Cards, an additional banking transaction charge of 1.75 per cent plus taxes shall be charged extra by the bank.