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Tag: Credit cards

  • OneCard is lifetime-free however this metallic bank card has no sheen

    “Metal bank cards have a feel-good issue. For lengthy, OneCard’s USP (distinctive promoting level) was that it’s an entry degree card in steel kind, a primary of its sort,” stated Kashif Ansari, assistant professor at Jindal School of banking and finance, O P Jindal Global University .

    Three years on, the noise has died down as a result of its reward fee and low cost provides, essentially the most enticing options of a bank card, pale compared to different cashback playing cards available in the market.

    OneCard earns one reward level (RP) on each ₹50 spent. The worth of 1 RP on redemption is ₹0.10. As a part of the cardboard’s accelerated reward programme, the cardholder will earn 5X rewards on prime two spend classes in a month. This is relevant when the cardholder spends on at the least three completely different classes in a month, so the app picks the 2 highest spend classes and awards accelerated factors on these. For occasion, in case you paid ₹5,000, ₹8,000 and ₹6,000 in direction of groceries, gasoline and on-line procuring, respectively, in a month, you’ll qualify for 5X rewards on gasoline and on-line procuring. However, in case you pay for groceries and gasoline alone the subsequent month, you’ll not be eligible for accelerated rewards because you didn’t pay for a 3rd class..

    The base reward fee on OneCard is abysmally low at 0.2%. In comparability, entry degree playing cards comparable to SBI cashback card and ICICI Amazon Pay card supply 1-5% base reward fee.

     

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    Apart from incomes rewards on spends, OneCard additionally sometimes provides 5-20% on the spot reductions on on-line procuring, meals supply platforms, journey reserving websites, and many others. These provides might be discovered on the OneCard cellular app. Yet, Sumanta Mandal, founder, TechnoFino, stated OneCard’s model tie-ups aren’t as large as banks. “ICICI has the widest community of brand name tie-ups, so ICICI Amazon Pay playing cards supply the very best reductions and different advantages on on-line procuring. OneCard provides profitable offers throughout competition gross sales,” he stated.

    FPL Tech provides OneCard in collaboration with Federal Bank, South India Bank, CSB Bank and BOB Financial.

    Is it price having one?

    Ansari stated OneCard is appropriate for freshmen whose bank card purposes are rejected by banks. “OneCard has low entry limitations. People with low cibil scores additionally get accepted. Those and not using a Cibil historical past can simply get it towards an FD,” he stated.

    Another upside, although minor, is that it instantly earns rewards on classes like utilities, gasoline, charges, insurance coverage premiums, and many others, which some sought-after entry degree playing cards, like SBI cashback and ICICI Amazon Pay card, don’t permit. With these playing cards, the workaround is to purchase Amazon or Flipkart vouchers and pay for exempted classes by means of these.

    The greatest draw is that you simply get to personal a steel card with out big annual charges. However, the draw back is that it has an costly re-issuance charge of ₹3,000 (items and providers tax is additional) in case you lose the cardboard or injury it. “My steel OneCard has gotten broken twice already. One can nonetheless use it for on-line transactions however not for funds on POS terminals. You can get a plastic card as a alternative at a decrease charge,” stated Mandal.

    The firm touts a low foreign exchange mark-up of 1% on international transactions. But, Mandal warns towards transacting abroad with OneCard due to the corporate’s poor customer support. “OneCard’s customer support is just not good so you could not get decision to your grievances in case you increase a dispute. For worldwide transactions, it’s secure to transact with a financial institution bank card,” he stated.

    Mint independently checked a number of bank card group boards the place individuals raised comparable issues concerning the firm’s unresponsive buyer care service.

    The financials

    FPL Technologies’ losses widened to ₹182.8 crore in FY22, from ₹33.2 crore in FY21, as per their filings with MCA. The widening losses are attributed to the rise in advertising and marketing bills, amongst others. OneCard spent over ₹124 crore on promotional bills in FY22 towards ₹11.8 crore in FY21.

    It is troublesome for a fintech firm to construct a sustainable bank card product that gives a good reward fee as a result of it doesn’t have deep pockets like banks and has restricted avenues to make cash. “Fintechs can solely earn from MDR and curiosity on defaults. A fintech can by no means compete with banks, which additionally earns from cross-selling different merchandise,” stated Ansari.

    OneCard didn’t reply to Mint’s question on its person base and the variety of energetic playing cards presently.

  • Credit Card, PayPal or Cash App? How You Pay Matters

    Each of the completely different cost strategies gives completely different conveniences, perks and protections from fraud. Credit playing cards have lengthy been the default possibility of alternative. But larger rates of interest have now raised the price of carrying a credit-card stability.

    Money-transfer apps reminiscent of Venmo and Zelle processed almost $900 billion final yr, and the Consumer Financial Protection Bureau expects that quantity to achieve $1.6 trillion by 2027.

    These apps and companies present simple immediate funds, normally without cost. The draw back is that these choices supply fewer protections from scams and unfulfilled orders.

    “The U.S. shopper could be very pushed by comfort. They is probably not immediately pushed by safety,” mentioned James Anderson, managing director at Paze, a bank-owned digital pockets.

    Payment apps are among the many fastest-growing sources of fraud experiences and losses, in keeping with Federal Trade Commission information. Overall fraud losses have elevated greater than fivefold to $1.2 trillion since 2019. Losses tied to cost apps jumped from $5 million to $47 million over the identical interval, in keeping with the FTC information.

    As new cost choices achieve acceptance, shoppers ought to attempt to educate themselves easy methods to use these strategies safely, mentioned Seth Ruden, director of worldwide advisory at BioCatch, a fraud-detection software program firm.

    “The channel itself isn’t the villain. The unhealthy actors are the scammers, the social engineers and exploit artists,” he mentioned.

    Here’s easy methods to weigh the safety, comfort and advantages of every cost possibility:

    Credit and debit playing cards

    When you swipe or faucet your card or authorize a card transaction on-line, the service provider’s financial institution communicates together with your financial institution via a card community reminiscent of Mastercard or Visa to ask permission to withdraw a specific amount. Your financial institution then decides whether or not to approve the transaction based mostly in your obtainable funds or credit score and the probability the transaction is fraudulent. If permitted, your financial institution places a maintain on the funds till they’re despatched to the service provider’s account, normally inside a enterprise day.

    Credit playing cards may be probably the most rewarding option to pay on-line. Card issuers use the income from transaction charges to fund perks for patrons reminiscent of cash-back offers, journey factors, entry to airport lounges and fraud safety.

    A bank card may be costly for those who don’t pay your stability in full, and better rates of interest have now raised the price of carrying a credit-card stability. Paying off a $1,000 stability in 12 months on the present common annual share fee of twenty-two.16% means $103 in curiosity, in contrast with $77 roughly a yr in the past when the typical was 16.65%, in keeping with estimates from the Federal Reserve.

    Debit playing cards don’t supply the identical rewards as bank cards since their issuers make much less cash from every transaction. They do include comparable fraud and cost protections as bank cards.

    Federal laws require issuers to reimburse clients for unauthorized transactions of greater than $50 and permit clients to dispute fees inside 30 days. Many bank cards additionally present buy safety, that means you may ask for reimbursements immediately out of your issuer if one thing you purchase is misplaced, broken or inconsistent with what was marketed.

    Few folks benefit from their credit-card advantages, funds specialists mentioned. After discovering most individuals don’t trouble to learn the advantageous print once they join a brand new card, Mastercard is now notifying clients of advantages in real-time.

    “If I’ve to learn an enormous booklet or name a quantity to grasp what my advantages are, I’m not doing it,” mentioned Chiro Aikat, government vp of U.S. market improvement at Mastercard.

    Digital wallets

    Digital wallets reminiscent of PayPal or Apple Pay are among the many most secure and best methods to pay on-line. Checking out with a pockets is often sooner than paying with a bank card immediately since one doesn’t should re-enter billing info and delivery handle.

    All of the protections and advantages related to the underlying card are nonetheless in impact for pockets transactions, so it’s best to attach these wallets to a bank card immediately to maximise your safety, mentioned Corie Wagner, an analyst at Security.org, a safety-product evaluation website.

    If a digital pockets provides you the choice to hyperlink a checking account immediately, it’s best to learn the coverage settlement to be sure you perceive what’s protected. For instance, PayPal affords an additional stage of buy safety, however Apple Pay and Google Pay don’t.

    Wallets additionally supply further layers of safety via encryption and biometric verification and lots of don’t share delicate monetary information reminiscent of your 16-card quantity with particular person retailers. “Use as many authentication elements as doable” reminiscent of Face ID or private identification numbers, Wagner mentioned.

    Peer-to-peer cost apps

    Apps reminiscent of Venmo, Cash App and Zelle have been designed to assist folks ship cash to family and friends, however they’re now utilized in extra settings. They transfer cash extra shortly than card funds as a result of, as a substitute of ready on banks to approve the transaction, the cost is permitted as soon as the sender hits submit. It is nearly unattainable to get a refund as soon as it has been despatched.

    These cost strategies aren’t regulated as closely as playing cards, so customers may nonetheless be on the hook for unauthorized funds if a swindler will get management of their accounts.

    “Use it to pay folks you understand, and belief,” said Meghan Fintland, a Zelle spokeswoman. “They’re not meant to have the credit-card security.”

    Bank transfers

    Businesses are more and more providing methods to pay together with your checking account immediately since Automated Clearing House, or ACH, transfers are less expensive to course of than playing cards. This possibility ought to solely be thought-about in change for a reduction, funds executives mentioned.

    Consumers ought to be selective in sharing their financial institution info with retailers since wire transfers don’t have the identical safety ensures as playing cards.

    If a enterprise requests a direct financial institution switch as a substitute of a card cost, selecting a slower possibility over the newer immediate strategies reminiscent of Zelle is likely to be finest. ACH transfers sometimes take just a few days to settle, supplying you with just a few extra days to attempt to cease the transaction earlier than the cash leaves your account.

    “The slower it’s, the larger chances are you’ll be capable of get recourse,” Ruden, at BioCatch, mentioned.

    Write to Imani Moise at [email protected]

  • Here’s how younger professionals can begin constructing their credit score historical past

    As you begin your skilled journey and embark in your profession path, it’s essential to grasp the significance of building a robust credit score historical past. Your credit score rating performs a key function in shaping your total monetary well-being and opens doorways to varied alternatives. However, many younger professionals face the problem of getting a restricted or inadequate credit score profile. By taking proactive steps and planning rigorously, you’ll be able to lay the muse for a financially safe future.

    Although constructing credit score will not be your rapid precedence, it holds appreciable significance. Your credit score rating, appearing as a complete reflection of your accountable borrowing and reimbursement habits, performs a key function in quite a few elements of your monetary life. It serves as a yardstick by which lenders consider your credit score worthiness. When you apply for varied monetary merchandise like loans or bank cards, lenders use your credit score historical past to determine in your mortgage software and finalize the phrases and circumstances you might be supplied. A powerful credit score historical past and an excellent credit score rating supply a number of advantages, corresponding to qualifying for bank cards and securing decrease rates of interest on loans. By saving cash on curiosity funds, you’ll be able to allocate these funds in direction of investments that form your future. Additionally, some employers in sure industries evaluate credit score reviews through the hiring course of, making a stable credit score historical past essential for job alternatives.

    Lenders are more and more leveraging various knowledge sources and superior analytics to guage creditworthiness of such clients to fulfil their borrowing wants. These lenders may very well be one of many first avenues that may be leveraged to begin constructing your credit score profile. To construct a robust credit score historical past, domesticate accountable monetary habits. Make well timed funds not solely on your loans and bank card payments but in addition for different bills like utilities and lease. This demonstrates monetary self-discipline and establishes your potential for future funds to lenders. Set up reminders or automate funds to make sure you by no means miss a cost. If you’re new to credit score or have restricted credit score historical past, assess your spending patterns and make changes that positively impression your creditworthiness.

    The length of your credit score historical past considerably impacts your credit score rating. Consider getting a bank card early in your skilled journey and prioritise paying off the total excellent steadiness by the required deadline. Responsible use of your bank card and assembly cost obligations will improve your credit score historical past and set up you as a dependable borrower.

    In addition to bank cards, diversify your credit score portfolio to strengthen your credit score historical past and rating. Effectively managing and responsibly dealing with varied types of credit score reveal your skill to deal with various monetary obligations.

    Lastly, frequently monitor your credit score reviews and observe your credit score intently. This means that you can promptly establish any discrepancies or errors in your reviews and take vital steps to rectify them. It additionally empowers you to evaluate particulars relating to your credit score utilisation, cost historical past, and total credit score administration, serving to you establish areas for enhancing your monetary well being.

    While constructing your credit score historical past, it’s equally vital to keep away from sure practices. Maintain a low credit score utilisation ratio and keep away from maxing out your bank card. Applying for credit score too regularly can negatively impression your credit score rating, because it suggests a want to tackle extra debt. Therefore, house out your credit score functions and solely apply when vital.

    Navigating private finance may be difficult for younger professionals beginning their careers. Focus on increasing your monetary data, find out about budgeting, saving, and successfully managing your funds to make knowledgeable selections. Additionally, prioritize constructing an emergency fund alongside creating a credit score historical past. This fund acts as a buffer throughout medical emergencies or surprising bills.

    Developing a stable credit score historical past requires time, consistency, and accountable monetary administration. Start by making a well-structured price range that aligns along with your particular wants and aspirations. Avoid widespread pitfalls like overspending, accumulating extreme debt, and incurring excessive curiosity expenses. Building and enhancing your credit score rating sometimes takes at the very least six months, so plan forward when contemplating main purchases. Adopting prudent fiscal habits and practices will pave the best way for a robust credit score profile, unlocking quite a few monetary alternatives.

    Sajish Pillai is managing director, head of property and strategic alliances, DBS Bank India.

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    Updated: 06 Jul 2023, 10:23 PM IST

  • Overseas spending utilizing bank cards to not entice TCS; examine particulars

    The authorities introduced on June 28 that abroad spending utilizing worldwide bank cards is not going to be included beneath the Liberalised Remittance Scheme (LRS) and therefore, wouldn’t entice TCS. In addition, the implementation of a better charge of tax collected at supply (TCS) of 20 per cent on abroad remittances beneath LRS, like tour bills, has been deferred by three months and can come into impact from October 1.

    However, bank card spending abroad is not going to entice TCS from October 1. The greater TCS charge can be relevant solely when the LRS funds exceed the edge of ₹7 lakh.

    In Finance Bill 2023, the federal government had elevated the speed of TCS from 5 per cent to twenty per cent for remittance beneath LRS in addition to for the acquisition of abroad tour programme packages and eliminated the edge of ₹7 lakh for triggering TCS on LRS.

    Also Read: TCS levy: Government proclaims 3-month extension for implementing revised charges, will apply from 1 October

    These two adjustments weren’t relevant when the remittance is for training or medical goal. These amendments have been to take impact from July 1, 2023.

    “In response to the comments and suggestions, it has been decided to make suitable changes. Firstly, it has been decided that there will be no change in the rate of TCS for all purposes under LRS and for overseas travel tour packages, regardless of the mode of payment, for amounts up to ₹7 lakh per individual per annum.

    “It has additionally been determined to present extra time for the implementation of the revised TCS charges and for inclusion of bank card funds in LRS,” the finance ministry mentioned.

    For the acquisition of an abroad tour programme package deal, the TCS shall proceed to use on the charge of 5 per cent for the primary ₹7 lakhs per particular person each year; the 20 per cent charge will solely apply for expenditure above this restrict, the ministry added.

    Last month, the federal government introduced adjustments to the FEMA Current Account Transaction Rules and included abroad bank card bills within the ambit of LRS (Liberalised Remittance Scheme), beneath which a resident can remit cash overseas as much as a most of $2.50 lakh each year. Beyond the edge, RBI approval could be required.

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    Updated: 28 Jun 2023, 11:19 PM IST

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  • Credit card jugaad: Sharing can max out rewards however has dangers

    How do bank card customers earn extra rewards that may get them free enterprise class flight tickets and stays at luxurious inns?

    Banks sometimes reward customers for all bank card transactions. And, extra the transactions, extra the rewards. But, how do folks make extra transactions if that’s past their means? Credit card nerds discovered a means out: Transact on behalf of different people as nicely.

    Credit card holders usually get a reduction on purchases that others don’t. Prospective patrons strategy these cardholders and route their transactions to get a reduction on purchases. On their half, the cardholders get extra rewards for spending on the cardboard.

    Initially, this jugaad began off with bank card nerds transacting on behalf of their family and friends however as bank card spending grew to become more and more rewarding, folks discovered extra methods to earn these rewards. Select Telegram channels started connecting cardholders with patrons looking out for reductions. Then, there are platforms like Yaper which allow folks on either side to find and transact with one another. Thus, cardholders may efficiently inflate their bank card spending and earn sufficient rewards that fulfil their aspirations.

    So, what can probably go incorrect? Well, as per the phrases and circumstances of banks, private bank cards are meant just for private use. Spends that breach the revenue restrict increase a crimson flag at banks, which may shut the account anytime. For occasion, an Axis Bank bank card consumer, who didn’t wish to disclose his identify, mentioned that he had spent ₹3-4 lakh at a petroleum pump that led to the financial institution cancelling his bank card.

     

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    The revenue tax division may pose one other set of troubles. It can monitor bank card spending by means of the Annual Information Statement (AIS) and lift scrutiny when the cardboard holder’s spending exceeds whole revenue.

    Some bank card lovers declare to have provide you with a workaround to this downside as nicely. They preserve a paper path to show that the spending was accomplished on behalf of different folks. Some bank card customers mentioned they do that by charging a small price for such a transaction and deal with it as fee revenue. That means, solely the fee is reported as revenue and the transaction quantity will get reimbursed. Note that this fee is taxable at slab charges and attracts 5% TDS (tax deducted at supply).

    Karan Batra, founder, charteredclub.com, mentioned he wouldn’t advocate this manner of incomes rewards as the method of proving that the transaction was accomplished on behalf of others would take months and create plenty of trouble. “The IT division will ask for varied paperwork similar to PAN particulars and written proof with a signature of the transaction. This may take months to resolve.”

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    Updated: 20 Jun 2023, 12:44 AM IST

  • The Maths behind the rise in bank card transactions in India

    Rise in bank card transactions in India: After the Unified Payments Interface (UPI), now bank card transactions have surpassed debit card utilization in India. Recent knowledge from the Reserve Bank of India confirmed a major rise in bank card transactions. Credit card use has overtaken debit card use in April of this 12 months, with 25 crore service provider card transactions in comparison with 22 crore in April of final 12 months. When in comparison with debit playing cards, bank card transactions had a complete worth of ₹1.33 lakh crore versus ₹53,000 crore. These embody purchases from e-commerce and bodily shops.

    The surge in bank card utilization in India signifies a notable transformation within the nation’s digital funds panorama. Historically dominated by debit card transactions, the shift in direction of bank cards is pushed by a number of elements, stated Ashish Aggarwal, Director, Acube Ventures. 

    Factors behind the rise in bank card transactions in India

    Firstly, the numerous improve in bank card transactions, each by way of quantity and worth, underscores the rising acceptance and adoption of this cost technique by customers at each on-line and offline retailers.

    While the rise of UPI has impacted debit card utilization, the outstanding development of the bank card ecosystem signifies its enduring attraction. “With bank card swipes experiencing a 20% surge over the previous 12 months, whereas debit card transactions have declined by 31%, it’s evident that customers are embracing the comfort and advantages related to bank cards,” said Ashish Aggarwal.

    Consumers use credit cards as a way to manage their finances.

    “The 48-day interest-free period enables consumers to make sure they have enough liquid cash to satisfy their daily needs by shifting the responsibility of spending to credit card issuers,” stated Vinit Khandare, CEO and Founder, MyFundBazaar

    Users of bank cards sometimes spend twice as a lot on-line as they do offline, indicating that they like the added safety that bank cards present whereas making purchases, he added.

    According to Ashish Aggarwal, the rise of co-branded bank cards in partnership with main banks and consumer-facing apps demonstrates the strategic strategy taken by Indian startups to diversify their income streams. These collaborations allow companies to leverage the recognition and person base of established manufacturers, whereas providing engaging incentives corresponding to reductions and rewards to bank card customers, thereby fostering buyer loyalty.

    However, it’s important for customers to train warning and accountable monetary conduct when utilizing bank cards. “The exponential improve in bank card excellent quantities, reaching ₹1.9 lakh crore in March 2023, highlights the potential dangers of overspending and accumulating high-interest debt,” added Aggarwal.

    Ultimately, the rising adoption of bank cards in India displays each the improved accessibility and altering attitudes of customers in direction of credit score. As the bank card ecosystem continues to broaden, it’s crucial for customers to strike a stability between having fun with the advantages of credit score and sustaining sound monetary habits to keep away from potential pitfalls related to extreme borrowing.

    India tops in digital funds, says MyGovInd

    Meanwhile, with 89.5 million digital transactions within the 12 months 2022, India has topped the listing of 5 nations in digital funds, in response to knowledge from MyGovIndia. As per the information, India within the 12 months 2022 accounted for 46 per cent of the worldwide real-time funds.

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    Updated: 14 Jun 2023, 12:57 PM IST

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  • Decoding zero overseas change markup on debit, financial institution playing cards

    Starting 1 July, there will be important changes in one of the best ways you spend all through abroad holidays, along with for meals, buying, commuting along with for leisure actions. International transactions on debit or financial institution playing cards exceeding ₹7 lakh will be matter to a 20% tax collected at provide (TCS), nonetheless loading a pay as you go overseas change card or shopping for native foreign exchange in India will entice TCS from the very first purchase.

    The regulation presents a dilemma for individuals whose abroad payments mustn’t extra prone to cross ₹7 lakh. They tend to utilize a debit or financial institution card to keep away from losing the 20% upfront worth levied on overseas change, nonetheless the draw again is that they have to shell out an extra 2.5-6% per transaction inside the kind of overseas change markup and transaction prices, which is decrease than the 1% inside the case of zero-cost overseas change taking part in playing cards..

    Nevertheless, there could also be some assist. Select fintech companies have partnered banks to produce zero overseas change markup debit taking part in playing cards, significantly decreasing the worth of worldwide spending. Presently, three such financial institution playing cards will be discovered that moreover waive markup prices, which usually range from 1.5% to a few.5%.

    Read the very good print

    Niyo Global card, Fi Visa Platinum debit card and Jupiter debit card have zero overseas change markup cost. While Niyo has tied up with Equitas Small Finance Bank and SBM Bank, Fi and Jupiter have a partnership with Federal Bank.

    In early 2023, the Reserve Bank of India had put restrictions on worldwide debit and financial institution playing cards issued by SBM Bank after discovering slip-ups in regulatory compliances. The clamp down hit Niyo Travel card prospects, talked about Swapnil Bhaskar, head, approach, Niyo, which is inside the strategy of inking a partnership with totally different banks. “Niyo Global prospects can take credit score rating and debit taking part in playing cards from various monetary establishment companions with zero mark- up overseas change costs,” he added.

    In the case of these debit cards, the issuing bank waives off its own markup fee but the markup charged by the payment network, though small, is still levied. “Rates offered by payment networks to these fintechs are already marked-up,” talked about Sudarshan Motwani, founder and CEO, BookMyforex. This means the conversion cost on these taking part in playing cards is barely bigger than mid-market commerce prices whatever the zero markup promise.

    Moreover, inside the case of Fi and Jupiter, overseas change cost simply is not waived for all debit card prospects (see graphic). Fi costs 2.5% overseas change mark-up on accounts that do not mandate minimal stability. Accounts that require ₹10,000 minimal stability are equipped zero overseas change markup as a lot as ₹50,000 month-to-month spends and folks with ₹50,000 minimal stability mandate get zero overseas change cost on all spends. Also, 2.5% and three.5% markup is charged on all transactions at first on Fi and Jupiter, respectively, nonetheless is reversed for eligible transactions inside 7-30 days.

    Zero-forex financial institution playing cards too have positive circumstances. For occasion, the IDFC First Wow financial institution card is issued solely in the direction of a tough and quick deposit (of ₹5,000) opened with the monetary establishment. “Credit prohibit is identical because the FD amount,” Sumanta Mandal, founder, TechnoFino, said.

    This could be a costly proposition for some as you have to lock-in money in an FD, which is akin to locking in 20% with the government through TCS. It can be argued that an FD earns an interest of 5-7%, unlike the TCS, the two are similar as they require you to pay the amount upfront.

    RBL Bank World Safari credit card could be a good option for those travelling overseas frequently in view of the zero forex fee and free medical insurance, despite not earning any rewards on international transactions.

    Axis burgundy private credit card is another option but it is available only for HNIs. “One needs burgundy private relationships with Axis bank to get the card, which requires ₹5 crore NRV (net relationship value in the form of salary, deposits, demat holdings etc),” talked about Mandal.

    Before taking your select, do uncover out about annual maintenance cost or transaction cost, to calculate how so much you may efficiently be saving (see graphic).

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    Updated: 06 Jun 2023, 10:50 PM IST

  • Meet India’s financial institution card nerds incomes free abroad journeys worth ₹25 lakh

    Yet one different is Ankush Dixit, 33. Over time, he has snagged 15 enterprise class flight tickets between Delhi and Dublin (Ireland) for his journeys with family almost totally with out spending a dime. “The flight tickets would have worth me spherical ₹25 lakh,” said the Gurgaon-based entrepreneur.

    Dixit and Ansari are not alone. There is a growing group of individuals, who sign up for several credit cards to amass enough reward points that would fund a major chunk of their travel budgets, including flights and hotel stays. Cashbacks and vouchers for buying gadgets, shopping on e-commerce sites, watching movies and dining out are some of the other perks that credit cards users can enjoy. These self-proclaimed credit card enthusiasts do one simple thing to achieve this–funding all their expenses through credit cards.

    “I use credit cards for all my regular expenses, from rent, groceries, to shopping and dining out, and each transaction earns me rewards. Even for small expenses, like rickshaws or paying vegetable vendors, I use credit cards,” said Ansari, a finance professor at OP Jindal University. “It’s a fantasy that it is worthwhile to spend extra to earn rewards on enjoying playing cards. Your day-to-day payments will do the job.”

    If you run a business, you could have sweeter deals, because along with your personal expenses, you can also fund business expenses using the plastic.

    Take the case of Murshidabad-based entrepreneur Sumanta Mandal, whose monthly spending through credit cards average ₹2 lakh. “My personal expenses are limited, but as a business owner, I use many business credit cards to cover my expenses, such as vendor payment, advertising costs, software subscription and hosting cost,” he added.

    However, the rewards components sport should not be as simple as it sounds thus far.

    The CC geeks

    Wringing out most benefits out of 1’s spending depends on various issues. For one, spending functionality would possibly play a key perform throughout the type of perks you possibly can presumably earn. Dixit’s 15 free enterprise class flight tickets worth ₹25 lakh received right here for over 10 lakh air-miles (equal to about 16 lakh reward components). It acquired accrued by spending about ₹80 lakh. “In the ultimate one yr, I put two major payments: my wedding ceremony ceremony and residential renovation. However, that’s an exception. On a imply, my annual spends on financial institution playing cards are ₹30-40 lakh,” he added. Dixit paid ₹3.5 lakh in taxes on these tickets out of his pocket.

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    Boopathy Arumugam, a businessman from Erode, Tamil Nadu, who has annual payments of over ₹1 crore, takes advantage of his extreme spending vitality by charging all his payments via financial institution playing cards to earn adequate reward components to fund his worldwide family holidays yearly. “For my journey to Greece and Austria, I booked enterprise class tickets for my family and lodge stays using my financial institution card components,” said Arumugam, 47. All the free perks combined were worth ₹14.75 lakh. “I spent 480,000 miles for four business class air tickets, and for hotels, I spent 190,000 points.”

    A majority of these financial institution card nerds have annual spends of over ₹8 lakh. But even those who do not spend as lots, have only a few strategies up their sleeves to fund luxurious holidays using rewards. Gurgaon-based Ankush Sethia is a dwelling proof. He makes use of Axis Magnus card that gives additional 25,000 components worth ₹5,000 on spending ₹1 lakh per thirty days. If he cannot spend ₹1 lakh for his frequent payments, Sethia buys vouchers and sells them to buddies at a discount to complete the milestone.

    During product sales on e-commerce platforms, he retailers for his family and buddies on e-commerce platforms using reductions obtainable on his card. It’s a win-win for every because the shoppers get a discount, and Sethia earns rewards on the purchases with out really spending his private money.

    The rewards depend on the type of funds on financial institution playing cards. For event, some cashback enjoying playing cards exclude widespread payments akin to utilities and groceries from its benefits, and might be not useful to any person if these are key spending areas. However, there are workarounds like looking for an Amazon Pay voucher or topping up the Paytm pockets to pay for these items. This method would possibly enchantment to costs of 0.5-2%, however when your card supplies you a 5% cashback, you may nonetheless pocket a sweet 4.5-3%.

    Note, that no two financial institution playing cards would offer the an identical price, and rewards programmes on a number of kinds of enjoying playing cards are difficult. For event, reward enjoying playing cards that allow transferring rewards to airmiles or lodge loyalty programmes would require you to guage the conversion costs on two ranges: One, reward earned on each purchase and two, conversion ratio of rewards to loyalty components.

    Sounds difficult? Well it presumably for a beginner. But the components nerds have mastered the paintings. In actuality, some have turned the keenness for financial institution playing cards into their occupation. Dixit and Setia are co-founders of a financial institution card comparability platform referred to as Multiply, whereas Mandal runs a portal for financial institution card solutions and personal finance suggestion referred to as TechnoFino.

    They contemplate in optimising spends to the hilt, which means that every one of them private on the very least 10 financial institution playing cards (see graphic). For event, Ansari makes use of Axis Airtel Credit Card merely to pay his and family’s phone funds. “All of us use an Airtel sim card and the one objective of this card is to recharge cell. Each recharge with this card supplies me 25% cashback.”

    Mandal has 51 active credit cards. “I strategically choose cards based on my needs and preferences. For instance, when I plan to purchase gadgets, I use a credit card that offers reward points redeemable for vouchers at Croma or any other electronic stores. Simultaneously, I am also accumulating air miles for future travels within the next five years,” he added.

    The 20% TCS on worldwide transactions accomplished with a financial institution card should not be a deterrent for these CC geeks as banks present 2X rewards on spends accomplished overseas. Dixit has already exhausted his ₹7 lakh prohibit, previous which TCS will kick in after 1 July nevertheless he is prepared for it. “To get 30% reward that my card offers, I’m high-quality with sustaining the extra 20% extra cash transfer. Also, if not credit score rating, I’ll use a debit card, which too attracts TCS so larger to utilize the financial institution playing cards which on the very least earns rewards,” he added.

    Mandal concurred. “As the ₹7 lakh limit is not applicable to forex cards and cash, credit cards are a better option.”

    Is it for everyone

    Most rewarding enjoying playing cards are premium merchandise and comprise extreme annual prices ranging from ₹10,000-1 lakh (see graphic). Chasing rewards moreover runs the hazard of overspending. A 2021 look at by Massachusetts Institute of Technology said financial institution playing cards encourage spending by exploiting reward networks. People Mint spoke with, said they don’t make extra purchases merely to snag rewards. Besides financial institution playing cards carry the perfect charges of curiosity if one defaults on bill funds by the due date. Hence, the rule of thumb is to guage your cash flows sooner than spending on financial institution playing cards, and settle all dues in full and on time. Besides, award tickets (flight tickets bought by airmiles) are restricted, so one should e ebook them prematurely. Ansari intends to finalise all bookings for his world tour by June. “Earning rewards should not be the strong half, the strong half is guaranteeing that you just simply get an excellent deal on dates you’re obtainable. I’ll assemble my itinerary, look at all the provides after which start transferring the rewards, as as quickly as transferred, I may be sure to those airways,” he said.

    Paying on time is even more crucial when you own multiple cards. Arumugam has missed due dates a few times when he was travelling overseas, but he was lucky as the banks waived off the fees in view of his timely payments history. Ansari has also missed a payment. “The bill amount was small so the interest did not pinch me, but my cibil came down from 790 to 750. It is not a massive downgrade as I have a long history of on-time payments. Even one default can bring down cibil scores by 80-90 points,” Ansari said.

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  • 20% tax on financial institution card spend all through overseas journey

    New Delhi: Starting 1 July, a 20% tax collected at provide (TCS) will most likely be levied on overseas financial institution card payments of Indians, barring such expenditure on education or medical treatment-related visits, which is able to most likely be matter to a lower price, the finance ministry clarified on amendments to the worldwide commerce administration tips issued earlier this week.

    The financial institution card issuer will purchase the tax when the bill is settled in rupees and could be adjusted in opposition to the cardholder’s tax obligation when paying taxes.

    While the salaried class may must attend till the time of submitting returns, professionals can use this credit score rating to set off their advance tax obligation met on a quarterly basis, consultants acknowledged.

    Experts moreover acknowledged the TCS requirement may end in a cash transfer concern for people travelling abroad. The inclusion of overseas use of financial institution playing cards all through the purview of the Reserve Bank of India’s liberalized remittance scheme, which attracts TCS, is environment friendly from 16 May. Currently, the TCS costs range from 0.5% to 5%.

    The set of clarifications launched out by the ministry covers a ramification of factors in regards to the enhanced TCS costs that will come into play from 1 July. According to the funds bulletins, overseas remittance on the acquisition of tour packages and ‘any other foreign remittances’ excluding education and effectively being spending coated beneath LRS will attraction to twenty% tax from 1 July, up from 5% now. Credit card use all through worldwide visits is now coated beneath LRS, which has an annual cap of $250,000, above which RBI permission is required. Debit card utilization abroad all through visits was coated beneath LRS even earlier.

    The ministry acknowledged that it had come to light that some individuals had exceeded the limit of worldwide remittance beneath the LRS as a result of exemption given to financial institution card utilization abroad all through worldwide journey.

    “The differential treatment between debit taking part in playing cards and financial institution playing cards needed to be eradicated inside the curiosity of uniformity…and for capturing full expenditures beneath LRS for prudent worldwide commerce administration and to forestall by-passing of LRS limits,” the ministry acknowledged. It moreover acknowledged that in FY23, LRS remittance was higher than $24 billion, of which overseas journey accounted for higher than half.

    The ministry’s clarification acknowledged that lower costs of TCS would apply when the worldwide go to is for education or medical treatment. That is, 0.5% TCS on education-related remittance if made out of loans and 5% if not out of loans, every matter to a threshold of ₹7 lakh.

    For TCS on remittance for journey and incidental payments related to education and medical treatment, the fees of TCS as related to remittances for education and medical treatment, respectively, shall apply. An in depth clarification will most likely be issued individually, the ministry acknowledged.

    There is one help obtainable to workers on overseas assignments—the payments all through such enterprise visits borne by the employer will most likely be dealt with outdoor LRS.

    Sudhir Kapadia, a companion for tax and regulatory firms at EY, acknowledged the latest switch to include financial institution card funds incurred abroad inside LRS limits would extra wean people away from the utilization of financial institution playing cards and uncover informal avenues to amass international trade.

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    Topics

  • Spending wise: How you could earn these free flights

    In this story, Mint unravels the maze of airline loyalty programmes and strategies to earn free flight tickets.

    Air miles are rewards that airways present whilst you fly with them. Some reward components have a monetary value, whereas others solely get you air miles.The ones with monetary value will be utilized as cash to make funds whereas reserving a flight ticket. For event, Spicejet has a scheme whereby one reward degree is worth 50 paise. Even the taxes on these tickets can be paid with these reward components.

    Some airways present air miles. They adjust to some extent system and tickets are priced in components for these reserving the flight by way of air miles. To ensure that, each airline has a definite miles incomes cost that ranges from 3-8%.

    View Full Image

    Mint

    “Vistara’s air miles are often known as CV components they normally don’t carry any cash value. The airline has fixed a positive number of CV components all through routes and airline class and it’s unrelated to the ticket value of the similar flight on a particular day. For event, a Delhi-Goa financial system class ticket is fixed at 6,000 CV components and the prices won’t be dynamic. Air miles solely cowl the underside fare and the taxes should paid individually,” said Sumanta Mandal, founder, TechnoFino, a digital platform that offers personal finance advice.

    How to earn your air miles

    There are three ways to earn air miles: sign up with the loyalty programme of an airline, use co-branded credit cards that allows converting reward points accumulated with the card company, or bank through different types of spends to partner airlines.

    Frequent flyer programmes: These do not require you to buy a credit card. You earn air miles each time you fly with a particular airline, using online banking to book tickets. “These are loyalty programmes that brands offer for transacting with them. The idea is that you spend frequently with a brand and get a reward in return for your loyalty,” said Kashif Ansari, assistant professor, Jindal School of Banking and Finance, O.P Jindal Global University. This chance is helpful for people who want to fly with select airways or those who do not want a financial institution card.

    Low-cost airways in India each don’t have frequent flyer programmes or solely present one which has low incomes along with redeeming prices which do not revenue prospects quite a bit.

    For event, among the many many low funds carriers, GoAir, which these days filed for insolvency, did not have a loyalty programme for its prospects. Indigo solely affords reward components by way of co-branded financial institution playing cards, whereas Spicejet’s reward prices are so low {{that a}} purchaser should take about 25 flights on a busy route like Delhi to Mumbai to earn enough components to earn one free flight (see graphic). Also, reward components in Spicejet’s loyalty programme, known as SpiceClub, embrace a one 12 months expiration. Besides, you’ll need to construct up a minimal 500 components initially to be even eligible to start using the components.

    Credit card components: In a reward financial institution card, the components that you just earn are collected with the cardboard issuing agency or monetary establishment. Some of these taking part in playing cards imply you possibly can swap these reward components to the confederate airways which then get reworked into air miles.

    “Typically the selection to remodel reward components into air miles is obtainable by premium and great premium financial institution playing cards. Currently, American Express, HDFC, Axis and Citibank are the one 4 avid gamers that offer reward financial institution playing cards with a swap chance,” said Ansari. “This is a faster way to accumulate air miles compared to, say, just enrolling in a loyalty programme.”

    This chance is helpful to extreme income earners who use premium financial institution playing cards repeatedly for buying, and spends on groceries, consuming, movement footage and lots of others. Rewards earned from gasoline, insurance coverage protection premiums, utilities are normally not allowed to be reworked into air miles. Reward cost on these taking part in playing cards is often extreme, going as a lot as 12%. However, the swap ratio on these taking part in playing cards is simply not on a regular basis 1:1 (see graphic), which means that in some situations it is doable you will lose rewards in conversion.

    Co-branded taking part in playing cards: Airlines confederate with banks or financial institution card companies to provide financial institution playing cards that offer rewards on spends inside the kind of air miles and free air tickets. For event, Indigo affords co-branded financial institution playing cards with Kotak monetary establishment beneath its 6E rewards programme whereby the rewards incomes cost is 3-6% and one air mile earned by way of them is identical as ₹1.

    Co-branded taking part in playing cards come bundled with additional bonuses, equal to free flight tickets or 5,000-20,000 reward components as changing into a member of bonus.

    “Co-branded journey taking part in playing cards may enable you accumulate accelerated reward components for individuals who are more likely to fly a particular airline or information by way of a particular platform,” said Adhil Shetty, CEO, BankBazaar.com.

    However, Ansari said the downside with co-branded cards is that you’re restricted to one particular airline, unlike with a rewards card.

    Redeeming your air miles

    In the case of airlines that value their reward points in rupees, the points can be used to buy tickets and services. Think of these points as cashback offers. The calculation of reward points is simple and transparent. For instance, for a Spicejet ticket priced at ₹5,000, you need 10,000 points (1 point = 50 paise).

    Airlines that offer award flights (flight tickets priced in reward points) are saddled with complicated terms. For one, limited seats are available under this option. “Vistara allocates only four economy and two business class seats to air miles in each flight and they are given on a first-come, first- serve basis. This means, one has to plan in advance to buy a ticket through air miles,” said Mandal. Second, airways may change their miles requirements for a trip spot over time, which means that it’d grow to be more durable to redeem your air miles for the rewards you want, he added.

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