India's new credit card rules: How will they affect cardholders?
The Reserve Bank of India (RBI) announced new criteria for the issuance of credit and debit cards in April this year. Some of them came into force on July 1. The rest of them will come into effect on October 1. These include three new rules related to credit cards. Let's take a look at what these new regulations are.
Why does this story matter?
There is a central theme to the three new credit card rules that will come into effect on October 1 - the protection of the cardholder. Issuers are often criticized for practices that are predatory in nature. These activities often don't take into account what the customer wants. However, the new rules change that for good. They safeguard the rights of cardholders.
Credit card issuers must obtain OTP-based consent for card activation
Credit card issuers will need to obtain consent from cardholders from now on. If a cardholder has not activated their credit card for more than 30 days after issuance, issuers must obtain One Time Password (OTP)-based consent before activating the card. If the customer declines, the card issuer must close the account without any cost to the customer within seven working days.
Issuers must obtain express permission before increasing credit limit
Once again, the new rules have put emphasis on cardholders' consent. Credit card issuers will be required to seek the customer's express approval before increasing the credit limit. Earlier, cardholders simply received a message when their credit limit increased. From October 1, their express permission will be required before the issuer increases the sanctioned and advised credit limit.
Terms and conditions of payment must be stated
The new credit card rules will make it mandatory for the card issuer to specify the terms and conditions for payment, including minimum payment. This is to prevent negative amortization (an accounting technique used to lower the book value of a loan over a set period of time). Also, issuers cannot capitalize unpaid levies, charges/taxes for the purpose of charging or compounding interest.
