Credit card companies focus on fee-based cards to earn profit

Over the past few months the banks have stopped offering free credit card. Due to economic downturn banks have decided to go slow on free cards and they are mainly focusing on fee-based cards.

Earlier credit card companies to hold large portion of market shares disbursed maximum number of cards. At that time companies did not pay much attention to the repayment ability of the customer therefore the number of defaulters increased. But now the companies are looking for higher spending on the credit cards and the repayment ability of the customer, which add up to the market growth.

As banks have got cautious of payment defaults it is the right decision to focus on fee-based cards as people are likely to spend more of what they have paid for.

According to the Reserve Bank of India report the issuing of cards decline by 17.2 per cent in July from a year ago whereas there has been drop of 11 per cent in the billed business over the same period.

Rajesh Saxena, CEO, American Express Banking Corp. India, which offers only fee-based cards pointed out, “The industry is more focused on fee-based cards as the customers spend more on them. In India, the average spending of our premium card members’ is tens of times the industry average”.

Under fee-based card series few banks have launched several premium segment cards this year. In February Citibank launched its Platinum Select card with an annual fee of Rs 4,000, while in May ICICI Bank launched ICICI Bank Singapore Airlines Visa Platinum card for which it is charging an annual fee of Rs 6,000.

Sandeep Bhalla, Business Manager, Cards, Citi India said, “As customers become more discerning in their choices, products that will carry a fee may well become an increasingly important feature of credit cards market”.

According to industry executives people who take premium cards use them all the time. On the other hand due to inactive and free cards the card industry in India has been badly affected, whereas the premium card segment is equivalent to the global standards.

“Card usage patterns of premium customers in India are very comparable to markets like Hong Kong, Singapore & US,” said Saxena.