NEWS & ADVICE : CREDIT CARDS
Banks play safe in terms of credit cards
By Ankit Sharma
Jan 5, 2010
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If you hold a credit card, make sure that you check your credit balance before swiping your card. Some banks have started reducing the cash limits.

While some card-holders are being informed of the reduction in credit limits, others were surprised as their payments did not go through.

"My credit limit was brought down to Rs 59,000 from Rs 80,000 while cash drawing facility was totally withdrawn by HSBC Bank," Ms Benna, an Andhra Pradesh Government employee, said.

She further claimed that she did not incite the bank for doing it since all her payments were on time. Other private lenders like ICICI bank and HDFC bank have also reduced the cash limits. ICICI recently announced that it would block all credit cards in case of a single default.

When contacted, an ICICI Bank official said: "ICICI Bank follows prudent credit line management practices and as a result assesses the credit limits of its customers on an on-going basis. This can result in an increase or a decrease of credit line or cash lines. Our efforts on consolidation of our portfolio are seeing good results."

An HDFC official said that there was no general reduction in the credit limit, adding that if it happened it might have been due to some changes in the customer profile. He said that the bank was bullish on the card segment.

Bankers say that there are mainly two reasons for reduction in limits. The first is that banks want to reduce exposure in unsecured portfolio and the other reason is lack of usage of card. A large unused limit is an issue for a bank since it has to be kept reserved with no earnings.

The reduction in limit points is alarming situation in credit card portfolio in general, say experts. "Most of the banks have reduced their card exposures significantly during the last 12 months. The current reduction of limits shows their intention to reduce unsecured credit exposure," an economist with SBI said.

 


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