Taking heed from the recent economic meltdown, the credit card companies that earlier fought for higher market shares in terms of number of cards disbursed and offered free credit cards are now concentrating on fee-based cards.
The companies now plan to spend higher on cards and repayment ability of its customers. This helps in banks becoming cautious of defaults.
Introducing more fee-based credit cards is more logical because people tend to use more than what they pay for them. Rajesh Saxena, CEO, American Express Banking Corp. India, said "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." American Express India only offers fee-based cards. He also said that the card usage pattern of premium Indians is similar to that of United States, Hong Kong and Singapore.
Several premium segment cards were launched this year. While Citibank launched its Platinum Select card in February that charges an annual fee of Rs 4,000, ICICI Bank launched ICICI Bank Singapore Airlines Visa Platinum card in May 2009 which charges an annual fee of Rs 6,000. Industry executives say that these premium segment cards are used all the time.
While the inactive and free cards are letting the industry down in India, the premium card segment is at par with global standards. According to RBI, number of cards in force dropped 17.2 percent in July while the billed business slowed down by 11 percent.
Taking lessons from the increasing number of credit card defaults ICICI bank has come out with a development to block all its credit cards in case of a single default. ICICI has informed its customers that if a person is carrying more than one ICICI credit card, the bank will block all the credit cards in case of default on one and withdraw all the facilities offered under the same.