The increasing number of credit and debit cards in India clearly indicates the popularity of the product as a convenience product. Cards are simple to use and are widely accepted in offline and online business channels. But unfortunately, the rising popularity is also increasing the risks of fraud.
The RBI has introduced a set of new guidelines to safeguard consumers. While some of the new rules were announced earlier in July, others have been made effective in October 2022. The announcements mostly are for new credit card rules, while some are also applicable as debit card rules.
Let us begin with tokenisation, which is a component of both credit and debit card new rules.
Tokenisation
Effective October 1, the RBI has prescribed that credit and debit card transactions in all modes, online, point–of–sale or through an app, have to be carried out through a system of unique tokens. The card transactions environment provides an additional safety layer through tokenisation.
Tokenisation will mean no disclosure of the card details by the user while making a transaction online. The operating banks will issue a token instead for the transaction. The process will mask the identity details of the user, which will not be available to the merchant now. The process will work on an OTP-based authorisation. Merchant entities may save the last four-digit of the card number and the issuer’s name for transaction tracking if needed.
Credit card new rules: Effective October 1
Card Activation: A cardholder must activate the card through an OTP-based consent within 30 days of issuance. If not done, the issuer is supposed to cancel the card within seven days. However, this rule is applicable for new cards only and not for renewals/replacements.
Credit Limit Revision: The issuer can enhance a card’s credit limit only against the cardholder’s written consent. Similarly, prior communication is necessary for a reduction in the limit.
Capitalisation of Charges: The unpaid charges/levies cannot be capitalised, and no compounding (for interest calculation) is permitted for such outstanding charges. In addition, the issuer can do no negative amortisation of the due payment, including minimum payment of dues.
Credit Card new Rules: Announced in July 2022
User Consent: The card issuer will need the user’s written approval for upgrading an existing card. Similarly, issuing new cards will also require the customer’s consent in writing.
Card Closing: A credit card must be closed within seven days (by the issuer) of a written request from the cardholder, subject to clearing all card dues. For delays (in closing) beyond seven days, there will be a penalty on the issuer of Rs 500 / day.
Transparency of terms: New applicants should get the issuer to clarify details of various fees, credit/withdrawal limits, interest rates on overdue bills, modes of payments etc.
Change Note: Changes in credit terms should be intimated through a MITC to the cardholder at least one month in advance, should the customer wishes to close the card(because of the change). If customers are unwilling to continue under the changed terms and want to close the card, no penalties or charges can be levied by the issuer of the card.
EMI: The process of converting purchases to EMI payment option must be transparent with information on the principal, interest, discounts etc.
Billing –Cycle: A one-time option should be available to the users to modify the card’s billing cycle.
Rejection: In the case of turning down credit card applications, the issuer has to convey the reason to the applicant in writing.
Conclusion
The new credit and debit card rules aim to improve cards’ safety features. For example, tokenisation will enhance the safety feature of a card by several notches. However, a financial product like cards requires careful study to select the best-suited one for you. Therefore, checking with professional experts may help maximize your benefits and convenience; Ruloans, for example.
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