IDFC First Bank is now offering an interest free credit card that allows cash withdrawal, claiming another industry first privilege by way of the lowest finance charges synchronized with customer ratings.
IDFC will levy finance charges at an annual rate of 9% on the card for the best rated customers and up to 36% for lower rated customers. Generally, the annual percentage rate (APR) for other banks range between 34% and 40%.
Customers can also benefit from its interest-free cash withdrawal facilities of up to 48 days at ATMs by paying a nominal fee of Rs. 250 per transaction. The interest levied by other major lenders is usually Rs. 500.
B Madhivanan, chief operating officer (COO) of IDFC First Bank, told that they are hoping to shake-up the industry with these first-of-its-kind initiatives and becoming reasonably strong and one of the most preferred credit cards as they go along. Nowadays, so much data is available about customers that they have the ability to offer the right price to the right person.
The bank also did a closed user group pilot with its 15,000 employees before the launch.
Currently, this credit card membership is open to the existing customers of IDFC First Bank and will be open to others by April 2021.
Madhivanan also said that the preference is going to be their existing customers. They have 1.5 million on the liability side & 4 million people having an asset relation with them. So, the bank would like to give cards to a percentage of these users. By the end of March 2021, they are aiming to onboard around 2 lakh credit card users. They want to play it steady rather than getting into aggressive posturing.
This Lifetime Free Credit Card has four variants:
The bank will also offer a standard reward point structure of 10X reward points for incremental spends of more than Rs. 20,000 in a billing cycle, 3X reward points on all spends, and 6X on all online spends. Reward points earned by the customer will have no cap or expiry.
The bank will also charge a lower forex mark-up fee of 1.5% to 3.5%, and it will not levy over-limit fees for the convenience of 10% over limit usage.
According to the central bank, currently (as of October 2020), the Indian market has around 59 million credit cards and 870 million debit cards. There are only 40 million unique credit card users, and the monthly spends on credit cards have recovered to Rs. 64,892 crores in October 2020 from the lockdown months from Rs. 21,017 crores in April 2020.