Last Updated on August 30, 2021 at 8:53 am
IDFC Bank Credit Card is a new offering from IDFC Bank. Just like the pricing of its Savings Account, i.e. 7% for all balances less than INR 1 Crore, it appears IDFC Bank is planning to disrupt the unsecured lending space in India as well – through its business model for credit cards what you need to know about this credit card offer.
About the author: Arjun is a financial services professional, keen about personal finance and special enthusiasm about Credit Cards and the points and rewards associated with the instrument. Also by the same author: HDFC Infinia Credit Card Review and American Express Platinum Charge Card Review
Having launched its Banking services in 2015, IDFC announced the launch of its credit card proposition earlier this year. By the looks of it, the rollout is going to be a phased affair. Cards variants in descending order of exclusivity are Wealth, Select, Classic and Millenia with exclusiveness likely defined in terms of bank profitability, income and age.
IDFC Bank has brought out the Big guns to help acquisitions in the crowded mass-market for Credit Cards in India. There are also some spend linked incentives like 10x rewards for spends above 20k and 6x for online spends. The main themes here, which are also the most competitive in the market, include –
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Pocket-friendly fees: It’s a Lifetime Free credit card with no over-limit fees and late payment fees capped at INR 1000.
Low Cash Advance Fees – Cash Advance fee is INR 250, even for international cash advances with no interest charges on cash advances if the outstanding statement balance is paid in full. The latter is a first in segment feature – almost like an interest-free payday loan. The fine print on the cash withdrawal limit will be the key here. Most banks dissuade cash withdrawals from credit card products, with no interest-free period, since banks have to incur funding charges from Day 1. The feature is inherently risky and costly. It remains to be seen how IDFC Bank manages it as overnight rates inch up in a rising interest rate environment.
Low Revolve APR – The advertised lower end goes as low as 9%. It goes without saying that this one is a headline feature for IDFC credit cards. Unlike its blanket 7% offering for savings accounts, the 9% rate is expected to be for the lucky few with excellent credit history. A 200 bps spread between the guaranteed savings rate and an unsecured lending instrument does stretch the math. Given that the cards’ public launch is still a few months away, the bank will need to keep providing 7% rate on savings for the sake of the optics. In such a scenario, the real picture will gradually emerge as news gets around about actual APR’s being offered to existing bank customers. If many cardholders do indeed get APR’s at the lower end of the spectrum, a credit revolution could take off if other banks follow suit. The “EMI option” could become mainstream for regular spends.
On the face of it, Rewards are mostly run of the mill, with a good deal of uniformity across all variants for regular day to day spending. It perhaps emphasises the focus on the mass market. Spends above 20k will offer 2.5% returns on spending, which is attractive for the Millennia and Select variants.
IDFC Bank credit cards are currently getting issued to the existing customer base with applications from non-customers expected to be opened up from the next financial year. This is the pre-launch waitlist for IDFC FIRST Bank Credit Cards sign up form.
While the business model appears to be targeting revenue generation from revolving balances, it remains to be seen how many people qualify for the lower end of the revolving interest rates as the bank draws up the initial qualification criteria on its customer base. All this is happening in a post-pandemic era when the growth rate of the economy is still negative. It won’t surprise if the public rollout of the higher end Select and Wealth variants are very gradual and long drawn out affairs.
With one of the credit card market leaders – HDFC Bank currently barred from issuing new credit cards, IDFC Bank had the field open to launch a class-leading premium proposition. This would enable them to get a sizable market share of the super-premium cards in the Indian market on the widely used Visa/ Mastercard platforms. The current rewards proposition of its elite variants makes it clear that it is unlikely to attract defectors from the competition’s premium card base.
Time will tell whether that was a missed opportunity. In any case, balancing a disruptive mass-market proposition and a very premium high-end proposition, was always going to be challenging.
References
Most important terms and conditions of the cards
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