It has come to light that their are several Point of Sale [POS]Terminals in India which are participating in Organized Credit Card malpractices.
For instance, this gentleman in Delhi provides cash when you swipe Credit Card at his POS terminal, but at a massive 4% of the total transaction as his fees in addition to bank charges. Lets assume the customer borrows Rs 100,000 or Rs 96,000 after charges from the Vendor with POS. Banks immediately call from a recorded line to the customer inquiring about the transaction. The vendor with the POS gets credit within a day so he is ready to go for the next day withdrawing cash from his account.
So why are people involved in such practices ? The answer is plain and simple – for cash advances on your credit card, banks charge interests as high as 34.8%. While for cash purchases the interest is somewhere between 12% to 20%, depending on your credit history. So if we assume your APR on purchases is 15% you would end up with 19% APR in the above said shady transaction.
This is a very well organized racket which will go bust very soon. We request the concerned authorities in the Indian Financial System to setup a watchdog and crackdown on such malpractices. They should also lobby with the RBI and Banks to make interest rates more affordable for customers.