Managing Credit Card Dues – How Technology Has Made It Easier

In recent years, India has seen a massive increase in the issuance of credit cards. According to Statista, India recorded over 2.9 billion credit card transactions valued at ₹14 trillion in FY23. At the same time, there’s a rapid increase in credit card payment defaults. The credit card default amount was valued at ₹4,072 crores in FY2022-23.

Financial institutions (FIs) issuing credit cards can benefit from charging interest on outstanding credit card amounts. However, non-payment (or delayed payments) of dues can damage the consumer’s credit rating – as well as impact the revenue flow of the issuing bank or financial institution.

Thankfully, digital technology is beginning to make a difference. Among the simplest techniques, FIs can automatically send payment reminders to credit card holders – or even help them set up automatic payments each month.

Everything to know about credit card dues

Here’s what credit card users must track when managing their outstanding dues and payments:

• Billing date: Every credit card has a billing cycle – typically a month. At the end of each billing cycle, FIs prepare the credit card statement on the billing date. This statement lists all the customer transactions (including payments) made during the billing cycle.
• Grace period: Once the credit card statement is generated each month, users receive a grace period (typically, around 15-20 days) to make the payment. During the grace period, FIs do not charge any interest provided consumers have paid their due amount.
• Minimum due amount: This represents the minimum amount consumers must pay towards their credit card dues before the deadline. On-time payment ensures that consumers are not charged for late payments. However, the balance amount will attract a considerable interest component.
• Total outstanding amount: This amount represents the full amount that consumers must pay against each month’s credit card statement. The total amount is a sum of the latest transactional amount, previous dues, and accrued interest (if any). By paying off the outstanding amount in full, consumers do not incur any interest on their next credit card bill.

 

The “traditional” mode of managing credit card payments

Before the advent of digital technology, credit card companies and users faced a lot of constraints in making their payments on time. Here are some of the “traditional” forms of managing credit card payments:

1. Physical statements: Before the age of emails, FIs had to send their credit card statements to the user’s physical location (or address). This was prone to delivery delays or non-availability of users at the mentioned address.
2. Limited payment options: Before the emergence of digital payment modes, credit card users could make their monthly payments by depositing cheques – or through the nearest ATM. This required physical effort and consumed a lot of time.Alternatively, users had to visit the nearest bank branch (or FI office) to make the payment. This was a time-consuming hassle for those holding multiple credit cards.
3. Lack of payment reminders: Payment reminders are now common with the use of email and mobile phones. Previously, FIs could not send payment reminders to customers to make timely payments. Individual consumers had to personally keep track of the payment due date to avoid late payment penalties.

Additionally, the traditional payment system was inflexible as banks or FIs could not process deposited cheques during festivals or bank holidays – or outside the local branch. Due to these hassles, most consumers limited the usage of their credit cards. Thus, issuing banks and FIs were restricted for credit card sales and promotions.

How technology is transforming credit card payments

Digital technology has transformed how credit card users can make their monthly payments. This also ensures that banks and FIs receive their payments on time. Here are some of the technological innovations that are streamlining credit card payments:

• Mobile phones

Mobile phones are among the preferred modes of making credit card payments in India. Through mobile apps, users can now view their latest credit card statement and the due date. Additionally, mobile phone users now have the convenience of making their payments using a variety of options including:

• Net banking
  • UPI
  • Digital wallets

• Instant notifications

Through direct messaging and email, credit card companies can now automatically send payment reminders and acknowledgments (for received payments).

Consumers no longer have to “remember” to pay their bills – or track their due dates. Additionally, they can configure automatic payments to facilitate automatic deduction of the outstanding amount from their bank account.

• Security

With the growing volume of credit card fraud in India, companies are switching to digital security measures like tokenization, biometric authorization, and encryption. This improves customer trust and encourages them to widen the use of their credit cards.

Among the latest industry trends, consumers are opting for invisible payments instead of the physical swiping of plastic cards.

• Advanced analytics

By analyzing credit card data, companies now have a deeper understanding of their customer behavior and spending habits. This enables them to target the right customer with the right product.

Additionally, credit card users can also analyze their usage patterns and expenses, thus enabling them to manage their finances efficiently.

Conclusion

Globally, the credit card industry is undergoing digital transformation at an accelerated pace. Banks and FIs are adopting technology to avoid financial fraud and pursue their next phase of transformation.

At Verinite, we are facilitating our customers with new forms of payment solutions and innovations. With our expertise in payments technology, financial institutions and other players in this domain are gaining a distinct business advantage over their peers.

Do you want to know more about our financial products and solutions? Get in touch now.