Some ‘Magic' in your life?

Juggling with your debit and credit cards? Trying to balance your finances while paying extraordinary interest rates on your outstanding bills hoping to reduce the outgo burden? Falling short of cash towards the end of the month?

If it a ‘Yes!' to all these questions, then it is time you had a look at the new ‘magic' card launched by IDBI Bank. Of course, there is no serious ‘magic' to the card, just the possibility of doing more with your salary account.

Two-in-one

The working of the card is fairly straight forward. It is a debit card that also comes with a credit facility. It is akin to an overdraft facility given by banks to account holders, but with some differences. So the moment you exhaust your salary for a given month, you can start using your debit card as a credit card. In other words, it is an extended salary overdraft product.

The credit limit is pegged at three times the monthly salary if you are public sector employee or a top rated private company and two times for other private company employees.

This card allows you to do all that can be normally done with a credit card – buy goods at retail outlets, paying bills or even doing shopping online. What's more, there are also loyalty points to be gained for purchases made. But the real sweetener is the fact that cash transactions can be made to the tune of Rs 50,000 (daily limit), including those at point of sales terminals. So you can just withdraw cash from the banks' or partner's ATM networks. And none of the cash withdrawals are subject to any charges, unlike the case of a normal credit card where users are charged a fee for such transactions. There is a surcharge only for usage at petrol pumps and railway stations. But where does the bank money from?

Easier interest terms

IDBI Bank charges an interest rate which is closer to personal loan rates prevailing in the market. Generally, they are much lower than the credit card interest rates.

The bank charges base rate plus four per cent for public sector employees and base rate plus five per cent for others.

Presently, this works out to a total interest rate of 14.75 per cent and 15.75 per cent for public sector and other private sector employees respectively. The bank does seem to like the certainty of the job stability in public sector enterprises in assigning differential interest rates!

The interest is payable for the number of days for which the credit facility has been availed and has to be serviced on a monthly basis. So, to avail the card, you must open a salary account with IDBI Bank and ask your branch to activate the card.

Credit limits are fixed only after a report is obtained from CIBIL on your credit-worthiness. The interest as well as the principal portions are recovered from your monthly salary subsequent to your availing the credit. The card also comes with insurance to protect against loss, theft or counterfeit issues.

As with all loans and overdrafts, planning of finances is an important factor before you decide to leverage. This magic card may be especially useful for those of you who use credit cards extensively and do not repay the full amount every month and instead get by paying just the minimum amount. This is because the interest rates are much lower compared to credit cards.

More importantly, there are no charges for cash withdrawals, which is big plus. Being linked to your savings account, it may create better discipline to manage your credit facility appropriately.

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