IDFC First Bank enters credit card business

Generally, the annual percentage rate or the APR for other banks ranges from 34-40%. Customers can also use interest-free cash withdrawal facilities at ATMs of up to 48 days

MUMBAI: A credit card allowing cash withdrawal – and interest free – sounds too good to be true. But IDFC First Bank is offering one, claiming another industry first perquisite by way of the lowest finance charges that would be synchronized with customer ratings.

The lender is set to levy finance charges at an annual rate of 9% for the best rated customer, climbing up to 36% for lower rated customers.

Generally, the annual percentage rate or the APR for other banks ranges from 34-40%. Customers can also use interest-free cash withdrawal facilities at ATMs of up to 48 days. They will have to pay a nominal fee of Rs 250 per transaction against Rs 500 charged and interest charges levied by other major lenders.


“We are hoping to shake-up the industry with these disruptive first-of-its-kind initiatives; we hope with this we will be a reasonably strong and one of the most preferred cards as we go along,” B Madhivanan, chief operating officer, IDFC First Bank, told ET. “Today, so much data is available on customers that we have the ability to give the right price to the right guy.”

The private lender did a closed user group pilot with 15,000 of its employees before the launch.

Currently, the credit card membership is only open to existing IDFC First Bank customers and will be thrown open to others from April 2021.
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“Our preference is going to be existing customers, we have 1.5 million on the liability side and 4 million people who have an asset relation with us. So, we would like to give cards to a percentage of these users,” said Madhivanan. “By the end of this March, we aim to onboard around 2 lakh credit card users. We want to play it steady rather than getting into aggressive posturing.”

The lifetime-free credit card includes fourvariants, FIRST Millennia for digitally savvy millennials, FIRST Classic aimed at value seekers, FIRST Select for the aspirational and FIRST Wealth for those who prefer premium benefits.

The bank will offer a standard reward point structure with 10X reward points for incremental spends of over Rs. 20,000 in a billing cycle and 3X reward points on all spends, 6X on all online spends.

There will be no cap or expiry on the reward points earned by the customer. The bank is also offering dynamic interest rates starting at 9% based on the customer’s credit assessment.
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The bank will also charge a much lower forex mark-up fee between 1.5% and 3.5% and will not levy
over-limit fees for convenience of 10% over limit usage.

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“We are seeing a smart bounce-back on our portfolios. In fact, credit cards have bounced back much faster; we are not in a hurry, we don’t want to compromise on credit quality,” said Madhivanan.

Currently, the market has around 59 million credit cards (as of Oct 2020) according to the central bank, compared with 870 million debit cards.

There are only 40 million unique credit card users. The monthly spends on credit cards have recovered to Rs. 64,892 crore in Oct 2020 from the lockdown months from Rs 21,017 crore in April 2020.
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