Buy now, pay later

Credit cards have become a convenient substitute to bulky wallets and wads of currency notes. But the tendency to overspend could push cardholders into the proverbial debt trap, writes ASHWIN RAJAGOPALAN.

WHEN KULASHEKAR Raghavan decided to spend Sunday afternoon browsing at one of the city's large bookstores in Adyar he never imagined he would run up a bill of Rs.2000. After all, he had come there to browse; not to make any purchases. The fact that he paid by credit card is no coincidence. Kulashekar does not like to be considered an impulsive shopper but on this Sunday afternoon he was not so sure. This was certainly not the first time that he made an unplanned purchase. Five years back this chartered accountant did not carry a credit card. That sure has changed today; his wallet is more plastic than leather! Three credit cards and a debit card, Kulashekar wondered as he made his way back home whether he needed all the books that he had just picked up and whether his convenient credit card was gradually transforming him into an impulsive shopper.

That's precisely the reason Bhuvana, a musician, has steered clear of credit cards. ``I tend to plan my expenses very carefully and am scared that a credit card might throw all these calculations out of gear. There have been many times when I have missed out on things I really liked but that's better than being rudely awakened by a fat credit card statement at the end of the month.''

Meera, a journalist, who just moved back to Chennai from Bangalore actually surrendered her credit card while she was in Bangalore.

``Bangalore was full of temptations - shoes, clothes, bags and more and I kept giving in. I came back to Chennai wiser and without a credit card. But after a few months, I found that life without a credit card meant frequent visits to ATMs and longer processing times for consumer durable loans. That prompted me to rediscover credit cards and fortunately for me Chennai's stores don't entice me as much as Bangalore.''

And its certainly not just adults who are responsible for all the impulsive shopping - take the case of Sujatha Panju, a housewife. Her seven-year-old son knows she carries a card and refuses to buy excuses from his mother like ``I don't have the money or let's buy this game another time.'' His response is quite straightforward - "Use your credit card."More and more Chennaiites are discovering the world of plastic. Possessing a credit card or two is no longer a status symbol. That was the case in the early Nineties when the credit card boom began almost along with the process of economic liberalisation. According to reports, the market in Chennai has grown by 25 per cent in the last two years alone. Increased competition among the various players has made it easier for the burgeoning middle class to own credit cards. Attractive offers and speedier processing of applications are among the factors that have fuelled this growth, not to mention the increasing convenience of possessing one. Offers range from waiver of annual fees, free ``add-on'' cards for family members, and the usual bait of free gifts. Credit card issuers no longer target those without cards but are going all out to reach existing credit card holders. The number of people receiving calls from persuasive "tele-marketing'' executives continues to increase. In most cases, the fact that the target consumer possesses a credit card does not deter these executives but only spurs them.

But as more and more establishments begin to welcome people who pay in plastic, the concern among most credit card holders is whether they can keep a tab on expenses. After all how many people collect payment receipts of their credit card transactions? That's not all. Many people are unaware of the implications of finance charges and also the recent service tax.

"I am aware of the newly-imposed tax on credit cards but am not aware of the exact implications on my credit card bill,'' says Rupayan, an Internet professional, who runs up credit card bills of about Rs.1000 every month.

But a world without a credit card can be full of inconveniences. You can use it to pay your telephone bill or to pick up cash in an emergency and it is an absolute blessing when you travel.

That still doesn't answer the question - to own or not to own. ``The solution is to use the card as a debit card and settle all your bills at the end of the month,'' says Sandhya Radhakrishnan, a marketing professional. ``Otherwise the finance charges keep mounting and you spend months just servicing debt.'' Another report says most credit card holders in Chennai are like Sandhya. They are conservative with the way they spend and use their card like a debit card. However, the concept of consumer credit in the shape of car loans or durable loans has taken root. Even 10 years back most people in Chennai would not admit to buying durables on credit. Cash-down payments were the norm then. Not any more. Outstanding credit with your finance company or credit card company is no longer taboo. Unfortunately, this has led to a tendency of overspending among some cardholders. And sometimes this overspending can push cardholders into the proverbial debt trap. In the words of a credit card holder - ``It sure was unpleasant having the card company hound me, especially the embarrassment at my workplace. Ducking calls and all that.'' Fortunately, that's more the exception than the rule but, when it does happen, it can be a rough ride for the errant cardholder.

Like Manojeet Bhujabal, a hotel executive puts it: ``It's all about fighting the little man in your head. I kept succumbing to temptation till my credit card bills hit the roof. I still use all my credit cards but use them a lot more prudently.'' Most credit card holders find themselves in the situations that Manojeet found himself. Whether it's paying that first instalment for a new home theatre system or choosing the more expensive restaurant or buying a new tie on an impulse when you are window shopping it sure is not easy to take a call when you have an object of desire in your hand and a credit card in your pocket.

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