The answer of the Question asked in Title is BANK Earns and YOU Pays(Extra to bank+ Extra 2% to vendor).
Once upon a time I was very fascinated with CC I think that was in early 90s, that time I was student and it was very difficult to get CC and it was THE status symbol.
In those days, one had to pay around 850-1200/- as annual fees to get one. So even card was expire people did not throw it rather they use to keep it and use to flash once on the payment counters(So called Status Symbol).Now days things have change I mean really there is lot of change if you compare early 90 and 2005+.
Change :-
You give your Visiting Card you get CC free delivered at your home address.You get thousands of calls on your cell phone "Sir Do you have CC.Etc. Big Surprise One of my Friend got the CC funny thing is He never applied for one.
# How CC works #
You apply for CC -> You Get one -> you purchase goods ex 1000/- for which you get credit of 45 days.You have billing cycle date say 25th of every month. So you purchase goods on 25th of Jan your bill will be generated on 25 of Feb and you have to pay your debts or the due amounts by 15th Feb( 45 days credit) so you are expected to pay 1000/- before 15th feb.
Above given is an ideal situation and If you follow above given CC cycle then YOU are not Good customer for the bank.
Good Customers for banks: - Customer who never pays on time, customer pays interest to banks, who take demand loan on CC(@ 10%-11% flat interest rate.). Customer who pays late payment charges. Customer who keep on purchasing and gets surprise on end of the months. People who never pays attention to the bank CC Statements.
Ok Enough. If you fall in good customer category, you end up paying too much to bank, which is beyond your expectation.
*How Charges are forced on customers.
Case 1:-*
apply for CC and supplementary card for spouse this card is linked with the salary account. On due date if the complete credit amount is not deposited to CC account then this amount is debited to your salary account. Ah. BUT not Complete amount:) only minimum Due amount is Debited to your salary account. So your card is still valid you have credit limit on rest due Amount BANK STARTS to charge interest usually 1.99% PER MONTH That comes 1.99 x12= 23.88% FLAT par annum so if you take 100/- @ end of year you will have to pay 123.88/- to bank.
*Case 2:-
late Charges your billing date is 25th of Jan and your Due date is 15th of Feb and if you your due amount say 100/- By cheque to back on 15th Ah. you have to pay late charges+ interest to back BECAUSE as per Bank Rules Full money should be Credited to CC account before or ON Due date.( this is igonre by most of the people). If you try to pay CASH to CC account on Due Date then Bank Take/Charges 100-150 Rs Extra( you do not have to pay extra charges to deposit cash in yoru Credit Card account! [ DOES RBI PERMITS THIS? ])
*Case 3:-
One Orders demand lone on CC Say 1000/- in this case bank creates another account for loan. On billing date you get 2 statements one for regular CC and another for loan account for the installment you have to pay Since you have taken loan on CC you pay whole amount to the CC Ah. (ideally that is the way it should be) . **in this case, bank does credit the entire amount In CC account BUT put penalty+ late Charges+ Interest on Loan Account. AND you get a latter+ Phone from recovery department With 100% Arrogance.( If you ask them why chargers are forced then they are not in position to answer they says Talk to Customer Care).
Some Suggestions:-
Use Credit card Just as Security in case needed not on Regular basis.
ALWAYS check Statement and DO ask Customer Care if you are not sure about any Transaction.
Do not take loan on CC.
Do NOT Use credit Card for internet Transactions(unless you are sure that WebSite is very Secure).
Keep Minimum Credit limit, ** this limits the liability.
*Do not give your credit card #no to anybody.
*Make sure Card is Swipe in front of you(even in hotel make sure you are there while card is being swipe).
Finally I just want to say do not fall for false/ very lucrative schemes which assures very very high returns more then NATIONALIZE BANK.( No One operates any Scheme Unless they are making profit).When you are paying someone make sure you get a worth for your Money BECAUSE it your HARD Earn Money.*