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COVID-19: How To Deal With Financial Crisis

New-to-bank consumers and working professionals are dependent on credit cards that provide a line of credit to make purchases, balance transfers and/or cash advances.

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The common man often looks back on his hard-earned savings (which includes a huge investment of time and financial discipline for several years) in times of financial crisis. One cannot ignore the fact that Covid-19 impacted the monthly budget of bread earners to a great extent. It introduced professionals to a uniform work culture (i.e. 'Remote working’ and ‘freelancing’ culture) and encouraged businesses to rethink on innovative digital strategies across the globe. However, it also resulted in shooting up of day-to-day expenses, job loss, medical emergencies amidst the reduction in salaries of bread earners, thus impacting the savings and credit score.  

Research reports state that almost 57.4 million credit cards were in operation in April 2020, which further indicates financial dependency on digital lending. Experts predict that the digital lending space will turn into a $1trillion opportunity in the next five years owing to financial services platforms that cater to under banked individuals and small and medium-sized enterprises. While digital lending seems to have a bright future, one cannot ignore the fact that new-to-bank consumers and bankers with a poor bureau score are denied credit cards quite often. 

New-to-bank consumers and working professionals are dependent on credit cards that provide a line of credit to make purchases, balance transfers and/or cash advances. Even though credit card owners have been well-informed that he/she will need to make at least the minimum payment every month, the hidden fees are not revealed beforehand. In such situation, the  mobile app-based/ digital  lending platform-based model introduced by fin-tech credit line firms could work as a reliable financial dependency tool to ease out the financial stress and overcome the challenge of rejections done for young working professionals, helping them meet their lifestyle needs without having to borrow money from friends or relatives.

Credit card companies in India do not offer the ability to temporary block the card and permanently block the card in case of complaints. Replacement cards typically take a few weeks to arrive and almost always carry a fee. In contrast to this, Credit Line Card holders can block or unblock the card without paying any fee or calling customer support. 

Credit Line Cards allow salaried and self-employed individuals avail instant personal loan(s) in easy EMIs and with known chargeable interest upfront. It allows them financial freedom and access to personal loans upto Rs 5 lakh and helps them to load funds within 90 seconds. Interestingly, the Visa-powered cards used to withdraw cash from any ATM and swiped at any POS terminal, to make instant online purchases at merchant sites or make instant transfers to Paytm wallet. Easy online application, quick processing time, and immediate transfer of funds makes credit line cards a wise choice. Additionally, there are no annual fees, commitment fees or  foreclosure fees that Credit Line Card users need to pay. 

In fact, individuals who opt for Credit Line Cards also have the freedom to set auto debit instructions such as payments can be deducted from their account automatically without them mistakenly missing any payment free of charge. In case the payment gets missed, absence of penalty charges and late fee, is a sigh of relief to credit line card users. 

When can one avail a credit line card?

Indian citizens, above the age of 18, with a proof of current employment earning a monthly income of Rs 15,000 or above, a bank account and a valid identity and address proof can easily opt for a credit line card. In case of self-employed individuals, last two years’ IT returns are required. 

Credit Line Cards - The Saviour of all times

Salaried and self-employed individuals (with a minimum  monthly income of  INR 15,000) who opt for a credit line card are able to withdraw the emergency cash from any ATM, swipe at any PoS terminal or make purchases at any online merchant site. Traditional lenders keep focusing only on the credit score. However, digital credit line card issuers also take into account the traditional and other representative data points to determine a borrower’s circumstance. Using proprietary risk models, the verification process while issuing a credit line card determines the borrowers’ ability and willingness to pay.

As compared to a credit card, users of credit line cards can repay the amount by benefiting from the extended moratorium period on EMIs. Credit Line Card users can easily re-price the loan as they build a repayment history. In contrast, credit cards interest rates are fixed for each drawdown.

For first-time borrowers, the Credit Line is approved within 15 seconds and funds get transferred in 4 hours. For repeat borrowers, funds can be transferred in less than 90 seconds. As one continues paying the respective EMIs, the principal amount gets added back to the Line of Credit.

Credit line Cards: A win-win for salaried and self-employed professionals 

As one follows the financial discipline and continues paying EMIs, the principal amount gets added back to the Line of Credit, thereby empowering him/her to load and use more money. In the rapid development of smartphone users, digital access and a shift towards consumerism have helped fuel the growth of Digital lending.

Instant personal loans or credit lines offered to individuals ranging from Rs. 1000 to Rs. 5,00,000 with repayment period between 3 months to 36 months. The additional advantage that salaried and self-employed professionals have is that zero interest is charged on unused credit amounts. 

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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financial crisis

Tushar Aggarwal

The author is Founder, StashFin

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