This is about your credit card. No, really.

There’s a fundamental truth about credit cards which surprises so many people that I have stopped assuming that it is common knowledge.

If you use your credit card to make a purchase of 100 rupees in a month. The bill will be total 100 and minimum due 20 bucks.

If you pay only 20 bucks which is the minimum, interest will still be charged on 100 bucks.

If you pay 50 bucks, interest will still be charged on 100 bucks.

If you pay 99, interest will still be charged on 100.

That’s one part of it.

How much interest?

The average interest rate is 3-4%. Per month.

Which means 36-48% per year.

Or so you think.

This is compounding interest, so it’s closer to 60%.

In about 18 months, your debt doubles. I repeat, it doubles, no matter what amount you pay, as long as it isn’t the complete bill.

This isn’t the case globally. What prompted this post however, is a recent judgment of India’s Supreme Court.

The Case

The National Consumer Disputes Redressal Commission in 2008 put a 30% annual cap of interest Credit Cards could charge. It put some other consumer friendly conditions also. Now, anyone who has an unfortunate familiarity with even an atom of the NCDRC’s functioning, knows that they rarely do any good. This was one of the instances.

The funny thing is, that no company honoured this judgment in practice. Everyone continued to do whatever they wanted to. Interest rates remained in the 36-48%(simple) and approx. 60% compounded territory.

The Supreme Court

India’s Supreme Court is the most powerful Supreme Court in the world. This isn’t rhetoric, it’s a fact. No other court has the kind of blank cheque that India’s constitution gives to the Supreme Court (See Article 141) This Shaktimaan of Supreme Court in this case said India’s courts don’t have the power to amend contracts and people are signing contracts soch samajh ke so let Credit Cards take as much money as they want.¹

This would be hilarious if it wasn’t tragic. India’s courts change contracts ALL THE TIME.

In 2020 India was ranked 164 on enforcing contracts in the Ease of doing business index published by the World Bank. Who is the Supreme Court kidding?

In the Supreme Court, the RBI has also said that credit card companies are doing nothing wrong and should be allowed to do whatever they want.

Meanwhile, in America:

In India, the only people whose debts are “capped” or made to vanish, are billionaires who get photos clicked with the powerful and have their loans “written off”.

For the rest of us, there is 9 PM news and whatsapp forwards about which temple has been found under which mosque. Enjoy.

1. https://www.livelaw.in/pdf_upload/hsbc-v-awaz-577851.pdf