Today, holding a credit card is a necessity. Whether salaried or self-employed, earning individuals adorn their wallets with multiple credit cards. Customers are now well-versed in the usage and benefits and are looking for suitable offers besides the regular benefits that are standard to most. Banks also offer special privileges to entice customers, such as free access to Domestic and International lounges provided by ICICI Bank Sapphiro Credit Card.

When marketing a Credit Card, a sales pitch often used is that a customer can enjoy the card’s benefits free for a lifetime. This means that no Joining, Annual, or Renewal fees are to be paid, and the customer is only charged for the actual usage or spending.

What are the economics behind The Lifetime Free Credit Card Offer? Is it a reality or a sales gimmick? Let us examine the rationale.

Joining Fees: Most Credit Cards have a joining or issuing fee, which is not paid in advance but added to the monthly statement. The joining fee varies from lender to lender and depends on the privileges offered.

For example, the joining fee for the ICICI Bank Coral Credit is ₹500/-+ GST, whereas the joining fee for an ICICI Bank Rubyx Credit Card is ₹3000/-+GST. The cost difference is justified by the exclusive features of the ICICI Bank Rubyx Credit Card, such as a higher spending limit and free access to International and Domestic lounges.

When are the Joining Fees Waived?

The joining fee is waived for customers as a special offer to boost sales for a limited period. Customers who are ICICI Bank account holders and applicants with a high CIBIL Score are eligible for the offer. Some Banks also reverse the joining fee after three months if the customer uses the card and spends the prescribed amount.

High-income customers applying for an elite range of Credit Cards are compensated with welcome vouchers that can be used for travel and shopping. The value of the vouchers is usually more than the joining fee charge. For example, customers who are issued the ICICI Bank Rubyx Credit Card are given welcome vouchers worth ₹ 5000/- whereas the joining fee applicable is ₹3000/-.

Banks also waive the joining fee for customers with solid relationships with the Bank, such as corporate or savings accounts. Check closely for the cash bank, free coupon offers, and minimum spending terms to ensure you recover the joining fee.

Annual Fees: A credit card’s yearly fees are charged at the end of each calendar year since the card activation. When issuing a Credit Card, the bank expects the customer to use it regularly to fill fuel, make online payments for shopping, dine at restaurants, book air tickets, and other personal requirements.

Banks will profit from the card issued only with customer usage if a customer does not use it actively or uses it minimally, the applicant is liable to pay the annual fees. The annual fee charged depends upon the type of card. The yearly fee charges can range from ₹ 500/- as charged for the ICICI Bank Coral Credit Card to ₹12000/- for the high-value Emeralde Credit Card.

Conditions for Annual Fee Waiver: The Bank assesses the customer’s annual Credit Card usage. The annual fee is waived if the customer has used the Credit Card extensively and above the minimum spend as specified.

Banks make an exception and waive the annual fee for customers who do not meet the spending benchmark if they have been swiping their Credit Cards regularly and paying their monthly dues on time.

ICICI Bank account holders who maintain a sufficient balance in the account or have fixed deposit accounts are also eligible for the annual fee waiver.

Renewal Fee: When issued by a Bank, a Credit Card includes an issue date and an expiry date. The expiry date is usually three to four years from the issue date. A renewal fee is typically similar to an annual fee.  The renewal fee can also be redeemed against the points earned on behalf of the previous usage.

Customers can request a renewal fee waiver for further card patronage. The bank will check the customers’ CIBIL records and usage, considering the various credit card options available. Banks typically want to retain customers who have enabled profitability with regular usage and payments. At the same time, customers with delayed or pending payments will be asked to clear the same to enjoy the card’s privileges further.

A Word of Caution: The charges for joining, or as yearly or renewal fees reflected in the statement, must be paid as per the monthly cycle. The payment must be honoured even if the applicant does not use the card. The amount will attract interest if not paid according to the applicable finance charges. There have been instances when customers who have been issued a card have refused to pay charges, which have multiplied. As a result, the customer’s CIBIL Score can be affected, and the account will show unpaid dues.

In Conclusion

The ‘Lifetime free Credit Card’ cannot be taken at face value; it always has strings attached.

Banks offer free Credit Cards to customers as an added value to a relationship, to further their marketing interest, as a token of appreciation to customers with a long-standing account, or to offer further financial investments. The continuity of the offer will depend on the treatment of the card and its usage. If, for any reason, the Bank feels the offer is not justified, the free tag can be replaced by the charges applicable.

A Credit Card, if used and managed well, is convenient and financially favourable. Use your card extensively to enjoy the benefits of free shopping vouchers, airline miles, discounts at leading hotels and restaurants, and even cash-back offers, provided the payments are made on time, and who knows, you may enjoy the privileges of your Credit Card free of any charge.

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