Credit card fees exposed: Can you be charged before your card is even activated?

Can banks charge you a joining fee even before your credit card is activated? They cannot as the credit card account will not be created unless the card is activated. With complaints about banks charging a joining fee even before the card is activated, unsolicited cards being issued and the undue delay in closing the card account even after a formal request from the customer, here are a few things that you must know about credit card activation and related rules.

When is a credit card activated?

A credit card is activated only when the customer does an authentication confirming her/his willingness in owning the card through an OTP (one-time password) sent to her/his mobile number. The card will be considered activated even if you do not do any financial transaction. For instance, if you just set a PIN for the card, but do not use the card, it will be considered activated.

“In addition to financial transactions, any process initiated by the cardholder such as generation of statement, change of PIN, change in transaction controls, etc., shall be considered for treating a card as ‘used’,” RBI (Reserve Bank of India) said in its circular on credit cards.

However, any calls made to the customer care centre, for reasons other than those cited above, shall not be considered towards usage of a card, it said. “Customer-initiated processes indicating intent to use a credit card such as PIN generation, modification of transaction control, Interactive Voice Response, recorded call to the customer care centre and SMS may be considered as activation,” RBI said.

Is there a timeframe for activating the card?

Yes. If you do not activate your credit card for more than 30 days from the day it was issued, card issuers will seek an OTP-based consent. “If the card is not activated by the cardholder for more than 30 days from the date of issuance, card-issuers shall seek OTP based consent,” RBI said.

“If the cardholder does not provide consent, the card issuer has to close the credit card account within seven days of seeking consent,” it said. Any request to close the credit card should be processed within seven working days if there are no outstanding dues.

What should you do if you get an unsolicited card?

Unsolicited credit cards are a dime a dozen these days. But you have to be careful with such cards as any unintentional act will activate the card. You should never give a consent for activating the unsolicited card either through an OTP or other modes.

“If the customer receives an unsolicited card, she/he should refrain from activating or providing consent for activation of the card through OTP or any other means. If no consent is received for activating the card, the card-issuer is required to close the credit card account without any cost to the customer within seven working days from the date of seeking confirmation from the customer and shall also intimate the customer that the credit card account has been closed,” RBI said in its circular.

“Subsequent to receiving the intimation from the card-issuer that the card account has been closed, the customer shall destroy the card. Further, the customer may file a complaint with the card-issuer against the issuance of unsolicited card and escalate it to the RBI Ombudsman as per ‘Integrated Ombudsman Scheme’,” the apex bank said.

Will an unsolicited/unused card reflect on your credit score?

No. Unused cards will not have any impact on your credit score. But there have been cases of information on unused cards being reported to credit bureaus. The RBI has said that card issuers should pull out such information within a month.

“Credit card issuers can report information of a new credit card to credit bureaus only after the card is activated. Any information related to inactive credit cards reported to credit bureaus has to be withdrawn within 30 days from the date of sharing the details,” the apex bank said.

Is de-activation and closure the same?

No. The two are completely different. Deactivation and blocking of the card is a temporary measure done to shield the customer from any unauthorised usage due to loss/theft or other reasons. “De-activation/Blocking of a credit card temporarily curtails the ability of a cardholder to make any transaction in a credit card account while still maintaining the credit/account relationship with the card-issuer,” RBI said. “Closure of a credit card on the other hand amounts to termination of the account-based relationship between the cardholder and the card-issuer,” it said.

What happens if you want to close the card but have outstanding dues?

If you have unpaid dues on your credit card but still want to close it, there is a prescribed procedure. “In case payment towards dues is outstanding, the card-issuer shall provide details regarding such outstanding dues to the cardholder upon receipt of the closure request without waiting for completion of the billing cycle and accordingly advise her/him to make payment in order to complete the closure process,” RBI said.

“In such cases, the prescribed timeline of seven working days shall be calculated after excluding the number of days taken by the cardholder to clear the outstanding dues,” it said.

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.