Earlier this year in April, The Central bank of India known as RBI (Reserve Bank of India) announced the new credit card rules. Some of them came into effect on 1st July. Three new rules are introduced now which will be effective from October 1, 2022. These rules will be applicable to all new credit card applications as well as existing credit cards.
In this blog, I will explain how these rules will affect credit/debit card users in India.
Effective From First July
Credit Card Tokenization
As per the mandate from RBI all credit and debit card data like card number, expiry date, CVV etc in online, point-of-sale, and in-app transactions will be replaced with unique tokens by September 30 this year. By substituting personal & sensitive info with the token, card holders can authenticate themselves without privacy issues. These tokens will protect users' against fraud and data breaches by third parties. The token can be used by the card issuer to identify the cardholder when making a purchase.
Tokenization offers many benefits:
- It’s more secure because it replaces your actual credit card number with an encrypted value called a token.
- Tokenization reduces data breaches because stolen information can no longer be used for fraudulent transactions (because it’s not real).
Tokenization also helps protect businesses from liability since they aren’t liable right now for unauthorized charges. If they have implemented strong authentication processes and encryption standards as required by PCI DSS security standards they are good but it's not enough.
This was one of the major changes happened in credit cards rule book among many other changes that went effective from 1st July.
Effective From First October
Credit Limit Approval
As of 1 October, you will be able to approve or reject credit limit increases on your own account. Credit card companies are required to send customers a notification before increasing the credit limit, but after 1st October, they will have to take explicit permission or approval from the customers regarding the same.
The change means that customers have more control over their finances and can decide whether or not they are ready to take on more debt than they can afford – which could help prevent bad financial decisions in the long run.
Interest Rates
Oftentimes, credit card agents lie and hide the terms of their credit cards from their customers. After the 1 year grace period, customers start facing unexpected charges and taxes every month/year which is immoral. All terms are conditions must be stated by the issuer while issuing credit/debit cards to avoid negative amortization or any surprises later on. RBI's circular also specifies that issuers cannot capitalize on unpaid charges, taxes and/or charging/compounding of interest on credit cards.
Card Issuers To Seek OTP For Activation
Your new credit card may look a little different than the one you're used to. From 1st October, all credit cards issuers will require OTP (one-time password) from the customer to activate unless they do it themselves within 30 days of issuing the card. This can be done over the call or via the bank's application.
Conclusion
The new credit card rules are a welcome move by the RBI. They will help customers to better manage their own finances and avoid unnecessary issues. As the country moves towards a digital economy, these new rules offer greater security for cardholders and add convenience for merchants by allowing them to process payments quickly and easily. Please make note of these changes to your card that need addressing before you can start using them after 1st October.