Fintech start-ups such as Slice and Uni are tapping into the underserved young customer base, which often lacks a credit history, by offering credit card challengers. Offering attractive features, these new challenger credit cards are distinguished by greater flexibility and simplicity of reimbursement. But customers would do well to understand the risks associated with these cards. Here’s everything you need to know.

How to get a card

Slice and Uni source card customers while the funding component and card issuance rights are generally provided by other financial institutions. These cards work on payment networks operated by Visa.

One can join the bandwagon of credit card challengers in a few simple steps via the respective mobile apps. We tried the Slice and Uni offerings and it took us 5-10 minutes to complete the process (as a salaried customer). According to the platform, you are asked for details such as email id, date of birth, PAN, Aadhaar, employment status, father’s name, etc., and submit a mandatory selfie. The apps also ask for certain phone permissions.

Your existing credit ratings and reports (CIBIL/CRIF) are accessible through the platforms. You also need to provide the address you would like the physical card delivered to (within 5-7 days). If the request is successfully processed, the customer is notified via the app as well as by email. The virtual card will be ready instantly. A sanction letter and a loan agreement are also sent by email and mention the general conditions such as the amount of the sanction / the credit limit, the duration of the line of credit (months), the fees and commissions, the overdue interest rate, etc. You can also find cost information in the respective apps.

Gifts galore

A traditional credit card is a physical or virtual payment instrument containing a means of identification, issued with a pre-approved revolving credit limit. It can be used to purchase goods and services or withdraw cash advances, subject to prescribed conditions. But these cards come with a wide range of fees and are not freely distributed. Convenience and speed of issuance are among the reasons credit card challengers have struck a chord with new-age customers. But, freebies remain the biggest draw.

There are no membership fees or annual fees (the typical credit card brings these fees back from the 2nd year). In addition, these new cards allow you to pay your monthly expenses in 3 instalments over 3 months at no additional cost. For example, if you spend ₹45,000 today, only 1/3 of that i.e. ₹15,000 will be charged this month. This is a longer repayment window compared to the grace period of traditional credit cards; Also, if you split repayments with traditional credit cards, you have to pay interest. Uni customers can choose which transactions they want to pay in full and spread the rest over three months.

The fuel surcharge (up to a certain limit) is completely removed. Additionally, credit card challengers offer 1-2% cash back on transactions or refunds. Also, these cards have special offers with many e-commerce partners and using cards for such transactions can get you discounts.

Fees, charges

Late penalties are one of the main costs. This is applicable when there is a delay in repayments beyond the due date. Slice takes a daily fee per slab (up to ₹150) based on the principal due or 30% of the outstanding amount, whichever is lower (max: ₹3,000). In the case of Uni, the late fee brackets range from ₹30 to ₹3,000 per billing cycle and are based on the amount billed. For any payment less than the amount charged in the event of a Uni pay-tard refund, the borrower may be charged a deferral fee of up to 6% on the remaining unpaid amounts.

Although there is no interest on timely bill payments and no charges for early bill payments, there is an interest element of 36% per annum if you split your bill into more than 3 payments at Slice. For fee-free EMI vouchers (merchant gift vouchers from Flipkart, Amazon, Myntra, etc.) with a longer duration, 24% interest per annum is charged.

Slice allows you to transfer part of your credit limit to a Paytm/bank account for a fee (₹10 to ₹1,800) depending on the order amount. However, interest charges are applicable on the total amount of the order at 42% per year.

Risks

Some Slice and Uni card users have taken to social media platforms to highlight their grievances. Their complaints are usually related to issues with refunds, recovery methods, lack of knowledge of the card’s terms and conditions, personal data issues, and more.

While credit card challengers allow you to split your monthly bills into three installments at no cost, managing easy long-term debt requires the utmost discipline. Late fees and charges are higher compared to traditional credit cards.

If you already have a credit card, these new offers do not bring you anything special. For new customers who may not be eligible for traditional credit cards, these cards are a stepping stone. Use them only for short-term liquidity crises.

Although the BNPL trend is catching up, consumers may be trapped due to overspending and impulse buying, as they will only have the option to pay a third of the amount at any given time.

Published on

May 07, 2022