Would you buy a fee-based card if it charges a low interest rate?

The market is full of credit card offers that charge no annual or joining fee. Should you still consider one of Yes Bank’s clutch of seven fee-based credit cards?

Abhijit Bhatlekar/Mint
Abhijit Bhatlekar/Mint

Yes Bank Ltd, India’s sixth largest private sector bank in terms of market capitalisation, recently entered the credit card segment with the combined launch of seven credit cards to boost its retail banking business. This is the first credit card offering of the bank. The cards come in two categories: the Yes Prosperity range, offering five cards, and the Yes First range with two cards. Yes First is aimed at high net worth customers.

Who can get it

The minimum income requirement for a Yes Prosperity card is gross annual income of Rs5.5 lakh, and Rs18 lakh or more for Yes First cards. Apart from this, one has to live in one of the 10 cities chosen by the bank, to apply for these cards.

Fees and interest

The first-year membership and renewal fees range from Rs250 to Rs10,000. While some cards have the facility of membership fees reversal if the cardholder spends a certain amount, this facility is not available on the two Yes First cards where the fees stand at Rs2,500 and Rs10,000. This also means that there is no lifetime free offer on these cards.

A search on BankBaazar.com showed that there are at least 10 cards that have no fee, at least for the first year. Adhil Shetty, chief executive officer, BankBazaar.com said that after card-specific benefits such as discounts, cash-backs or miles, joining or annual fee is what that customers consider before taking a card. “I would put interest rate at No.3 in a customer's decision-making criterion. Among the two other factors, the most common is benefits. Customers then look at the annual or joining fee. They either don’t want a joining fee or a low one. Then comes interest rate,” said Shetty.

The Yes First cards carry an interest rate of 1.20% per month or 14.40% per annum on revolving credit for card owners who have a salary or savings account with the bank. For others, the rate is higher: 1.99% per month or 23.88% a year. 

HDFC Bank’s Jet Privilege cards also have an annual interest rate of 23.88%. The industry average stands at 3.4% per month or 40.80% per annum. 

Interest rate on the most expensive card—in terms of interest charges—Yes Prosperity is 2.40% per month or 28.80% annually for existing customers, and 38.64% a year for non-customers.

Other features

A common grudge that credit card holders have is that their reward points get wasted due to expiry or some other reason. The reward points on the Yes Bank cards don’t expire. Each reward point has a value of Rs0.25, and a spending of Rs100 translates into 10 reward points.

Most cards’ reward points can also be redeemed as JetPrivilege (JP) miles: 4 reward points gives you 1 JP mile. Other benefits include airport lounge access and cash-back benefits. 

Other banks, too, provide reward points in the similar range, such as the Air India SBI Signature Card, which gives 20 points for every Rs100 spent on Air India tickets. 

The three most expensive Yes Bank cards (by annual fees) have near-field communication (NFC) technology. 

Another useful feature for high net-worth customers is the lower foreign currency mark-up, of 1.75%, on the First category. You have to pay this fee on every transaction you make abroad using your Indian credit card.

The average foreign currency mark-up for most Indian credit cards is around 3.50%, according to the listings on BankBazaar.com. There are other privilege cards too, that have this fees as low as 2%; HDFC Bank Regalia credit card, for example. For the other Yes Bank credit cards, this fee is 3% for one variant and 3.4% for four others.

Mint Money take

While the interest rate for the top variants of the Yes Bank credit cards is low when compared with cards from other banks, this is not the only factor that you should consider.

It is expected that you will pay your bills in entirety and on time, which will also help improve your credit score. Interest rate comes into the picture if you carry forward the balance on your card. Yes Bank’s cards do not fare well when compared to the other cards in the market that have no joining and annual fees.

Mint Money believes that if you pay your credit card dues on time, you won’t need to look at a low-interest cards.

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