Name of the product
IDBI Bank Ltd’s Magic Card.
It is a debit card with a difference. While through a regular debit card you can spend up to the balance maintained in your savings account, the Magic Card allows you to spend more. It’s like an overdraft facility, where you can spend more than you have in your account up to a predetermined credit limit. The credit limit will be a multiple of your salary, at times up to three times your salary in accordance to your eligibility. So if your salary is Rs50,000, you could get an overdraft credit limit of Rs50,000. So, if your credit limit is Rs50,000 you can spend your bank balance plus Rs50,000 credit. The card can be availed only by eligible account holders of the bank.
What are the charges?
The overdraft facility comes at a cost. You would need to pay 14.75% per annum (base rate of 10.75% plus 4%) on the credit you utilize. Like most overdraft, interest is calculated on the overdraft amount on a daily basis, but charged on a monthly basis. But like other overdraft facility on savings accounts, you need to pay interest only for the amount you use and for the period you don’t repay.
There is no processing fee for using the credit amount. You can withdraw money from any bank’s automated teller machine without paying any charges as many times as you want.
The facility comes with a daily withdrawal limit of Rs50,000. You will also get loyalty points when you use the card for purchases. The card comes with an insurance cover for lost, stolen or a counterfeit card.
How do you pay back?
The bank will adjust the credit you use when your salary is credited into you account. So, if you use an overdraft of Rs10,000, the same will be deducted from your account when your salary comes next month.
Mint money take
The interest rate here (14.75% per annum) is much less than what a credit card charges for cash withdrawal (2.5% per month, or 30% per annum) or for roll over of credit (35-40% per annum). However, people who pay off the total due on credit card every month, and do not roll over credit may find spending through this card expensive since interest is calculated daily. But the card’s charges are less than what most personal loans offer, which is around 18%. While many other banks offer overdraft facility on regular savings accounts, that usually comes with processing charges as well as cash withdrawal charges.
If you are an IDBI Bank salary account holder and need emergency cash, this facility may work for you. However, like all credit instruments, you need to use it carefully, lest you fall into a debt trap.