In August this year, HDFC Bank launched the Millennia cards targeting the country’s millennials. The bank offers a prepaid card, a debit card, a credit card and an EMI card as part of its Millennia range. “I am confident that this unique range of cards will allow us to meet the youth’s evolving needs," said Parag Rao, country head-payments business and marketing, HDFC Bank.
At close to 450 million, India has the world’s largest millennial population, making them the top consumers of goods and services. While HDFC Bank and others are trying to leverage this fact, does it really make sense to get these Millennia cards? We help you understand.
While the bank claims to offer additional benefits tailored for the millennial spending habit, there’s little distinction between this and other cards available in the market. But, what stands out is the higher cashbacks on online transactions. “As millennials are more comfortable using digital wallets, this card allows cashback on reloading digital wallets which most other cards don’t," said Naveen Kukreja, CEO and co-founder, Paisabazaar.com, an online financial services marketplace. The card gives a 2.5% cashback for every online transaction above ₹2,000 and a 1% cashback on all offline spends and wallet reloads on a minimum transaction size of ₹100. Note that this is not applicable on fuel spends and there’s a cap on the maximum cashback. “The biggest benefit of this card is that it accrues cashbacks instead of reward points. The cashback is accrued in the form of CashPoints, which can be redeemed against the statement balance or flight and hotel bookings or making purchases from the bank’s SmartBuy rewards portal," said Kukreja.
However, these CashPoints come with a short expiry period. The co-founder of an online marketplace who didn’t want to be named said, “While the reward points of most credit cards have an expiry period of 2-3 years, the CashPoints on this credit card expires within one year." The conversion rate for one CashPoint is ₹0.30. The renewal fee on this card is waived off only on spending above ₹1 lakh in the first year and joining fee is waived off on spending more than ₹30,000 in the first 90 days.
Lovaii Navlakhi, CEO and MD, International Money Matters said, the objective of such products is to get the youth to spend more.“Having a credit card is a plus if you are smart and can take advantage of the credit card billing cycles to avail maximum credit. But if you are unorganized, it can result in overdue charges, which then becomes a vicious cycle," said Navlakhi. He said one shouldn’t get tempted looking at the reward points and cashback because no great wealth is created out of them.
Easy EMI card
The feature of this card is nearly the same as the credit card except for the fact that all transactions above ₹10,000 automatically get converted into EMIs for nine months at an interest rate of 20% per annum. The cardholder also earns cashback on transactions converted into EMI. “The interest rate charged on the EMI is pretty high compared to other options including personal loan and EMI conversion available on regular credit cards. While the rate of interest (ROI) in case of this card is 20% , it starts from 13% in case of EMI conversion on other cards," said the co-founder quoted above. Also, this card gives a single choice of a nine-month tenure whereas tenures range anywhere from three to 48 months in other cards.
A processing fee at ₹99 plus GST is also levied. “The ₹99 on ₹10,000 increases the interest rate to 24.90% per annum; even if the amount spent is ₹40,000, the interest rate is 22.70%. You should just repay it by the due date. Living beyond your means is a habit that is difficult to shake off," said Navlakhi. In response to why one should still go for the card, Rao said, customers get up to 5% cashback within the same month on the transaction amount, thereby reducing the ROI impact.
Prepaid and debit cards
Prepaid cards are payment cards with the monetary value stored on the card and not an external bank account. “There are not many comparable products to HDFC Millennia prepaid card in the market. The Axis Bank Gift Card has a loadable limit of ₹50,000, while the ICICI Bank prepaid card variant offers limit of up to ₹10,000. On the other hand, the HDFC card comes with a loadable limit of up to ₹1 lakh, along with insurance cover and exclusive cashback offers," said Raj Khosla, founder and MD, MyMoneyMantra, an online financial services marketplace.
The Millennia prepaid card offers a personal accident cover of ₹1 lakh, which can be availed only if the card is used for shopping at least once in the last 30 days, excluding ATM withdrawals.
For individuals who are just learning to be financially independent, going for a prepaid card is a better option as it allows you to spend only what you have. Khosla said, he recommends a prepaid card for millennials who want to spend on the go. Since you are not obligated to maintain any minimum balance, there are no restrictions on number of transactions.
“Students are one key segment as they may not have a bank account to avail a debit card or credit history to avail a credit card. For regular customers, prepaid cards can be used as a gift for friends and family," said Rao. The Millennia debit card comes with features such as daily domestic shopping limit of ₹3.5 lakh and daily cash withdrawal limit of ₹50,000, annual cashback up to ₹4,800 and 1% cashback on reloading wallets. Cardholders can earn 5% cashback on shopping via PayZapp and SmartBuy. Khosla said the annual access to airport lounge is limited to only four on this card whereas there are cards that offer six to eight lounge access each quarter.
Though the bank has tried to cater to various spending patterns through the four cards, it’s advisable to compare and understand all the terms and conditions before taking the plunge. The rewards and cashback may seem attractive at first but it’s important to evaluate how much you’d have to spend in order to avail them. If it pushes you into spending more than what you can, it’s best to stay away.