IndusInd Bank’s Nexxt credit card: Convenience or ticking time bomb?

Nexxt does all of that; just gives you more flexibility to spend. On the face of the card is a swipe button with three options. First: convert your purchases into equated monthly instalment (EMI) to be paid over six, 12, 18 or 24 months. Second: Pay using your reward points. Third: by using it as a plain-vanilla credit card.

Source: IndusInd Bank

The three options are like buttons on your card. Once you push any of these buttons, a light glows that reflects your choice. Before you make a purchase, you need to push the relevant button. If you push the EMI button, you get to choose the loan tenure.

If you wish to pay using the EMI option, you need to make purchases of at least Rs 2,000. If you wish to pay using rewards points, you need to have accumulated a minimum of 500 reward points. Nexxt is accepted at all shops across India. The card is targeted at millennial and mid-age customers with high spending habits using credit card.

Anil Ramchandran, EVP & Head of Marketing and Retail Unsecured Assets, IndusInd Bank said, "There are two types of customers we see adopting this credit card. First a set of customers prefer buying a consumer durables (LED TV, washing machine, refrigerator, etc.) or other high ticket purchases and converting it to an EMI later and other set of customers are often redeeming reward points to shop from limited options given by the banks merchant online / brochure."

A customer with a monthly income of Rs 50,000 and above is eligible to apply for Nexxt credit card. She will get a credit limit of Rs 80,000 to Rs 1 lakh considering any other debt obligations.

What works?

It’s easy to use. Nexxt allows you to buy without having the need to do any paperwork, or call their bank, or log in to any banking channel to convert their purchase into EMIs. If you wish to use your rewards points, no need to go through the rewards brochure, spend hours searching for a product that falls in your reward points’ budget. Just choose the rewards button on Nexxt, and your next purchase- whatever that may be is bought using your reward points.

The rate of interest in EMI option on this card is 12 percent per annum. Sukanya Kumar, Founder and CEO of RetailLending.com said, “This is a good deal in case you planning a purchase by taking a loan. Since, you will be charged at 12 percent per annum on this card against 14 percent to 18 percent interest on personal loans.” However, you need to compare pre-closure charges and processing fees of this card against banks offering personal loans before deciding a purchase using pay by EMI option on this card.

The bank has zero processing charges with the launch of this card. However, bank can levy processing fees in future on EMI purchase as per terms of the product. Kumar adds, "If bank charges processing fees up to 1-1.5 percent of the loan amount, it's competitive with other banks. But if a bank charges 2 percent and above, it's on a higher side.”

The bank offers total protect on this card against fraudulent usage. The cover is up to the credit limit issued on your card. For instance, if you have a credit limit of Rs 1 lakh on your Nexxt credit card, you will be assured for Rs 1 lakh against any fraudulent transaction.

What doesn’t work?

There are costs and limitations to the convenience that the card offers.

Apart from a joining fee of close to Rs 2,000, not all your purchases can come with your reward points or EMI facility. To be able to pay by rewards, you need to accumulate a minimum of 500 rewards points on your card. The customer earns 1 reward point for every Rs 150 spent. For using this pay by rewards option on this credit card you first need to spend at least Rs 75,000 using this card and accumulate 500 reward points. Till then it will be like standard credit card.

To use pay by rewards option again in future, you need to have minimum 500 reward points on your card. For instance, once you earn first 500 reward points and redeem 200 points to buy some product. Then, again you need to accumulate 200 reward points through purchases and bring up the tally to minimum 500 points to use it again.

The bank charges a pre-closure fee of 3 percent on the principal outstanding of the loan while purchasing on EMI option, which is on the expensive side.

But here’s the most dangerous part of your card. The more easier it makes spending for you, the more dangerous it can be for your finances. The card is offering convert into EMI option upfront before any purchase. So, converting purchase into EMI works wonderfully well for the bank offering credit cards since they earn interest but not necessarily will work for you.

Suresh Sadagopan, Founder of Ladder7 Financial Advisories warned, "With this credit card impulse purchases will happen and you will keep converting them into EMIs by selecting this option on the card. Soon, you will end up serving multiple EMIs. Using this card with EMI option will lead you into debt trap." Also, there is no processing fee at present so it urges you to shop more using EMI option on card.

Moneycontrol’s take

With its interactive features and scheme bank is primarily targeting customers who rely on credit card for day-to-day transactions. It urges such customers to opt for the EMI scheme (at 12 percent interest rate per annum) which is available upfront for any spending above Rs 2,000. The catch here is that it can easily lead to customer splurging.

A card that makes it easier for you to spend can easily turn your finances into disaster and is prone to misuse or overuse.

Over and above bank is charging an additional one time fees close to Rs 2,000 for this interactive credit card from the customer. It seems bank is charging premium amount from customers in the name of convenience with high interest rates of 3.83 percent per month on outstanding amount after due date of billing.

Avoid Nexxt credit card with a bargepole.

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