Play your cards right

Credit card companies have been on an overdrive of late, trying to lure customers through various discounts and special offers. Co-branded cards — which offer numerous benefits through tie-ups with hotels, restaurants, retails outlets, airlines, insurers, oil companies etc — are the rage these days. One such co-branded credit card is the SBI Railway Card — a tie-up between the Indian Railways and State Bank of India’s credit cards division.

The SBI Railway Card offers benefits to customers each time they log on to the Indian Railway Catering and Tourism Corporation (IRCTC) website to buy tickets. It functions as a normal credit card, as well as a traveller loyalty card, which can help customers collect railway points and earn free railway tickets after accumulating the required number of points. In other words, you can call it the Frequent Traveller Programme of the Indian Railways.

But is it really worthwhile to go in for such a card, when most people already hold other credit cards available in the market? For this, you need to compare the various costs and charges involved in using the SBI Railway Card vis-à-vis other credit cards, to figure out the latter’s financial viability.

The most important benefit of the SBI Railway Card is that it enables you to book rail tickets online at zero transaction cost, i.e. there’s no surcharge on booking tickets online, unlike normal credit cards, which levy a transaction fee on customers. For example, if you book a rail ticket via the IRCTC website and make a payment through a MasterCard or Visa credit card issued by any bank (other than SBI), a transaction charge of 1.8% on the total transaction will be levied.

If you pay in three monthly installments via an ICICI Bank credit card, Rs 343 per Rs 1,000 will be levied as transaction fee. And if you pay in three monthly installments via a Citibank or Diner’s Club credit card, a transaction charge of 2.8% on the total transaction value will be levied. But if you make the payment through your SBI Railway Card, the 1.8% transaction charge will be waived.

However, the total outgo on your SBI Railway Card may not necessarily reduce, as you need to factor in several other charges as well. One of them is the membership fee, which is Rs 500 for the first year and may vary from Rs 300-500 in subsequent years. So, you need to factor this in while calculating the total cost.

Various other charges are also applicable on the SBI Card such as late payment fee, replacement card fee, statement retrieval fee, cheque bounce fee, foreign currency transaction fee etc. You should compare the fees levied by other credit cards to find out whether your SBI Card will make you better off financially or not.

When you opt for an SBI Railway Card, you get 250 free bonus railway points and a complimentary free membership to the Railways’ loyal customer programme called ‘Shubh Yatra’. Once you become a member of Shubh Yatra (applicable only for tickets booked at www.irctc.co.in), you will get 10% of your base ticket fare as railway points on all AC class travel (excluding 3AC), which can be used to buy a free rail ticket after earning the required number of points. But the offer is subject to certain conditions as you will earn 10% as points only if you buy the ticket during lean season, i.e.

from January 15 to March 31 or from July 15 to September 15. For the rest of the year, you will only earn 4% of the fare as rail points. You can also earn rail points by using the SBI Railway Card as a normal credit card — you get one rail point for every Rs 125 you spend. In order to find out how beneficial this card actually is, you need to compare the reward points earned on other cards. For example, if you make purchases using your HDFC Bank credit card, you earn one reward point for every Rs 50 you spend, which is much better than the SBI card. On the other hand, Citibank gives you one reward point for every Rs 150 you spend, so you’re better off with the SBI card in this case.

While considering the cost benefits of the SBI Railway Card vis-à-vis other cards, you should also compare the various money-back schemes, if any, offered by credit card companies. For example, SBI Railway Card offers 7% money-back on rail tickets booked through the IRCTC website. The eligibility criteria for this scheme are two ‘eligible’ transactions.

(All transactions above Rs 400 are considered eligible transactions.) From the third eligible transaction onwards, SBI Cardholders will get 7% money back on the transacted amount. But the point to be noted here is that transactions below Rs 400 won’t be considered eligible. Moreover, this amount reversal is subject to a maximum cumulative reversal of Rs 1,000. This offer is valid only till June 30, ’06. Hence, if you are not planning to travel at least three times during this offer period, you will not gain from this money-back scheme.

So before opting for the SBI Railway Card, you should weigh all your options and compare the various costs and charges involved in using other credit cards as well. If you are not a frequent rail traveller, the SBI Railway Card may not necessarily give you more benefits than your existing credit cards. So put on your thinking cap and see where your ‘train’ of thought leads you. Bon voyage!