E-wallets to the rescue: How to turn credit card money into hard cash on Business Standard. And it is free if done through e-wallets. But wallet companies can block repeat offenders

1. E-wallets to the rescue: How
to turn credit card money into
hard cash
And it is free if done through e-wallets. But wallet
companies can block repeat offenders
A few weeks earlier, Paytm had started charging its customers a two per cent fee for
adding money to the wallet using their credit cards. However, the mobile wallet company
withdrew the fee after a week, saying it would cause inconvenience to a large section of
their customers.
So, how does one transfer credit card money into a bank account via an e-wallet? The
mechanism is quite simple. A user sends money to the wallet through his credit card, say
Rs 15,000. Well-established mobile wallets such as Paytm, MobiKwik and FreeCharge
allow funds in the wallet to be sent to any bank account. All the person has to do is enter
his account number and the National Electronic Funds Transfer (NEFT) code. He can send
the entire Rs 15,000 to any bank account he wishes to.
Most wallet companies don’t allow transfer of funds immediately. One can send the money
to a bank account only after 48 hours. The best part: There are no charges on deposit or on
withdrawal of money from the wallet. The wallet provider bears the cost.

2. It’s a smart way to get a hassle-free loan. An individual does not need to fill up an
application form, share documents, wait for the approval, and so on. There’s no fear of
rejection because of a low credit score. It can also be at zero cost if the person pays back the
issuer before the due date. To many, it may look line an easy credit line, but it’s not.
A few do it to earn points on their credit card without actually spending on anything. But
banks have to report to the income-tax
(I-T) department all users who spend over Rs 2 lakh on their credit cards annually. If your
income doesn’t justify such spending, the tax authorities could call you to explain the
source of money.
Wallets players are watching: Mobile wallet companies absorb the transaction cost levied
by banks, as they are focusing on acquiring new customers and on making their services
popular. They want users to transact using their wallets and not use it as a medium to
rotate money. They have started analysing the spending patterns of users and blocking
those who are using their wallets for “unintended purposes”.
“We use algorithms, machine learning and other technologies to understand the spending
patterns of users. The technology platform gets smarter every day. Narrowing down on
users who are rotating money and blocking them is not difficult,” says Daman Soni, vice-
president (growth), MobiKwik. He further explains that when the company studied
spending patterns, it realised that many users who added money from their credit card to
their wallet and then transferred the funds to their bank account were first-timers trying to
understand how the platform works.
Deepak Abbot, senior vice-president at Paytm, says the company constantly monitors all
such activities and based on its algorithm restricts such behaviour. “We have several
parameters to analyse the behaviour of such customers,” says Abbot.
Limits are low: Wallet accounts with limited Know Your Customer (KYC) have a
transaction limit of just Rs 20,000. Only a few individuals would genuinely need such little
amounts of cash. Even then they can swipe their credit cards at most places. Also, the cash
is not instantly transferred from the wallet to the bank account. It takes around three
working days and sometimes more. Accounts that are fully KYC compliant can store up to
Rs 1 lakh. (readmore...)