Want to help a friend in need? You don’t have to be loaded with the stuff, be a registered financier, or rob a bank. But you can still help ‘create’ money and come to your friend’s rescue.
Rajesh (name changed), around 35, employed in a private company, needed money to buy an iPhone. He had also planned some surprise purchases for the family just before Diwali. He approached private financiers to meet the funds crunch, but found that the rates were comparatively costlier than the lending rates of banks.
He did not approach commercial banks because they were not ready to offer a personal loan if he did not maintain his salary account with the said bank. Even if they were ready, the process and background checks took time.
He also did not seek the support of his regular bank where his salary was credited as he had already availed a home and vehicle loan from them. He was in a fix.
That’s when he came to know about an arrangement by which people were ready to give cash against a credit card swipe. Rajesh was reluctant to draw cash directly from the card company by swiping his card, as such withdrawals attract high rates of interest.
Given that lending rates on the card are anywhere between 2-3 per cent per month (annualised rates upwards of 30-40 per cent), it would have inevitably worked out to between two and three times the amount charged by private lenders.
But there was another way. All he needed to do was hand his credit card to an accommodating vendor, who would swipe the card for the borrowed amount and hand over the cash minus the interest charges.
Rajesh took his chance, accompanied his friend to the shop and lo! In a matter of 5-10 minutes, he walked out of the store with cash, after paying 3 per cent upfront to the lender.
“I did not realise that it is this easy to get cash,” he said, recalling his experience. The lender, who incidentally is not into finance business, has been helping individuals who were in urgent need of cash.
All the seeker needs to do is submit his address proof and share the maximum cash withdrawal limit on his card. The transaction is over after one swipe on a POS machine for the sum. The seeker walks away with the cash, while the lender raises an invoice to make it look as though there was a sale for the said amount.
Thereafter, Rajesh called the customer care centre of the card company to request for payment of his dues in 10 instalments. “It was easy, job done,” he said heaving a sigh of relief.
In another such example of ‘accommodation’ finance, Venkat (name changed) was looking to buy a television. His friend Ram (name changed) approached the former to seek finance support. The duo agreed that Ram would swipe his card to buy the TV, and Venkat pay the money to Ram for the same.
In the bargain, Venkat was able to get the TV at an additional discounted rate. The TV had cost Ram ₹66,000, Venkat offered to pay him ready cash of ₹62,000, after deducting ₹4,000 towards interest. The friends say they felt they were helping each other and it was a win-win situation for both.
In other such practices, it is understood that there is a similar arrangement that select consumers have with some petrol bunks.
The card is swiped, say for ₹500 , but only ₹300 worth of petrol is poured into the vehicle. The balance ₹200 (less some charges for accommodation) are provided as cash by the fuel vendor.
While the volume of such transactions is not known and difficult to estimate, these are some more ‘innovations’ and sharp practices that regulators will have to keep an eye on.
Meanwhile, for those who scan card spends and look for trends showing a recovery, this is one more activity to look out for!