Lifecycle

The lifecycle of a retail co-branded credit card is similar to a standard credit card. However, they have unique elements influenced by the partnership between the retailer and the issuing financial institution. Below are the stages:

1. Application and approval
2. Card issuance and account setup
3. Credit card management
4. Interests, fees, and taxes
5. Billing and repayment
6. Delinquency management
7. Account closure or upgrades

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📝 Application and Approval

Customers apply for the co-branded card through a retailer-specific or financial institution channel. This stage has the following activities:

1. Customers provide the required information for the eligibility check.
2. The financial institution evaluates the eligibility using credit scores, income verification, and payment history.
3. Easy approval with required KYC to enhance customer experience.

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💳 Card Issuance and Account Setup

After approval, the physical or virtual card is issued, and the customer's account is created. Here are the activities in this stage:

1. Assignment of credit limits and rewards account integration.
2. Card activation through the retailer’s app or the issuer’s portal.
3. Welcome emails or kits explaining card benefits, retailer rewards, and usage guidelines.

Credit Cards Status

A retail co-branded credit card (physical and virtual) goes through the following states:

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System Block:

The system blocks the card if a customer makes incorrect PIN attempts, where n is the attempt limit as per the issuer policy.

Credit Card Account Status

Every credit card is associated with an account. The credit card account goes through the following statuses:

Active

When all account creation steps and card activation processes are completed, a retail co-branded credit card account moves to the active state. This state signifies that the cardholder can use the card for transactions, and all associated features, such as rewards and promotional benefits, are operational.

Inactive

A credit card becomes inactive when it is temporarily or permanently disabled due to specific reasons such as non-usage, pending cash advance, or no duly repayments for a prescribed period. In this state, the cardholder cannot use the card for transactions or access associated features until reactivated.

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Account Closure

The procedure to close an account starts if a customer does not use the card for a year.

Inactive to Active

The account moves back to the active state:

• When a customer makes a transaction, clears a cash advance, or makes a repayment after the prescribed days.
• The bank can reactivate the account after the customer contacts them.

Blocked

A retail co-branded credit card account transitions to the blocked state when the issuer or retailer temporarily or permanently restricts access to the card due to specific concerns. In this state, the cardholder cannot use the card for any transactions until it is reactivated. The account can be blocked for the following reasons:

Overdue

The credit card account will be blocked if a customer fails to repay the minimum amount due (MAD) within the prescribed time frame. For example, if the MAD is 5,000 INR for 30 days, the account will be blocked on the 31st day if the customer fails to make this repayment within 30 days.

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Handy Tips

The account is reactivated if the customer pays the MAD.

Pending Bank’s Review

The credit card account will be blocked if there is a pending from the bank’s/issuer’s side. The bank/issuer reactivates the account after the successful review.

Suspended

A retail co-branded credit card account transitions to the suspended state if it becomes a non-performing asset (NPA).

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Handy Tips

An account comes out of the NPA status if a customer repays the full amount due.

Closed

A retail co-branded credit card account transitions to a closed state when the account is permanently deactivated and cannot be used for transactions. This can be for the following reasons:

• Customer initiated
• Closed due to inactivity
• Upgraded the credit card
• Paid off the due amount post the CMS-induced NPA
• Paid off the due amount post the bank-induced NPA
• Written off

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Watch Out!

The account cannot be reopened if it is closed.

Transactions

When a customer makes a transaction using a retail co-branded credit card, it is processed through the issuer's payment network (Visa, Mastercard, or RuPay). The retailer and issuer jointly track the spending, apply co-brand benefits (e.g., loyalty points, discounts), and settle funds. Below is how the transaction works:

1. Cardholder Initiates a Transaction: A customer uses the retail co-branded credit card at the retailer’s outlet or online store.
2. Issuer Authorisation: The issuer checks credit limits, approves or declines the transaction, and applies loyalty program rules.
3. Settlement and Reporting: The issuer settles the payment with the retailer and updates the customer’s statement.

Reversals

A transaction reversal happens when a previously authorised transaction on a credit card is canceled, resulting in a refund of the amount. The following transactions can be reversed:

• All types of fees
• Interest postings
• All repayments

Here's how the reversal works:

1. A customer requests a refund.
2. The retailer initiates a reversal and sends a refund request to the issuer.
3. The amount is credited back to the customer’s card.

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🧭 Credit Card Management

Cardholders can manage their credit card through the retailer’s app or the issuer’s portal. They can perform the following actions to manage their cards:

• Set/reset credit card PIN
• Raise a card replacement or renewal request
• Convert any transaction to EMI
• Change card spending limits
• Change the due date of the repayment
• Raise a temporary credit limit change request

Card Renewal

The CMS triggers the renewal process automatically and notifies the cardholder via email or SMS before the card’s expiry date (typically 30-60 days prior). The Renewal happens for active, non-delinquent accounts. Below is how the renewal process works:

1. The CMS performs the card pre-renewal checks.
2. The issuer and co-brand jointly approve the renewal request based on the cardholer's performance.
3. A new card with the same card number but with the updated expiry date is generated and dispatched to the customer.
4. The CMS updates the card details.

Card Replacement

The card replacement happens when it is:

• Lost or stolen
• Physically damaged
• Compromised due to fraud

Here is how the replacement process works:

1. The customer initiates a replacement request due to any of the above-mentioned reasons.
2. The CMS blocks the compromised card to prevent misuse.
3. A new card number is generated in the event of loss, theft, or fraud, or the same card number with a new expiry date is issued in the event of damage and dispatched to the cardholder.
4. The CMS updates the account ledger and co-brand partner systems to reflect the new card credentials.

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💰 Interests, Fees, and Taxes

Retail Co-branded credit cards come with financial obligations that cardholders must understand to use the card effectively. These obligations generally include taxes, interest rates, and fees, which vary depending on the terms set by the issuing bank and the co-branding partner.

Interests

Interests are applied to each transaction from the date of the transaction. Below are the types of interest rates:

• Purchase Interest Rate: Interest rates are charged on purchases if a cardholder fails to pay the TAD before the due date. However, for cardholders who always pay the TAD, there is an interest-free credit period up to the due date.
• Cash Advance Interest Rate: Interest rates are charged on cash advances from the transaction date, irrespective of when the payment is made. Also, there is no interest-free period for cash advances. This interest rate is added to the next statement.
• Partial Payment Interest Rates: When a cardholder makes a partial payment instead of paying the full outstanding balance on their credit card, an interest rate is applied to the unpaid amount. The following example illustrates this. The 3.25% is the monthly and the daily interest depends on the number of days in the month.

Fees

Retail co-branded credit cards come with various fees that cardholders should pay during the account lifecycle. These fees vary based on the terms set by the financial institution and the co-branding partner. Below are some examples of types of fees:

• Cash advance fee
• International markup (on POS, Online, and ATM) fee
• Fuel surcharge waiver fee for certain MCCs
• EMI processing fee
• EMI foreclosure fee
• Add-on card fee
• Annual fee
• Card replacement fee
• Late payment fee
• Rent payment fee
• Overlimit fee
• Payment return fee
• Rewards redemption fee

Taxes

Depending on the customer’s and bank address, one of the following taxes is levied on all fees and interest amounts.

• CGST (9%) + SGST (9%): When both the customer and bank are from the same state.
• IGST (18%): When a customer is from a different state.
• CGST (9%) + UGST (9%): When a customer and bank are from a union territory.

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🧾 Billing and Repayment

Billing and repayment are crucial and impact both the cardholder experience and the revenue model for the issuer and retail partner.

Billing

Billing is a process of generating and sharing periodic statements with the cardholder, capturing all spending, fees, rewards, and repayment obligations.

Statement Generation

• The issuer generates billing statements for the cardholder's account at the end of the billing cycle.
• The issuer can offer multiple statement cycles to provide flexibility for cardholders and align with retail partner strategies.

Repayment

Repayment is when the customer clears outstanding dues based on their billing statement. Timely repayments ensure smooth operations, minimize risk, and maintain customer eligibility for continued benefits from both the issuer and the co-brand partner. Below is how the repayment works:

1. The issuer sends automated reminders via SMS or email before and after the statement generation.
2. Cardholders can make the total amount due (TAD) or minimum amount due (MAD) using any of the following modes:
   • VISA Fast Funds
   • VISA Money Transfer
   • Net Banking
   • Payment Gateway (Net Banking and UPI)
   • NEFT
   • IMPS
   • RTGS
   • Direct Debit (from the savings account of the same bank)
   • Standing Instruction (from the savings account of the same bank)
   • Demand Draft
   • Cheque
   • Cash
   • Debit Card
3. The CMS reconciles the payment to the cardholder’s account after the payment is successful and the available credit limit is restored accordingly.

Auto-Debit/Auto-Pay/Standing Instructions

Customers can repay manually, enable auto-debit, or provide standing instructions for the repayment. By default, the auto-debit will be disabled. Customers can opt to enable auto-debit of payments (either MAD or TAD) during or post onboarding.

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Handy Tips

A customer should have a Savings account with the same bank.

EMI

An EMI (Equated Monthly Installment) facility allows a cardholder to convert large purchases into smaller, manageable payments over a fixed tenure. This feature enhances affordability and strengthens cardholder loyalty for both the issuer and the retail partner.

EMI Conversion

Below is how the EMI conversion happens:

1. A cardholder makes a high-value transaction at a store or a website.
2. The issuer allows EMI conversion through:
   • Instant EMI option at POS/online checkout with the co-brand partner.
   • Post-purchase EMI conversion via the bank's app, or net banking within a defined window (e.g., 30 days).
3. A cardholder chooses a Repayment tenure (e.g., 3, 6, 9, 12, 18 months) with an applicable Interest rate and a processing fee, if any.
4. EMI Billing and Repayment:
   • The CMS converts a transaction into equal monthly installments, reflecting each EMI component in the cardholder’s billing statement.
   • The monthly EMI includes both principal and interest.
   • Each EMI payment restores the available credit limit accordingly.

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🚨 Delinquency Management

Delinquency is the status of an account when the customer fails to make the minimum payment by the due date. There are two types of delinquency:

• CMS-induced delinquency
• Bank-induced delinquency

How Delinquency Works?

The delinquency is divided into cycles, which indicates the number of payments the cardholder has missed.

For example, the account moves to cycle 1 when a cardholder fails to repay MAD within the due date. Similarly, if the cardholder fails to repay MAD within the due date of the next billing cycle, the account moves to cycle 2, and so on. The days past due (DAD) are calculated from the due date.

How Repayment in Delinquency Works?

The account moves to the lower cycle if the cardholder repays the earlier MAD, not the total amount due (TAD).

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Example

If MADs for 3 months are INR 1,000, INR 3,000, and INR 10,000 respectively, and the cardholder has missed to pay 2 MADs, the account will be in cycle 2. Now, if the cardholder repays INR 1000 before the due date of the 3rd month, the account will move back to cycle 1 and will:

• Move back to cycle 2 if the cardholder fails to pay INR 2,000 by the due date of the 3rd month.
• Remain in cycle 1 if any amount between INR 2,000 and INR 8,999 is paid.
• Remove from delinquency if the cardholder pays the TAD.

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🔁 Account Closure or Upgrades

The last stage of the lifecycle of a retail co-branded credit card account is the account closure. This stage represents the point at which the account is no longer active. This stage can occur voluntarily or involuntarily and signifies the end of transactions and activity on the card. Below are some of the reasons for account closure:

• Voluntary closure
• Closed by issuer/bank

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📉 Non-Performing Asset

An account becomes NPA when a cardholder fails to make the minimum or full payment for a prolonged period (typically 90+ days past due). The issuer flags the account as delinquent, suspends all card privileges, and initiates legal recovery processes. For retailers, NPAs reduce customer engagement and loyalty value.

CMS-Induced NPA

Here is how a CMS Generates NPAs:

• The CMS tracks each cardholder’s payment behavior and automatically categorizes overdue accounts into DPD (Days Past Due) buckets, e.g., 30 DPD, 60 DPD, and 90+ DPD.
• Once an account crosses the 90+ days past due threshold (or issuer-defined threshold), CMS automatically flags it as an NPA.

Bank-Induced NPA

Bank-induced NPAs occur when a financial institution overrides CMS rules and manually classifies an account as an NPA based on risk intelligence or external circumstances before CMS automatically triggers it. Here is how a bank-induced NPA works:

• The issuer’s risk, credit, or compliance teams intervene based on:
  • Regulatory instructions (e.g., RBI circulars)
  • Customer insolvency, fraud alerts, or legal notices
  • Negative external credit reports (e.g., default on other loans)
  • Business-specific risk assessment (e.g., merchant-linked risk in co-branded partnerships)
• The bank manually converts an account to NPA even if it is in early delinquency (e.g., 60 DPD or before the CMS threshold).
• Such NPAs are often applied to high-value or sensitive retail accounts.