attitude of customers towards plastic money

Customer attitude towards plastic money

Project Report on

“A Study on Changing Attitude of Customers towards Plastic Money”

Bachelor of Commerce

Banking & Insurance

Semester-V

Submitted By

Mr. Akhilesh G. Pillai

Roll No. 46

BIRLA COLLEGE OF ARTS, SCIENCE & COMMERCE

Murbad Road Kalyan (W)

University of Mumbai

(2009-2010)

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Project Report on

“A Study on Changing Attitude of Customers towards Plastic Money”

Bachelor of Commerce

Banking & Insurance

Semester-V

(2009-2010)

Submitted

In partial fulfillment of requirement for the Award of Degree of

Bachelor of Commerce (Banking & Insurance)

By


Roll No. 46

BIRLA COLLEGE OF ARTS, SCIENCE & COMMERCE

Murbad Road Kalyan (W)

2


BIRLA COLLEGE OF ARTS, SCIENCE, & COMMERCE, KALYAN

(Conducted by Kalyan Citizens’ Education Society)

(Affiliated by University of Mumbai)

BACHELOR OF BANKING AND INSURANCE

CERTIFICATE

This is to certify that Mr. Akhilesh G. Pillai of T.Y.B.Com. Banking & Insurance

(Semester V) has successfully completed the project on “A Study on Changing

Attitude of Customers towards Plastic Money”, under the guidance of Mr. Sachin

Achrekar.

Principal

Project Guide

Course Co-ordinator

Internal Examiner

External Examiner

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Declaration

I, Mr. Akhilesh G. Pillai, student of T.Y.B.Com (Banking &

Insurance) Semester V (2009-2010) hereby declare that I have completed the

project on “A Study on Changing Attitude of Customers towards Plastic

Money”.

I further declare that the information contained in this project report

is genuine, true & fair to the best of my knowledge.

Signature (Akhilesh G. Pillai)

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Acknowledgement

If words are considered to be signs of gratitude then let these words

convey the very same. My sincere gratitude to Mumbai University for providing

me with an opportunity to get practical as well as theoretical knowledge of plastic

money and giving necessary directions by my guide on doing this project to the

best of my abilities. I am highly indebted to Branch Manager of IDBI Bank and

project guide Prof. Sachin Achrekar who has provided me with the necessary

information and also for the support extended out to me in the completion of this

project and his valuable suggestions and comments on bringing out this report in

the best way possible.

I also thank to Prof. Hema Tahilramani who has sincerely supported

me with valuable insights into the completion of this project.

I am grateful to all faculty members of Birla College and my

relatives and friends who had helped me in the successful competition of this

project.


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CONTENTS

SR NO. TOPICS PAGE NO.

Preface

1. Introduction of Money

2. Plastic Money in India

3. Features of Plastic Money

4. Types of plastic money

5. Rise of plastic money

6. Plastic card and its uses

7. Safety and Precautions in plastic money

8. Credit card and Debit card

9. Parties involved in transactions

10 Customer attitude towards plastic money

Report on visit to a Bank

Conclusions

Bibliography

Wibliography

Annexure ‘A’

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Annexure ‘B’

PREFACE

It is my proud privilege to present this project on “A study on changing

attitude of customers towards plastic money” to Mumbai University.

In the initial stage paper currencies were popularly used against the goods

which finally leads to an end of barter system. People were considered paper money as

a purchasing power but due to increase in income the value of money were started

declining. When plastic money was first introduced people were not very free to use it,

but when frauds were started increasing in paper money people were losing their faith

on paper money. They thought carrying a plastic card is far more safer than carrying a

hard cash. Thus in the real sense plastic money came into existence. Under plastic

money debit card issued by bank helps the customer to an easy access as and when

they are in need for money whereas the credit card issued by bank in which the issuing

bank gives credit to its customer and earns commission and interest through it. Thus

from this we can see the changing attitude of customers.

Objectives of the study:-

To find out the features of credit cards offered to the customer by the banks

through personal approach.

To bring out different types of plastic money offered exclusively by banks.

To prevent the causes for risk involved in the credit card business.

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To find out the customers attitude towards plastic money.

Research Methodology:

Secondary Data

Primary Data

CH.1 The Introduction of Money

The Rise of Paper Money

The next phase in the evolution of currency was the invention of paper money. The first

banknotes were issued in China during the reign of Emperor Hien Tsung (AD806-821), but not

as a result of any great financial insight. The sole reason for their introduction was an acute

copper shortage that precluded the striking of new coins. Eventually, China got carried away

with the ease of producing this new form of cash. Too much of it was printed and this led to

inflation. In 1455, the Chinese abandoned the use of paper money and did not return to it for

several centuries.

The Chinese experience was repeated when Sweden became the first European nation to

experiment with paper money. In 1661, a banker named Johan Palmstruch began to issue credit

notes that could be exchanged at his Stockholm bank for stated numbers of silver coins.

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Customer attitude towards plastic money Unfortunately for Palmstruch, who had consulted the Swedish government before launching the

scheme, he got carried away with his licence to print money. He issued more notes than his bank

had silver deposits to redeem, and in 1668 was prosecuted for fraud. He was initially sentenced

to death, but the penalty was later commuted to imprisonment.

Despite the less than glorious outcomes to these early trials of paper money, the tide of history

was firmly on the side of the new form of currency. As economic activity increased in Europe, it

became apparent that the money supply needed to be expanded beyond the limits imposed by

holdings of precious metals.

This recognition led to the establishment of the first national central banks. People were much

more likely to trust notes backed by government reserves than those issued by private

institutions. They even proved willing to accept temporary governmental bans on the redemption

of banknotes for silver, as happened in Britain during the "Restriction Period" of 1797 to 1821.

The Gold Standard

Entrusting the issue of banknotes to one central authority effectively removed the danger of

bankruptcy, but it did raise the spectre of inflation. This would happen if a central bank printed

too much money. (To understand this, imagine you were an egg seller and everyone suddenly

had twice as much cash; you would feel foolish, not to say cheated, if you continued to sell your

eggs at the old price.) It was the risk of inflation, among other factors, that propelled

governments into joining the Gold Standard, a measure that harked back to the days when all

money really was made of precious metal.

The Gold Standard was a mechanism that fixed the values of the coins and banknotes of

participating nations in terms of specified quantities of gold.

The Standard operated both domestically and internationally. On the domestic front, it forestalled

inflation by ensuring that the money supply remained relatively constant. In the international

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Customer attitude towards plastic money sphere, it had the effect of fixing exchange rates between the nations involved. If the US set the

price of gold at $20.67 per ounce, for example (as it did from 1834 until 1933), and the UK set it

at three pounds 17 shillings and 10.5 pence, as it did from 1844 until 1931 (apart from a period

after the First World War), an exchange rate of $4.867 dollars to the pound necessarily followed.

The benefits of fixed exchange rates included stability and a balancing of prices between

subscribing nations. If the UK made a technological breakthrough that increased economic

output, its prices would fall. Assuming US prices stayed the same, this would make UK products

more attractive from an American perspective, and American products less attractive to the UK.

The upshot would be that gold – that is, the stuff in which payments were made – would flow out

of the US and into Britain.

As the money supply/amount of gold in Britain had now increased, its prices would rise. At the

same time, US prices would fall in line with the nation's own money supply. Hey presto,

everyone ended up more or less where they had been in the first place and price stability was

restored.

The Gold Standard worked very well so long as everyone played nicely. In the US, for example,

inflation between 1880 and 1914 averaged a mere 0.1 per cent per year. The trouble was that

many nations were inclined to cheat, particularly when the going got tough. When the First

World War broke out in 1914, the countries involved threw their rule books out of the window.

They started printing money to finance their war efforts and the Gold Standard broke down. It

was reinstated in modified form in 1925, but collapsed again due to instability caused by the

Great Depression.

In 1931, Britain left the Gold Standard as a result of massive outflows of gold from the nation's

coffers. The successor to the Gold Standard was the Bretton Woods system, named after the New

Hampshire resort where the Second World War Allies thrashed out the details in 1944. Once

again, exchange rates were fixed (within a margin of 1 per cent), but the key feature was that all

participating nations apart from the US were allowed to settle their debts in US dollars. The US

promised to redeem the dollar holdings of other countries for gold at a fixed rate of $35 per

ounce.

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Customer attitude towards plastic money Unfortunately, this offer was taken up to the extent that the US started running out of gold,

which placed the entire system in jeopardy. In 1971, President Nixon announced that the US

would no longer be paying out gold for dollars. For the Gold Standard, this was the final nail in

the coffin.

Fiat money

Since 1971, the world economy has largely run on a system of floating exchange rates, with

gold-backed currency replaced by what is called " fiat money". This is money that has no

intrinsic value and obtains its worth entirely on the basis of governmental decree. ("This piece of

paper can be used to pay debts because we say it can.") The use of fiat money obviously places a

greater responsibility on governments than they had in the days when currency had to be backed

by precious metals. Print too much of it and you end up in a right mess.

Credit cards, debit cards and cheques

Not so long ago, it was relatively difficult to open an account with one of the clearing banks, and

the Mainwaring and Wilsons who ran the institutions long catered principally to the professional

classes, discussing their affairs over a glass of Amontillado in the manager's office.

Though bounders could be relied upon to write bouncing cheques, for most of the 20th century

the possession of a current account denoted respectability. The manual working classes relied on

a little brown envelope of notes and coins at the end of the week, and remained "unbanked" until

well into the 1970s. If they wanted to send money away they relied on the postal order, now

almost extinct.

Then we all became more prosperous, the banks discovered marketing (black horses running

across the landscape) and students were being offered rail cards and book tokens (another quaint

form of money, happily still with us) just so that the bank could enjoy the mixed pleasure of

them running up enormous overdrafts.

In the 1980s, National Westminster Bank even raised eyebrows by allowing the customers the

option of "pictorial" cheque-books, featuring images of badgers and bunny rabbits. Cheque use

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Customer attitude towards plastic money peaked in 1990, with 2.7 billion passing through the system; it's about one-third of that level

now, and falling.

The reason is the debit card, a sort of cheque guarantee card without the cheque. The first Switch

card transaction took place in 1988; by 1995, they had overtaken credit cards in popularity, and

cheques fell behind them in 1998. The advent of "chip and PIN" greatly reduced the scope for

fraud. Last year, each debit-card holder used their cards 166 times on average, acquiring £3,848

in "cashback" and making purchases worth £4,799.

However, British consumers were not to be constrained by such trivial considerations as how

much money they had in the bank. The launch of the Barclaycard in 1966 (and its now defunct

but long-running rival Access in 1972) was the start of "plastic" – the discovery that a small

rectangle of polyvinylchloride (always measuring 85.60 by 53.98mm) could transform your life.

Until, that is, the astronomical APR (annual percentage rate of interest) and overlenient credit

limits led to the inevitable personal mini credit crunch.

The modern British addiction to debt can be traced back precisely to the advent of the credit

card. By the 1990s, 0 per cent cards were being offered to lure customers, and those who took

advantage of the initial free offers and then transferred the balance to the next free offer when the

interest became due were known as "rate tarts".

Our "flexible friend" (as the Access card marketing line went) had a nasty habit of landing us in

economic trouble; now that he's been allowed to make the acquaintance of the "sub prime"

community in the United States and Britain, the extent of the credit card's true perniciousness is

becoming apparent. At any rate, we save less than at any time since the 1950s; the teenager of

today is far more likely to have plastic than a building society

E-money: the future of cash

We may not be that far away from a world where cash follows the cheque book into oblivion and

few transactions are conducted face to face. There are in excess of 20 billion payments of less

than £10 made every year; they could all go cashless.

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Customer attitude towards plastic money E-money comes in three forms, two of them specifically creations of the internet. First, there is

the "card not present" phenomenon, where you have sufficient faith in the online retailer –

nowadays, anyone from Tesco to Amazon and lastminute.com – that you feel happy to tap your

payment card details on to a web page. You and the "shopkeeper" never actually meet, and you

never leave your home or office.

Money thus moves from being a physical commodity – a gold coin, a paper banknote or a plastic

card – to being a purely virtual commodity (though of course banks themselves have long held

your current account in virtual form, as a series of binary codes in a computer file).

Second, we have seen the growth of outfits specifically set up to facilitate payments on the web.

Perhaps the most high profile of these is Pay Pal, as featured, and trusted, on eBay. Barclays

Bank can chart its origins back to 1685, the Royal Bank of Scotland to 1727 and Lloyds to 1765;

Pay Pal dates back only to 2000, yet it now operates in 103 markets, manages more than 133

million accounts and allows customers to send, receive and hold funds in currencies from the US

dollar to the Polish zloty.

The real revolution, though, may be the abolition of cash, cheques, credit cards and debit cards

and their replacement by one single means of payment, which you just wave, possibly

nonchalantly, at the shop assistant. This is what the "contact less" card promises, so called

because you don't even have to put it into a reader to buy something.

The Barclaycard One Pulse card, for example, was launched only a month ago, with 4,000

guinea-pig customers in London. It will combine the functions of an Oyster card (Transport for

London's existing "cashless" method of prepaying for bus and Tube journeys), a Barclaycard,

and a "One Touch" contact less technology card.

This is the novel bit. It allows cardholders to make purchases of £10 or under more quickly and

conveniently with a single touch of their card against a reader instead of entering a PIN or

signature, thus reducing the need to use and carry cash. In a Bourne-style nightmare, your every

move and tiniest purchase will then be tracked by your bank and, if legislation allows,

officialdom. Thus can "they" know about your purchase of The Independent, a flapjack and day

trip to Tate Modern.

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Customer attitude towards plastic money Alternatively, the SIM card in your mobile phone could be used to pay for the little things in life

(they're trying this out in South Korea). Either way, you will be being monitored. Money is what

money does, according to the old adage. And in the future, your money may even spy on you.

HISTORY OF MONEY

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Barter

The first people didn't buy goods from other people with money. They used barter. Barter is the

exchange of personal possessions of value for other goods that you want. This kind of exchange

started at the beginning of humankind and is still used today. From 9,000-6,000 B.C., livestock

was often used as a unit of exchange. Later, as agriculture developed, people used crops for

barter. For example, I could ask another farmer to trade a pound of apples for a pound of

bananas.

Shells

At about 1200 B.C. in China, cowry shells became the first medium of exchange, or money. The

cowry has served as money throughout history even to the middle of this century.

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Customer attitude towards plastic money First Metal Money

China, in 1,000 B.C., produced mock cowry shells at the end of the Stone Age. They can be

thought of as the original development of metal currency. In addition, tools made of metal, like

knives and spades, were also used in China as money. From these models, we developed today's

round coins that we use daily. The Chinese coins were usually made out of base metals, which

had holes in them so that you could put the coins together to make a chain.

Silver

At about 500 B.C., pieces of silver were the earliest coins. Eventually in time they took the

appearance of today and were imprinted with numerous gods and emperors to mark their value.

These coins were first shown in Lydia, or Turkey, during this time, but the methods were used

over and over again, and further improved upon by the Greek, Persian, Macedonian, and Roman

empires. Not like Chinese coins, which relied on base metals, these new coins were composed

from scarce metals such as bronze, gold, and silver, which had a lot of intrinsic value.

Leather Currency

In 118 B.C., banknotes in the form of leather money were used in China. One-foot square pieces

of white deerskin edged in vivid colors were exchanged for goods. This is believed to be the

beginning of a kind of paper money.

Noses

During the ninth century A.D., the Danes in Ireland had an expression "To pay through the

nose." It comes from the practice of cutting the noses of those who were careless in paying the

Danish poll tax.

Paper Currency

From the ninth century to the fifteenth century A.D., in China, the first actual paper currency was

used as money. Through this period the amount of currency skyrocketed causing severe inflation.

Unfortunately, in 1455 the use of the currency vanished from China. European civilization still

would not have paper currency for many years.

Potlach

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http://library.thinkquest.org/28718/history.html#top%20of%20page





Customer attitude towards plastic money In 1500, North American Indians engaged in potlach, a term that describes the exchange of gifts

at banquets, dances, and various rituals. Since the trading of gifts was so important in figuring

the leaders’ community status, potlach went out of control as the gifts became more extravagant

in an effort to surpass others' gifts.

Wampum

In 1535, though likely well before this earliest recorded date, strings of beads made from clam

shells, called wampum, are used by North American Indians as money. Wampum means white,

the color of the clam shells and the beads.

Gold Standard

In 1816, England made gold a benchmark of value. This meant that the value of currency was

pegged to a certain number of ounces of gold. This would help to prevent inflation of currency.

The U.S. went on the gold standard in 1900.

Depression

Because of the depression of the 1930's, the U.S. began a world wide movement to end tying

currency to gold. Today, few nations tie the value of their currency to the price of gold. Other

government and financial institutions now try to control inflation.

Today

At present, nations continue to change their currencies. For example, the U.S. has already

changed its $100 and $20 banknotes. More changes are in the works.

Tomorrow

Tomorrow is already here. Electronic money (or digital cash) is already being exchanged over

the Internet.

Frauds in Paper Money

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Customer attitude towards plastic money Counterfeit money (Indian rupee notes). Fake currency detection

Counterfeit notes are a problem of almost every country but India has been hit really hard and

has become a very acute problem. Fake Indian currency of 100,500 and 1,000 rupees seems to

have flooded the whole system and there is no proper way to deal with them for a common

person. The legal way to handle is to lodge a police complain and mention the source of the

currency and then further investigations are done. The fake currency is then sent to RBI or

destroyed. RBI itself has installed currency verification and processing systems in its various

offices, each having a processing capacity of 50,000 to 60,000 pieces per hour.

PROBLEMS PEOPLE MAY FACE REPORTING / NOT REPORTING

If you are found to posses fake currency notes, and you cannot explain where you got them from,

you can even go to jail. Most people do not want to deal with this problem in a legal way

because our law enforcement (police) and legal system (courts) are not so easy to deal with.

Unlike most developed countries where a common person feels free to report even a smallest

problem to the police, in India it is quite different as most people avoid contacting police because

those investigations can be painfully inconvenient and especially because many people in law

enforcement are not exactly honest. The legal system is even more troublesome, even a

smallcourt case in India can easily drag for months and years.

Therefore more and more people have just started to live as is. It is not possible check each and

every currency note you receive in a bundle. Most people just pass it along to others, if someone

objects you just give different note. Infact most people in India do not even know how to the

things to check that differentiates a fake note from a real one.

Trying to pass on a currency note, knowing that is a fake, is a punishable offence under sections

120-B, 420 and 489-A, B, C & D of the Indian Penal Code. Possession of counterfeit notes too is

punishable with punishment as harsh as life imprisonment.

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FOR TOURISTS

For people travelling to India, always take money from authorized dealers and insist on a

currency exchange receipt. This proves the source of your funds in India. Never fall in prey to a

person who offers to give you a better exchange rate than exchange rate without receipt.

Similarly convert your currency back from an authorized place only. Fake foreign currency is

common in tourist areas.

HOW MUCH MONEY IN INDIA IS FAKE:

In year 2006: The Reserve Bank of India has estimated the amount of fake currency in

circulation at almost 1.7 trillion rupees, the report said. I am sure it is much-much higher now.

"The RBI annual report has confirmed all the fears of the security agencies on fake currency

notes in the country. The report shows that the number of counterfeit notes seized during the year

rose 87 per cent to 195,811 in FY08 compared to 104,743 in the previous year.”

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Know your Bank Note Currency - Identify fake Indian Rupees

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Optical Variable Ink:

The colour of the numeral 1000 appears green when the banknote is held flat but would change

to blue when the banknote is held at an angle. The font size is also reduced.

Latent Image:

When the note is head horizontally, the vertical band on the right shows an image of the number

1000.

Security Thread:

The note also has a three millimeter wide security thread with the inscriptions: one thousand, the

word 'Bharat' in Hindi and RBI.

Micro lettering:

The 'RBI' and the numeral, "1000" - which can be viewed with the help of a magnifying glass -

are between the Mahatma Gandhi portrait and the vertical band.

Watermark:

When the note is held against the light, the picture of Gandhi and an electrolyte mark showing

the number 1000 appear in the white space.

The best way to identify a note is the silver bromide thread that runs vertically

through a currency note. Fake currency notes tend to have silver-coloured band painted in place

of the silver thread. A real note has a prominent thread with raised 'RBI' markings made on it in

25

Customer attitude towards plastic money English and Hindi. Also, in a real note, the colour of the thread shifts from green to blue when

viewed from different angles.

CH.2 Plastic Money in India

Plastic Money never saw it Better in India than Now!

India has come out of self-binding shackles to look "young" again and the enthusiasm shared by

the young work force of the country is driving the economy like never-before. In the present day

world, no one wants to be bothered by the presence of huge cash in his or her wallet and the

Indians are no exceptions. The unprecedented growth in the number of credit card users has

stimulated the Indian economy by a significant extent. The arrival of malls, multiplexes, online

shopping stores and shopping complexes have contributed to the growth of the use of plastic

cards. It will not be wrong to say that such a scenario in context of the Indian market is not

driven by style statement and is driven more by needs. The benefits of plastic money have

offered unmatched ways to create equilibrium and offer an amicable solution when it comes to

purchases and the inability to possess or carry cash. The modern day Indian customers find it

easier to make physical payment (credit card payments) rather than carrying too much cash. The

introduction of credit card facilities to pay for mobile, electricity, movie tickets and other related

transactions have also contributed to the growth of plastic money in the country.

Best credit cards (India)

In context of the Indian market, the leading credit card service providers are ICICI, HDFC,

HSBC and Standard Chartered to name a few. These financial institutions have tried their hands

on ensuring value-addition while offering customer-friendly credit card deals.

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Customer attitude towards plastic money The Best credit cards in India are usually meant for specific user group such as women, students

and small business owners. These cards are offered to the prospective customers with appealing

deals. Statistics have clearly revealed that the numbers of credit card holders in India are close to

22 million as of January, 2007. It has been also revealed that the increasing consumerism in the

country has led to a two-fold increase in the number of credit card transactions from FY 2003-04

to 2005-06. The trends were as favorable as ever in the financial years, FY 2006-07 and 2007-08

and the same.

The credit card system started in India

While the first card was issued in India by visa in1981 and country first gold card was also

issued from the same.

The first international credit card was issued to a restricted number of customers by Andhra

bank1987 through the visa programme, after getting through special permission from RBI later

the AZN credit cards came in 1989.

However the credit card industry in India grown exponentially in its 15 years of business in the

country it had issued 2.69 crores card till December 2003. However in just one year 2004, the

figure has spurted to 4.33 crores.

RBI Guidelines on credit card operations

The reserve bank of India has placed draft guidelines on credit card operation from the members

of the public. The guidelines, when finally issued would be applicable to all commercial

banks/non-commercial finance companies (NBFC’s) and would come to effect as soon as

implemented.

It may be recalled that the Reserve bank had constituted a working Group to evolve a regulatory

mechanism for cards to ensure orderly growth of this segment of consumer credit and protect the

interest of banks / NBFC and their customers. The report of the group was placed in public

domain on April 23, 2005. The draft guidelines issued now have been framed taking into account

27

Customer attitude towards plastic money the feedback received from media, member of the public and other on the report of the working

Group. The draft guidelines are as each Bank /NBFC has a well documented policy and a fair

practices code for credit card and should widely disseminate contents.

CH.3 EATURES OF PLASTIC CARDS

As well as convenient, accessible credit, credit cards offer consumers an easy

way to track expenses, which is necessary for both monitoring personal

expenditures and the tracking of work-related expenses for taxation and

reimbursement purposes. Credit cards are accepted worldwide, and are available with a large

variety of credit limits, repayment arrangement, and other perks (such as rewards schemes in

which points earned by purchasing goods with the card can be redeemed for further goods and

services or credit card cash back).

Some countries, such as the United States, the United Kingdom, and France, limit the amount for

which a consumer can be held liable due to fraudulent transactions as a result of a consumer's

credit card being lost or stolen.

Revenues: Offsetting costs are the following revenues:

Interchange fee

Bank card associations such as Visa and MasterCard require merchants to pay billions of dollars

in Interchange fees to banks that issue their credit and debit cards. Card-issuing banks obtain

these interchange fees in addition to the enormous revenue they receive from card holder interest

and fees. Interchange fees are the single largest component of the various fees that banks deduct

from merchants' credit card sales. Merchants pay their banks fees of 1 to 6 percent of each sale

(for large merchants these fees may be negotiated, but will vary not only from merchant to

merchant, but also from card to card, with business cards and rewards cards generally costing the

28

http://en.wikipedia.org/wiki/Interchange_fee

http://en.wikipedia.org/wiki/MasterCard

http://en.wikipedia.org/wiki/Visa_(company)

http://en.wikipedia.org/wiki/Liability

http://en.wikipedia.org/wiki/France

http://en.wikipedia.org/wiki/United_Kingdom

http://en.wikipedia.org/wiki/United_States

http://en.wikipedia.org/wiki/Credit_card_cashback

http://en.wikipedia.org/wiki/Service_(economics)

http://en.wikipedia.org/wiki/Good_(economics)

http://en.wikipedia.org/wiki/Loyalty_program

http://en.wikipedia.org/wiki/Reimbursement

http://en.wikipedia.org/wiki/Tax

http://en.wikipedia.org/wiki/Expense

Customer attitude towards plastic money merchants more to process), which is why many merchants prefer cash, PIN-based debit cards,

or even cheques, or will add a percentage to the sale price to cover the interchange fee.

Traditionally, interchange fees have been set by the bank card associations and their major card-

issuing banks, who are the primary beneficiaries of these fees.

The interchange fee that applies to a particular merchant is a function of many variables

including the type of merchant, the merchant's total card sales volume, the merchant's average

transaction amount, whether the cards are physically present, if the card's magnetic stripe is read

or if the transaction is hand-keyed or entered on a website, the specific type of card, when the

transaction is settled, the authorized and settled transaction amounts, etc. For a typical credit card

issuer, interchange fee revenues may represent about a quarter of total revenues, but this will

vary greatly among credit card issuers. Interchange fees may consume over 50 percent of profits

from card sales for some merchants (such as supermarkets) that operate on slim margins.

Merchants contend

That interchange fees force them to raise prices for everyone; banks contend that interchange fees enable

them to offer better cardholder rewards for their best customers.

Hidden costs

In the United Kingdom, merchants won the right through The Credit Cards (Price

Discrimination) Order 1990 to charge customers different prices according to the payment

method. The United Kingdom is the world's most credit-card-intensive country, with 67 million

credit cards for a population of 59 million people.

In the United States, until 1984 federal law prohibited surcharges on card transactions. Although

the federal Truth in Lending Act provisions that prohibited surcharges expired that year, a

number of states have since enacted laws that continue to outlaw the practice; California,

Colorado, Connecticut, Florida, Kansas, Massachusetts, Maine, New York, Oklahoma, and

Texas have laws against surcharges.

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http://en.wikipedia.org/wiki/Truth_in_Lending_Act

http://en.wikipedia.org/wiki/Cheque

http://en.wikipedia.org/wiki/Debit_card

http://en.wikipedia.org/wiki/Cash


Redlining

Credit Card redlining is a spatially discriminatory practice among credit card issuers of providing

different amounts of credit to different areas, based on their ethnic-minority composition, rather

than on economic criteria, such as the potential profitability of operating in those areas.

Operating costs

This is the cost of running the credit card portfolio, including everything from paying the

executives who run the company to printing the plastics, to mailing the statements, to running the

computers that keep track of every cardholder's balance, to taking the many phone calls which

cardholders place to their issuer, to protecting the customers from fraud rings. Depending on the

issuer, marketing programs are also a significant portion of expenses.

Charge offs

When a consumer becomes severely delinquent on a debt (often at the point of six months

without payment), the creditor may declare the debt to be a charge-off. It will then be listed as

such on the debtor's credit bureau reports (Equifax, for instance, lists "R9" in the "status" column

to denote a charge-off.) The item will include relevant dates, and the amount of the bad debt.

A charge-off is considered to be "written off as uncollectable." To banks, bad debts and even

fraud are simply part of the cost of doing business.

However, the debt is still legally valid, and the creditor can attempt to collect the full amount for

the time periods permitted under state law, which is usually 3 to 7 years. This includes contacts

from internal collections staff, or more likely, an outside collection agency. If the amount is large

(generally over $1500 - $2000), there is the possibility of a lawsuit or arbitration.

In the US, as the charge off number climbs or becomes erratic, officials from the Federal Reserve

take a close look at the finances of the bank and may impose various operating strictures on the

bank, and in the most extreme cases, may close the bank entirely.

30

http://en.wikipedia.org/wiki/Arbitration

http://en.wikipedia.org/wiki/Collection_agency

http://en.wikipedia.org/wiki/Equifax

http://en.wikipedia.org/w/index.php?title=Charge-off&action=edit&redlink=1

http://en.wikipedia.org/wiki/Operating_cost

http://en.wikipedia.org/wiki/Redlining


Profits and losses

In recent times, credit card portfolios have been very profitable for banks, largely due to the

booming economy of the late nineties. However, in the case of credit cards, such high returns go

hand in hand with risk, since the business is essentially one of making unsecured

(uncollateralized) loans, and thus dependent on borrowers not to default in large numbers.

Costs

Credit card issuers (banks) have several types of costs:

Interest expenses

Banks generally borrow the money they then lend to their customers. As they receive very low-

interest loans from other firms, they may borrow as much as their customers require, while

lending their capital to other borrowers at higher rates. If the card issuer charges 15% on money

lent to users, and it costs 5% to borrow the money to lend, and the balance sits with the

cardholder for a year, the issuer earns 10% on the loan. This 5% difference is the "interest

expense" and the 10% is the "net interest spread".

Frauds in plastic money

The cost of fraud is high; in the UK in 2004 it was over £500 million. When a card is stolen, or

an unauthorized duplicate made, most card issuers will refund some or all of the charges that the

customer has received for things they did not buy. These refunds will, in some cases, be at the

expense of the merchant, especially in mail order cases where the merchant cannot claim sight of

the card. In several countries, merchants will lose the money if no ID card was asked for,

therefore merchants usually require ID card in these countries. Credit card companies generally

guarantee the merchant will be paid on legitimate transactions regardless of whether the

consumer pays their credit card bill.

Problems

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http://en.wikipedia.org/wiki/Economic_boom

Customer attitude towards plastic money A smart card, combining credit card and debit card properties. The 3 by 5 mm security chip

embedded in the card is shown enlarged in the inset. The contact pads on the card enable

electronic access to the chip.

The low security of the credit card system presents countless opportunities for fraud. This

opportunity has created a huge black market in stolen credit card numbers, which are generally

used quickly before the cards are reported stolen.

The goal of the credit card companies is not to eliminate fraud, but to "reduce it to manageable

levels". This implies that high-cost low-return fraud prevention measures will not be used if their

cost exceeds the potential gains from fraud reduction.

Most internet fraud is done through the use of stolen credit card information which is obtained in

many ways, the simplest being copying information from retailers, either online or offline.

Despite efforts to improve security for remote purchases using credit cards, systems with security

holes are usually the result of poor implementations of card acquisition by merchants. For

example, a website that uses SSL to encrypt card numbers from a client may simply email the

number from the web server to someone who manually processes the card details at a card

terminal. Naturally, anywhere card details become human-readable before being processed at the

acquiring bank, a security risk is created. However, many banks offer systems where encrypted

card details captured on a merchant's web server can be sent directly to the payment processor.

Controlled Payment Numbers are another option for protecting one's credit card number: they are

"alias" numbers linked to one's actual card number, generated as needed, valid for a relatively

short time, with a very low limit, and typically only valid with a single merchant.

The Federal Bureau of Investigation and U.S. Postal Inspection Service are responsible for

prosecuting criminals who engage in credit card fraud in the United States, but they do not have

the resources to pursue all criminals. In general, federal officials only prosecute cases exceeding

US $5000 in value. Three improvements to card security have been introduced to the more

common credit card networks but none has proven to help reduce credit card fraud so far. First,

the on-line verification system used by merchants is being enhanced to require a 4 digit Personal

Identification Number (PIN) known only to the card holder.

32

http://en.wikipedia.org/wiki/Personal_Identification_Number

http://en.wikipedia.org/wiki/Personal_Identification_Number

http://en.wikipedia.org/wiki/Credit_card_fraud

http://en.wikipedia.org/wiki/U.S._Postal_Inspection_Service

http://en.wikipedia.org/wiki/Federal_Bureau_of_Investigation

http://en.wikipedia.org/wiki/Controlled_Payment_Number

http://en.wikipedia.org/wiki/Transport_Layer_Security

http://en.wikipedia.org/wiki/Off-line

http://en.wikipedia.org/wiki/Online

http://en.wikipedia.org/wiki/Credit_card_number

http://en.wikipedia.org/wiki/Black_market

http://en.wikipedia.org/wiki/Fraud

http://en.wikipedia.org/wiki/Debit_card

http://en.wikipedia.org/wiki/Smart_card

Customer attitude towards plastic money Second, the cards themselves are being replaced with similar-looking tamper-resistant smart

cards which are intended to make forgery more difficult. The majority of smartcard (IC card)

based credit cards comply with the EMV (Euro pay MasterCard Visa) standard. Third, an

additional 3 or 4 digit code is now present on the back of most cards, for use in "card not

present" transactions.

The way credit card owners pay off their balances has a tremendous effect on their credit history.

All the information is collected by credit bureaus. The credit information stays on the credit

report, depending on the jurisdiction and the situation, for 1, 2, 5, 7 or even 10 years after the

debt is repaid.

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http://en.wikipedia.org/wiki/Credit_bureau

http://en.wikipedia.org/wiki/Credit_history

http://en.wikipedia.org/wiki/EMV

http://en.wikipedia.org/wiki/Forgery




Ch. 4 TYPES OF PASTIC CARDS

Credit card

A credit card is plastic money that is used to pay for products and services at over 20 million

locations around the world. All you need to do is produce the card and sign a charge slip to pay

for your purchases. The institution which issues the card makes the payment to the outlet on your

behalf; you will pay this 'loan' back to the institution at a later date.

Debit card

Debit cards are substitutes for cash or check payments, much the same way that credit cards are.

However, banks only issue them to you if you hold an account with them. When a debit card is

used to make a payment, the total amount charged is instantly reduced from your bank balance.

A debit card is only accepted at outlets with electronic swipe-machines that can check and

deduct amounts from your bank balance online.

Charge card

A charge card carries all the features of credit cards. However, after using a charge card you will

have to pay off the entire amount billed, by the due date. If you fail to do so, you are likely to be

considered a defaulter and will usually have to pay up a steep late payment charge. When you

use a credit card you are not declared a defaulter even if you miss your due date. A 2.95 per cent

late payment fees (this differs from one bank to another) is levied in your next billing statement.

Amex card

34

http://in.rediff.com/getahead/2007/apr/18credit.htm

Customer attitude towards plastic money Amex stands for American Express and is one of the well-known charge cards. This card has its

own merchant establishment tie-ups and does not depend on the network of MasterCard or Visa.

This card is typically meant for high-income group categories and companies and may not be

acceptable at many outlets. There are a wide variety of special privileges offered to Amex

cardholders.

MasterCard and Visa

MasterCard and Visa are global non-profit organizations dedicated to promote the growth of the

card business across the world. They have built a vast network of merchant establishments so

that customer’s world-wide may use their respective credit cards to make various purchases.

Smart card

A smart card contains an electronic chip which is used to store cash. This is most useful when

you have to pay for small purchases, for example bus fares and coffee. No identification,

signature or payment authorization is required for using this card. The exact amount of purchase

is deducted from the smart card during payment and is collected by smart card reading machines.

No change is given. Currently this product is available only in very developed countries like the

United States and is being used only sporadically in India.

Diners Club card

Diners Club is a branded charge card. There are a wide variety of special privileges offered to the

Diners Club cardholder. For instance, as a cardholder you can set your own spending limit.

Besides, the card has its own merchant establishment tie-ups and does not depend on the network

of MasterCard or Visa. However, since this card is typically meant for high-income group

categories, it may not be acceptable at many outlets. It would be a good idea to check whether a

member establishment does accept the card or not in advance.

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Customer attitude towards plastic money Photo card

If your photograph is imprinted on a card, then you have what is known as a photo card. Doing

this helps identify the user of the credit card and is therefore considered safer. Besides, in many

cases, your photo card can function as your identity card as well.

Global card

Global cards allow you the flexibility and convenience of using a credit card rather than cash or

travelers checks while travelling abroad for either business or personal reasons.

Co-branded card

Co-branded cards are credit cards issued by card companies that have tied up with a popular

brand for the purpose of offering certain exclusive benefits to the consumer. For example, the

Citi-Times card gives you all the benefits of a Citibank credit card along with a special discount

on Times Music cassettes, free entry to Times Music events, etc.

Affinity card

The card issuer ties up with popular organizations/ institutions which are often non-profit

organizations (City-WWF card or the Stan chart-Cricket cards) to offer an affinity card. When

the card is used, a certain percentage is contributed to the organization /institution by the card

issuer.

Add-on card

An add-on card allows you to apply for an additional credit card within the overall credit limit.

You can apply for this card in the name of family members like your father/ mother/ spouse/

brother/ sister/ all children above 18 years of age. Your billing statement would reflect the details

of purchases made using the add-on card. You are liable to make good all the payments for the

purchases made using the add-on card(s).

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Customer attitude towards plastic money Secured credit cards

A secured credit card is a type of credit card secured by a deposit account owned by the

cardholder. Typically, the cardholder must deposit between 100% and 200% of the total amount

of credit desired. Thus if the cardholder puts down $1000, they will be given credit in the range

of $500–$1000. In some cases, credit card issuers will offer incentives even on their secured card

portfolios. In these cases, the deposit required may be significantly less than the required credit

limit, and can be as low as 10% of the desired credit limit. This deposit is held in a special

savings account. Credit card issuers offer this because they have noticed that delinquencies were

notably reduced when the customer perceives something to lose if the balance is not repaid.

The cardholder of a secured credit card is still expected to make regular payments, as with a

regular credit card, but should they default on a payment, the card issuer has the option of

recovering the cost of the purchases paid to the merchants out of the deposit. The advantage of

the secured card for an individual with negative or no credit history is that most companies report

regularly to the major credit bureaus. This allows for building of positive credit history.

Although the deposit is in the hands of the credit card issuer as security in the event of default by

the consumer, the deposit will not be debited simply for missing one or two payments. Usually

the deposit is only used as an offset when the account is closed, either at the request of the

customer or due to severe delinquency (150 to 180 days). This means that an account which is

less than 150 days delinquent will continue to accrue interest and fees, and could result in a

balance which is much higher than the actual credit limit on the card. In these cases the total debt

may far exceed the original deposit and the cardholder not only forfeits their deposit but is left

with an additional debt.

Most of these conditions are usually described in a cardholder agreement which the cardholder

signs when their account is opened.

Secured credit cards are an option to allow a person with a poor credit history or no credit history

to have a credit card which might not otherwise be available. They are often offered as a means

of rebuilding one's credit. Secured credit cards are available with both Visa and MasterCard

logos on them. Fees and service charges for secured credit cards often exceed those charged for

37

http://en.wikipedia.org/wiki/Logo


http://en.wikipedia.org/wiki/VISA_(credit_card)

http://en.wikipedia.org/wiki/Credit_history

http://en.wikipedia.org/wiki/Savings_deposit

http://en.wikipedia.org/wiki/Deposit_account

Customer attitude towards plastic money ordinary non-secured credit cards, however, for people in certain situations, (for example, after

charging off on other credit cards, or people with a long history of delinquency on various forms

of debt), secured cards can often be less expensive in total cost than unsecured credit cards,

even including the security deposit.

Sometimes a credit card will be secured by home. This is called a home equity line of credit

(HELOC).

Prepaid "credit" cards

A prepaid credit card is not a credit card, since no credit is offered by the card issuer: the card-

holder spends money which has been "stored" via a prior deposit by the card-holder or someone

else, such as a parent or employer. However, it carries a credit-card brand (Visa, MasterCard,

American Express or Discover) and can be used in similar ways just as though it were a regular

credit card.

After purchasing the card, the cardholder loads it with any amount of money, up to the

predetermined card limit [and then uses the card to make purchases the same way as a typical

credit card. Prepaid cards can be issued to minors (above 13) since there is no credit line

involved.

The main advantage over secured credit cards (see above section) is that you are not required to

come up with $500 or more to open an account. With prepaid credit cards you are not charged

any interest but you are often charged a purchasing fee plus monthly fees after an arbitrary time

period. Many other fees also.

Collectible credit cards

A growing field of numismatics (study of money), or more specifically economic (study of

money-like objects), credit card collectors seek to collect various embodiments of credit from the

now familiar plastic cards to older paper merchant cards, and even metal tokens that were

accepted as merchant credit cards. Early credit cards were made of celluloid, then metal and

fiber, then paper and are now mostly plastic.

38

http://en.wikipedia.org/wiki/Fiber

http://en.wikipedia.org/wiki/Celluloid

http://en.wikipedia.org/wiki/Metal

http://en.wikipedia.org/wiki/Exonumia

http://en.wikipedia.org/wiki/Numismatics

http://en.wikipedia.org/wiki/Home_equity_line_of_credit


Ch.5 The Rise of Plastic Money

Indian consumers have never had it so good. The soiled

notes are definitely out. Plastic money in! Carrying

cash is no more `a pain in the neck' as consumers are

relying more on the `plastic card’, which gives them

money on credit.

Credit Cards have finally arrived in India. The card

industry which is growing at the rate of 20% per annum is flooded with cards ranging from gold,

silver, global, smart to secure….the list is endless. From just two players in early 80s, the

industry now houses over 10 major players vying for a major chunk of the card pie.

Currently four major bishops are ruling the card empire---Citibank, Standard Chartered Bank,

HSBC and State Bank of India (SBI). The industry, which is catering to over 3.8 million card

users, is expected to double by the fiscal 2003. According to a study conducted by State Bank of

India, Citibank is the dominant player, having issued 1.5 million cards so far. Stan chart follows

way behind with 0.67 million, while Hongkong Bank has 0.3 million credit card customers.

Among the nationalized banks, SBI tops the list with 0.28 million cards, followed by Bank of

Baroda at 0.22 million.

The credit card market in India, which started out in 1981, is on the verge of an unprecedented

boom. Between 1987 and 2000, the market has virtually grown to over 3.8 million cards with

almost 25-30 % growth in new cardholders.

39

Customer attitude towards plastic money SBI, one of the late entrants in the card market, has managed to grab over 8 per cent of the

market share from the bigwigs like Citibank and Standard Chartered Bank. The bank's credit

card business has grown by 8 per cent over the last two years. According to bank officials, SBI's

card issue so far is to the tune of 0.28 million which is expected to cross the 1 million mark by

the fiscal 2002. The bank is also planning to launch debit card, global card, gold card and

corporate card shortly.

In a bid to tap the lower middle class segment, SBI is currently sharpening its marketing skills

for the launch of `secure card', aimed at its fixed deposit clients. The bank will be launching this

new product at five of its branches at Delhi, the country's capital within a fortnight. With the

launch of `secure card', SBI will become the first bank to tap the lower middle class segment.

By the end of the fiscal 2000, the bank is expected to take the secure card to over 36 centers

throughout the country.

The bank is putting its best foot forward to compete with global card majors like Citibank and

Standard Chartered Bank. The global bigwigs have already established themselves as the

`bankable brands' in the metros. However, in a bid to move to greener pastures, they are trying to

tap the co-branded card market which has vast potential for growth. Citibank, which is leading

the card empire, recently launched a co-branded credit card in partnership with Indian Oil

Corporation. The card will offer its member’s reward points on every international spend which

can be redeemed for free fuel in India. Thus in a scenario where almost the entire card market is

dominated by the phirang banks, why the SBI-GE Capital subsidiary gung-ho about slicing off a

major chunk of the card market?

Expanding The Card Pie

There may be 3.8 million cards today. But the catch is that there are not 3.8 million cardholders -

one person has multiple cards. This makes the job of selling cards all the more difficult since

everybody is targeting the same market segment. What's more, multiple card ownership ends up

splitting card spends. If SBI ends up targeting the same multiple card customer-bases, then it is

unlikely to make much headway. Reason: Citibank and other foreign issuers like Hongkong

Bank and Standard Chartered Bank have already embarked on a massive marketing campaign to

40

Customer attitude towards plastic money boost card usage. Thus to move ahead of these phirang banks, nationalized banks like SBI and

BoB are targeting virgin territories. These banks are taking their products to smaller townships in

Uttar Pradesh, Andhra Pradesh and Orissa including others to widen their client base. Even in a

city like Mumbai, with an adult population of 7 million, card ownership is barely 2.5 million.

Now, SBI is perhaps best poised to geographically expand the existing credit card base and drive

up penetration. Its 8,800 branch network with an almost 100 per cent geographic coverage covers

almost 25% of the bankable population of the country. SBI is banking heavy on direct mailing

exercise aimed at its existing database, and bypassing the direct sales model, adopted by the

foreign banks.

CitibankStandard Chartered Bank

HSBC SBI ANZ Grindlays

Bank of Baroda

Others

Card Issue (31st March 2000)

1.5 m 0.67 m 0.30 m 0.28 m 0.26 m 0.22 m 0.57 m

41


Targeting The Customers

Currently, there is lack of awareness among potential cardholders, which is likely to stifle card

growth. Most of the banks are relying on freebees and bundle of services like free accident

policy, special shopping offers, purchase protection and add-ons like additional cards for family

members of the cardholder to woo customers. The smart ones like HSBC are offering very high

credit limit to tap customers. Last month, HSBC launched `Maha' card `with jyada power' which

offer customers 25 % higher credit limit than the limit on any other credit card held by the

cardholder.

In order to track the 4 million potential customers presently untouched by the `plastic money' is

immense. The only solution is to expand geographical coverage, which is tricky for the simple

fact that Visa and MasterCard have distinct skews towards metros. Only banks, which penetrate

the Indian countryside, will be able to stand the test of the time. For present, consumer is

definitely the king.

The How's & Wherefores of Plastic Money

42

Customer attitude towards plastic money Not all credit cards are created equal. In fact, they can be as individualist as the people who use

them. So when you're trying to find the best one for your individual needs, it can get very

confusing very fast.

Fortunately, there are lots of online credit card clearing house type companies who help you do

the research and save you time, money and headaches. Just as with everything in life, a little

homework goes a long way. It behooves us all, in this fast-becoming-cashless-society.

To familiarize ourselves with the businesses that provide this credit card screening service; a

short visit is a real eye-opener when you see how much is out there in the way of plastic money.

There are low-to-no interest credit cards, secured credit card, airline mile cards, cards that offer

rewards in the form of cash back bonuses on your purchases (or in other forms, such as points),

cards with no annual fee, cards with different rates and terms - the list is almost endless. Do your

homework and choose well. After you've figured out which card is right.

It's almost imperative these days to have a credit card and break it out now and then. Those who

do not will have a low credit rating or none at all. And since you may well have to depend on

your credit rating one day for something important, using credit cards wisely makes very good

sense.

Let's say you stumbled on a fantastic deal for a house. You weren't planning on it, but it would

be a real opportunity lost if you couldn't take advantage of it. You go for a loan.

The first thing your potential creditors want to know is whether you are capable of repaying your

debt. They'll look at your job, how much overhead you have, where you live now, and all kinds

of factors. And they will definitely get your credit rating. This one number alone carries a heavy

weight in a creditor's mind. In fact, it could easily make or break the deal of a lifetime.

Use your credit card wisely, not frivolously, and you will build the strength of your credit history

with every purchase and payment. Credit card companies love to rake in the late fees and raise

interest rates when you fall behind.

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http://www.articlealley.com/article_124220_19.html





Customer attitude towards plastic money Being aware of these pitfalls is part of being a responsible adult these days. Building a good

credit card payment history is part and parcel of good financial sense. You don't need to maintain

a zero balance. In fact, a balance can demonstrate, to your benefit that you're able to borrow and

pay back on a regular basis. Just keep the balance low. Take responsibility for your credit, and it

will be there for you and your family when you really need it.

CH.6 PLASTIC CARDS & USES:-

Card Types and there uses.

This section of the Intercard web site is designed to help you understand the various types of

plastic card available and their respective uses.

Access Control Card

Access control card is a plastic card used to gain/control access to premises or enter restricted

areas. Usually associated with magnetic or chip cards and proximity cards with or without photo

e.g. ID badges.

44



Customer attitude towards plastic money Affinity card

Affinity card is a form of loyalty card where the co-branding partner is a charity or organisation

that benefits financially from card use.

Barcode Card

Barcode card is a card with printed codes made from vertical lines of different thickness used for

fast error free data entry printed somewhere on the face or reverse. There is an array of machine-

readable rectangular bars and spaces arranged in a specific way defined in international standards

to represent letters, numbers, and other human-readable symbols. Cards are either the usually 30

micron credit card type cards or alternatively can be ‘pop out’ cards.

Blank Cards

Blank card it is totally blank card & cards with no printing usually used in imaging machines.

CR80 Card

CR80 Card it state about card size & information it is the description for a standard credit card

size (3 3/8" x 2 1/8" x .030).

Charge Card

Charge card is a payment card that provides automatic credit within a given invoice date (usually

monthly).

Cheque guarantee card

Cheque guarantee card is a card issued by a bank or building society for the purpose of

guaranteeing settlement of cheques to third parties or supporting the encashment of cheques at

financial institutions up to a specified value. Most debit and some credit cards may also function

as cheque guarantee cards (multifunction cards).

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Customer attitude towards plastic money Chip Card

Chip card is another name for a smart card; refers to a plastic card with an embedded integrated

circuit, which offers memory and micro processing capabilities.

City card

City card is a multi-application prepayment card for use within a specific urban area - also

known as town card.

Combo Card

Combo card is a smart card with both "contact" and "contactless" technology on one card. It is a

smart card that transmits and receives data using radio frequencies (RF) technology to

communicate with compatible terminal. Eliminates physical contact or insertion into reader

terminal while retaining intelligence. Often used in walk-by or gate access applications for mass

transit. Any card where information is transferred to a reader via a series of contact points

located on the card is knows as contact car

Company Card

Company card is a card issued to or by a company for use by an employee for business-related

transactions (e.g., purchases, logical access, and physical access).

Contactless Smart Card

Contactless smart card is a smart card that transmits and receives data using radio frequencies

(RF) technology to communicate with compatible terminal. Eliminates physical contact or

insertion into reader terminal while retaining intelligence. Often used in walk-by or gate access

applications for mass transit.

Contact Smart Card

46

Customer attitude towards plastic money Contact smart card is a smart card that requires physical contact with a card reading device to

exchange data. Any card where information is transferred to a reader via a series of contact

points located on the card.

Credit Card

Credit card is a term used for a card allowing its owner to spend money with no immediate

reimbursement. It is basically use for any credit purpose in terms of money.

Debit Card

Debit card is a card similar to a credit card, but differs by immediately withdrawing money from

an account and transferring it to another account. It replaces cheques (with no delay to give the

issuer time to cover it) and does not have a credit line associated.

Digital Optical Laser Card

Digital optical laser card is a portable card that passively stores information in the form of high-

density marks or bars.

Electronic Purse (e-purse)

Electronic card is a smart card that contains electronic money. It is sometimes called the

electronic wallet or the stored value card (SVC).

E-wallet

E-wallet cards it is similarly to electronic purse (e-purse) it is a small portable device that

contains electronic money. E-wallets are generally used for low-cost transactions.

Financial Hologram Card

Financial hologram card is a card using a hologram, 30 mil thickness, ISO cards, e.g. MasterCard

/ Visa and others.

47

Customer attitude towards plastic money Financial Cards (Other)

Financial cards (other) are typically Debit, Cheque, Charge or ATM cards not using a hologram.

Fuel card

Fuel card is a special purpose charge card used most by transport drivers to pay for fuel on the

road. It is basically use to pay out the fuel bills.

Generic Card

Generic card is a card that utilizes a base card stock of a pre-designed, centralized image and is

not individualized to a specific issuer (or department) within its basic design. It may have an IIN

(Issuer Identification Number) that groups the issuer with other organizations (for benefits of

scales of volumes) but the users’ card can be subsequently individualized by personalization

techniques.

Gift Card

Gift card is a standard or custom size CR80 card with a stored or prepaid value placed on the

card through magnetic striping or bar coding. Usually a retail card initiated at cash desks or

checkouts.

Health Card

Health card is a card used to store information about medical history or insurance coverage.

Commonly used in the USA these cards can be of any technology.

Hologram card

Hologram card is an identification card bearing a hologram as a security measure against

counterfeiting.

48

Customer attitude towards plastic money Hybrid Cards

Hybrid card are cards that support more than one technology, such as an IC (integrated circuit)

card with a magnetic stripe.

IC Card

IC Card is an abbreviation for Integrated Circuit or "chip card". The banking industry prefers the

term "IC card" or "ICC".

ID card

ID card is an abbreviation for identity card: a card that identifies both the bearer and the issuer.

All financial transaction cards are I.D. cards.

Java Card

Java cards it is just like a software basis smart card that supports applications written in JAVA.

Key Card

Key card is a plastic card used to gain access to premises, usually associated with magnetic stripe

and proximity cards.

Laser Engraved Cards

Laser engraved card are cards produced from a particular group of thermoplastics. These have

the properties of high-durability, light weight and flexibility because they are polymers linked

together by carbonate groups. Polycarbonate cards are stronger than Polyvinyl Chloride (PVC)

cards and thus more expensive. However, for applications where longevity and higher security is

pre- requisite e.g. National ID, Passport and Driver’s Licence cards, Polycarbonate cards are

ideal. These cards are utilised where the virtually tamper-proof personalisation technique of laser

engraving is required.

Loyalty Card

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Customer attitude towards plastic money Loyalty card is typically a standard CR80 size card that has off line accounting capabilities e.g.

mileage recording or merchandise purchases and often used as a retail frequent user card offering

promotional benefits.

Magnetic Stripe Card

Magnetic card is a card that has a strip of magnetic tape material attached to its surface. This is

the standard technology used for bankcards (ATM, credit, and debit cards) and for other

applications.

Membership Card

Membership card is just giving identity to an individual an identity is usually a club member card

for ID purpose.

Memory Card

Memory card is a type of smart card. Also known as a synchronous card, it features 256 bits or

32-byte memory and is suitable for use as a token or identification card. It is controlled only by

fixed logic rather than by a microprocessor.

Microprocessor Card

Microprocessor card is a type of smart card, also known as an asynchronous card. Features 1

kilobyte to 64 Kbytes of memory and is suitable for portable or confidential files, identification,

tokens, electronic purse or any combination of uses.

Mifare Card

Mifare card it give standarised to the card & it is a proprietary contactless smart card standard,

equivalent to ISO 14443 Type A.

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Customer attitude towards plastic money Multi-application Smart Card

Multi-application card is a microprocessor smart card that can handle a variety of applications -

typically with lots of memory and computing power – whilst maintaining separate security

conditions.

Non-magnetic Card

Non magnetic card &it is a card without a magnetic stripe it contain any information in a view

form e.g. ID cards.

Optical Card

Optical card is a card with information recorded on an optical memory stripe, similar to compact

disks.

Other Secure Card

Other secure card are just give for the basis security & are usually retail, oil/gas, telecom,

transport, and pay TV cards.

PCMCIA Card

PCMCIA Card is an abbreviation for Personal Computer Memory Card International

Association: it is not considered to be a smart card, as, whilst this card type contains

semiconductor chips, it is (a) physically thicker than a smart card, and (b) the connection means

is through an edge connector, not via the standard surface-contact method.

PETG

PETG formal name is polyethylene terephthalate-glycol-modified is extremely clear. PETG

does not contain a UV inhibitor. (Polycarbonate) .

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Customer attitude towards plastic money Photo ID card

Photo ID card is an identification card bearing a photographic image of the cardholder. The

image can be an actual photograph or one captured wholly electronically.

PVC card

PVC Abbreviation is Polyvinyl Chloride. It is basically use to prepare a plastic card. The primary

material used for typical plastic cards. Payment Card

Payment card is a card that is used as an identifier when used to transact full or part payment a

bill. It enables the payees’ details to be swiftly recorded automatically and credit lodged against

the account.

Pay TV Card

Pay TV Card is usually a chip card subscribing to a television service it is just connecting to

satellite for view of television. E.g. satellite TV.

Phone Card

Phone card is a stored value card that allows the user to access telephone networks via a PIN

number which is usually covered by a scratch-off panel for security.

Plastic card

Plastic card is a generic description of all payment cards including credit, debit and cheque

guarantee. It is just like carrying money in face of plastic card

Polycarbonate Cards

Polycarbonate card are cards produced from a particular group of thermoplastics. These have the

properties of high-durability, light weight and flexibility because they are polymers linked

together by carbonate groups. Polycarbonate cards are stronger than Polyvinyl Chloride (PVC)

cards and thus more expensive. However, for applications where longevity and higher security is

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Customer attitude towards plastic money pre- requisite e.g. National ID, Passport and Driver’s Licence cards, Polycarbonate cards are

ideal. These cards are utilized where the virtually tamper-proof personalization technique of laser

engraving is required.

Prepaid Card

Prepaid card is a card paid for at Point of Sale and permits the holder to buy goods or services up

to the prepaid value. Not all such cards show the identity of the bearer (e.g. phone cards).

Promotional Card

Promotional card is typically a card offering special benefits to users e.g. discounts or rewards.

Protected Memory Card

Protected memory card is a smart card that requires a secret code or PIN number to be entered

before the data can be sent/received from the chip.

Proximity Card

Proximity card is typically a contact less card whose presence and data can be sensed by an

interface device not in physical contact with the card and used for access control applications.

Embedded in the card is a metallic antenna coil, which allows it to communicate with an RF

external antenna.

Radio Frequency Card (RFlD)

Radio Frequency card (RFID). A proximity card in which the coupling between the card and the

interface device is by radio.

Retailer (Store) Card

Retailer (store) card it is given by retail group. It is a proprietary card used and issued by a

retailer or retailing group.

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Customer attitude towards plastic money Scratch Card

Scratch card is mainly used in mobile refilling or any price reveling it & it is a card that is

produced with special ink that can be scratched away to reveal a number or message.

Secure Card

Secure cards it is use for security are cards with an intrinsic value e.g. financial, other secure

cards etc.

SIM card

SIM card is an abbreviation for Subscriber Identification Module: a smart card that connects to a

GSM phone and establishes the user’s identity.

Single-application Smart Card

Single-application smart card is a smart card issued to a single organization for a singular

purpose.

Smart Card/Contact Smart Card

Smart card/Contact smart card also called a "chip" card or IC card. A smart card is a plastic card

with an embedded microchip that may be used to store information about the cardholder or

record card transactions as they occur. Plastic credit sized card that contains one or more

semiconductor chips. This is a credit card or SIM card sized plastic card with an embedded

microcircuit that contains either a: Memory Card, Protected Memory Card or Microprocessor

Card.

Store card

Stored card is a financial transaction card associated with a retailer or group of retail stores that

can be used only for purchases from the retailers concerned.

Stored Value Card

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Customer attitude towards plastic money Stored Value Card – is a financial card e.g. cash card, electronic purse, prepaid card that is

loaded with a certain amount of money/value e.g. loyalty points or credit for canteen meals with

each 'purchase' amount deducted from the card.

Telephone Card

Telephone Card is a card that can be utilized for the payment of telephone calls. This types of

card maybe a prepaid card, a credit card, or one that adds the cost of the call to a standard bill.

CH. 7. SAFETY MEASURES & PRECAUTIONS

PLASTIC CARDS

SAFETY MEASURES

Credit card security relies on the physical security of the plastic card as well as the privacy of the

Some merchants will accept a credit card number for in-store purchases, whereupon access to the

number allows easy fraud, but many require the card itself to be present, and require a signature.

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Customer attitude towards plastic money Thus, a stolen card can be cancelled, and if this is done quickly, no fraud can take place in this

way. For internet purchases, there is sometimes the same level of security as for mail order

(number only) hence requiring only that the fraudster take care about collecting the goods, but

often there are additional measures. The main one is to require a security PIN with the card,

which requires that the thief have access to the card, as well as the PIN.

An additional feature to secure the credit card transaction and prohibit the use of a lost credit

card is the MobiClear solution. Each transaction is authenticated through a call to the user mobile

phone. The transaction is released once the transaction has been confirmed by the cardholder

pushing his/her pin code during the call.

The PCI DSS is the security standard issued by The PCI SSC (Payment Card Industry Security

Standards Council). This data security standard is used by acquiring banks to impose cardholder

data security measures upon their merchants.

Interest on outstanding balances.

Interest charges vary widely from card issuer to card issuer. Often, there are "teaser" rates in

effect for initial periods of time (as low as zero percent for, say, six months), whereas regular

rates can be as high as 40 percent. In the U.S. there is no federal limit on the interest or late fees

credit card issuers can charge; the interest rates are set by the states, with some states such as

South Dakota, having no ceiling on interest rates and fees, inviting some banks to establish their

credit card operations there. Other states, for example Delaware, have very weak usury laws. The

teaser rate no longer applies if the customer doesn't pay his bills on time, and is replaced by a

penalty interest rate (for example, 24.99%) that applies retroactively. So customers should be

wary of these offers that usually contain some traps.

Fees charged to customers the major fees are for:-

Late payments or overdue payments

Charges that result in exceeding the credit limit on the card (whether done deliberately or

by mistake), called over limit fees

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Returned cheque fees or payment processing fees (e.g. phone payment fee)

Cash advances and convenience cheques (often 3% of the amount).

Transactions in a foreign currency (as much as 3% of the amount). A few financial

institutions do not charge a fee for this.

Membership fees (annual or monthly), sometimes a percentage of the credit limit.

Exchange Rate Loading Fees (May not even appear on your statement!).

Tips for prospective or existing credit card holders:

A prospective or existing credit card holder must observe carefulness while applying or owning a

credit card. The terms and conditions of the credit card agreement must be carefully viewed and

understood so that a clear insight can be achieved. This will help a credit card holder to make the

best use of the plastic money. The credit card repayments must be made before the due date to

avoid attraction of late fee, penalty and surcharge. This can also be done to maintain a smooth

flow of business transactions and ensuring one's credit stability and visibility in the plastic

money market.

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Customer attitude towards plastic money Precautions

To Avoid:

Bending the Card.

Exposure to electronic devices and gadgets.

Direct exposure to sunlight.

Be cautious about disclosing your account number over the phone unless you know

you're dealing with a reputable company.

Never put your account number on the outside of an envelope or on a postcard.

Draw a line through blank spaces on charge or debit slips above the total so the amount

cannot be changed.

Don't sign a blank charge or debit slip.

Tear up carbons and save your receipts to check against your monthly statements.

Cut up old cards - cutting through the account number - before disposing of them.

Open monthly statements promptly and compare them with your receipts. Report

mistakes or discrepancies as soon as possible to the special address listed on your

statement for inquiries. Under the FCBA (credit cards) and the EFTA (ATM or debit

cards), the card issuer must investigate errors reported to them within 60 days of the date

your statement was mailed to you.

Keep a record - in a safe place separate from your cards - of your account numbers,

expiration dates, and the telephone numbers of each card issuer so you can report a loss

quickly.

Carry only those cards that you anticipate you'll need.

To Do:

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Please sign on the signature panel on the reverse of the Card immediately with a non-

erasable ball-point pen (preferably in black ink). This will ensure that the benefits of

membership are yours and yours alone.

Keep the Card in a prominent place in your wallet. You will notice if it is missing.

Reasons credit card being rejected at retail outlet:

One may have exceeded the borrowing limit or defaulted (constantly) on minimum

payment due.

The Card is hot listed.

The card has crossed its expiration date.

Non-receipt of dues of one-card blocks future transactions on any other card(s) held of

the same card-issuing bank.

The magnetic stripe on the reverse of the card is damaged i.e. has been scratched or exposed to

continuous heat/direct sunlight or magnetic field-like card kept near a TV set / other electronic

appliances.

Systems or technology failures have in rare instances also led to non acceptance of cards when

swiped through Electronics.

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CH.8 CREDIT CARD & DEBIT CARD

Credit Card

Credit cards in India are gaining ground. A number of banks

in India are encouraging people to use credit card. The

concept of credit card was used in 1950 with the launch of

charge cards in USA by Diners Club and American Express. Credit card however became more

popular with use of magnetic strip in 1970.

Credit card in India became popular with the introduction of foreign banks in the country.

Credit cards are financial instruments, which can be used more than once to borrow money or

buy products and services on credit. Basically banks, retail stores and other businesses issue

these.

Workings of credit caard

An example of the front of a typical credit card:

1. Issuing bank logo

2. EMV chip

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3. Hologram

4. Credit card number

5. Card brand logo

6. Expiry Date

7. Cardholder's name

An example of the reverse side of a typical credit card:

1. Magnetic Stripe

2. Signature Strip

3. Card Security Code

Credit cards are issued after an account has been approved by the credit provider, after which

cardholders can use it to make purchases at merchants accepting that card. When a purchase is

made, the credit card user agrees to pay the card issuer. The cardholder indicates his/her consent

to pay, by signing a receipt with a record of the card details and indicating the amount to be paid

or by entering a Personal identification number (PIN). Also, many merchants now accept verbal

authorizations via telephone and electronic authorization using the Internet, known as a

'Card/Cardholder Not Present' (CNP) transaction.Electronic verification systems allow merchants

to verify that the card is valid and the credit card customer has sufficient credit to cover the

purchase in a few seconds, allowing the verification to happen at time of purchase.

The verification is performed using a credit card payment terminal or Point of Sale (POS) system

with a communications link to the merchant's acquiring bank. Data from the card is obtained

from a magnetic stripe or chip on the card; the latter system is in the United Kingdom and

Ireland commonly known as Chip and PIN, but is more technically an EMV card. Other

variations of verification systems are used by ecommerce merchants to determine if the user's

account is valid and able to accept the charge. These will typically involve the cardholder

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http://en.wikipedia.org/wiki/Chip_and_PIN

http://en.wikipedia.org/wiki/Ireland

http://en.wikipedia.org/wiki/United_Kingdom


http://en.wikipedia.org/wiki/Magnetic_stripe_card

http://en.wikipedia.org/wiki/Acquirer

http://en.wikipedia.org/wiki/Point_of_Sale

http://en.wikipedia.org/wiki/Credit_card_terminal

http://en.wikipedia.org/wiki/Credit_card_verification

http://en.wikipedia.org/wiki/Personal_identification_number

http://en.wikipedia.org/wiki/Receipt

http://en.wikipedia.org/wiki/Merchant

http://en.wikipedia.org/wiki/Card_Security_Code

http://en.wikipedia.org/wiki/Signature

http://en.wikipedia.org/wiki/Magnetic_stripe#Financial_cards

http://en.wikipedia.org/wiki/Credit_card_number

http://en.wikipedia.org/wiki/Hologram

Customer attitude towards plastic money providing additional information, such as the security code printed on the back of the card, or the

address of the cardholder. Each month, the credit card user is sent a statement indicating the

purchases undertaken with the card, any outstanding fees, and the total amount owed. After

receiving the statement, the cardholder may dispute any charges that he or she thinks are

incorrect (see Fair Credit Billing Act for details of the US regulations). Otherwise, the cardholder

must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher

amount up to the entire amount owed.

The credit provider charges interest on the amount owed (typically at a much higher rate than

most other forms of debt). Some financial institutions can arrange for automatic payments to be

deducted from the user's bank accounts, thus avoiding late payment altogether as long as the

cardholder has sufficient funds.

DEBIT-CARDS

The difference between a credit card and a debit card is that in the case of the latter, the payment

is made against the balance in your bank account. So a debit card relieves you of having to

withdraw lump sums of money from your bank account or of carrying your cheque book around

every time you go shopping or decide to eat out.

A debit card differs from a credit card in that a debit card is tied directly to your checking

account and the amount of money you can spend with it is limited to the amount of money you

have in the bank.

Workings of debit card

When you use a debit card, the transaction debits (withdraws) the amount of the transaction from

your checking account, usually on the same day. You can use a debit card to get cash from ATM

machines or have it swiped like a credit card at shops or restaurants or swipe it through a pay

phone to make a call.

Making a Travel Budget with a Debit Card

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http://en.wikipedia.org/wiki/Interest

http://en.wikipedia.org/wiki/Expiration

http://en.wikipedia.org/wiki/Fair_Credit_Billing_Act

http://en.wikipedia.org/wiki/Card_Security_Code

Customer attitude towards plastic money Naturally, you can't rely on your debit card for all your international transactions - imagine

haggling with a street vendor, getting the price right and then trying to give him/her plastic!

Remote hostels and many restaurants in third world countries don't accept credit cards (which is

how debit cards are viewed in the business world). Thus, you'll need to make budget plans before

you leave home so that you have traveler's checks and cash and some money in your checking

account for use on your debit card.

Let's assume you have a budget of $2000 for your trip. Decide how you're comfortable splitting

that into the way you'll use it; $500 in traveler's checks, $500 in cash and $1000 left in your

checking account, for example -- that's $1000 on your debit card. If that $2000 represents your

entire cash portfolio, consider setting up emergency precautions before you leave home. If

someone, like Dad, is willing to loan you money, leave deposit slips with him so that if you lose

all your money abroad, you can dial for dollars (using your debit card) and he can get some

money into your account. If your debit card (your checking account) is almost empty, ask him to

tell the bank to "memo post" the deposit so that the cash is immediately available and your debit

card is quickly back in business.

How to Get a Debit Card

Chances are you were automatically offered a debit card when you opened your checking

account. If you don't have a checking account, go open one now. Look for a bank that doesn't

charge checking account fees, and ask for a debit card.

It takes a few days to two weeks to get a debit card after you order it. When the card arrives, sign

the back; have photo id with your signature handy when you use the card - merchants may want

to compare your face and your signatures to protect themselves from fraud.

How to Choose a Debit Card PIN Number

Your debit card comes with a PIN (personal identification number) which can be changed to a

number you can easily remember. Memorize it; if you have to write it down, keep that separate

from your card. Don't choose an obvious number, like your birthday, in order to lessen the

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Customer attitude towards plastic money chances of someone else being able to guess your PIN number if they come into possession of

your card.

If You Lose Your Debit Card...

If your card is lost or stolen, call your bank before someone else spends your money. Write down

your bank's number before you leave home and keep it in a couple of places - your journal, your

guidebook. Set up an international snail mail address before you leave home so your bank can

send you a new card if it does get lost or stolen.

When to Use Your Debit Card

Debit cards are handy when making a long distance room reservation or any internet reservation,

including plane tickets. You can't use a debit card just like a credit card when renting a car - the

companies require a major credit card, which offer a certain amount of insurance in case you

have a fender bender.

About Debit Card Fees and Overseas Transaction Fees

International ATM machines will charge a fee when you use your debit card; the amount is

determined by the ATM owner. Most fees are under $5 -- a notice on the ATM machine will tell

you what the fee is. More than $2 is too much -- look for another ATM machine.

History of Credit Cards

Our society was once upon a time functioning without money; it is again likely to become

moneyless. While ancient society was confronted with the problems of adjusting mutually

satisfactory rates and basis of exchange, future society, with the help of computers, electronics

and telecommunications, credit cards, telephone and other modern means of communications,

would settle financial transactions instantly. Money as a medium of exchange will serve its

function. The difference will be that in future coins, currency notes, cheques, etc., will be

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Customer attitude towards plastic money dispensed with in favor of records. India has entered the stage of credit card system and credit

cards are gaining increasing relevance to facilitate industrial, commercial and agricultural

transactions.

Credit was first used in Assyria, Babylon and Egypt 3,000 years ago. The Bill of Exchange – the

forerunner of bank notes - was established in the 14th century. Debts settled by one-third cash

and two-thirds bill of exchange paper money followed only in the 17th century.

The first advertisement for credit was placed in 1730 by Christopher Thornton who offered

furnfvbr6d’iture that could be paid off weekly.

From the 18th century until the early part of the 20th, tallymen sold clothes in return for small

weekly payments; they were called “tallymen” because they kept a record of tally of what

people had brought on a wooden stick. One side of the stick was marked with notches to

represent the amount of debt and the other side was a record of payments. In the 1920s

shopper’s plate – “buy now, pay later” system – was introduced in USA. It could only be used in

shops which issued it.

In 1950, Diners Club and American Express launched their charge cards in USA, the first

‘plastic money’. In 1951, Diners Club issued the first credit card to 200 customers who could

use it at 27 restaurants. With the magnetic strip in 1970, the credit card became a part of the

information age.

The origins of the bank credit card have been traced to John C. Biggins, a consumer credit

specialist at the Flatbush National Bank of Brooklyn, New York. In 1946, Biggins launched a

credit plan called Charge-It. The program featured a form of scrip that was accepted by local

merchants for small purchases.

Concept of credit card

Progress in civilization in its turn has brought out radical changes in the manner of trading. The

need for something intrinsically useful and easily applicable in everyday dealing is clearly felt.

Cash in the form of currency notes and coins makes up just one form of the payment system.

Development in banking while also giving inputs to the further development of cash brought

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about a second phase in payment namely paper instructions such as cheques and credit transfers.

The requirement for greater flexibility and convenience has led to electronic payments, and this

is where plastic cards have proved their worth. It allows the card issuers to limit the sum of

money the card-holders wish to spend. The spending of card-holders who have defaulted on

payments or who are over their credit limit can be restricted until the balances are cleared.

Definition of credit card

A credit card is a credit-token within the meaning of section 14(1), Consumer Credit Act 1974

of the UK which defines a credit-token as a card, cheque, voucher, coupon, stamp, form booklet

or other document or thing given to an individual by a person carrying on a consumer credit

business, who undertakes:-

a. That on the production of it (whether or not some other action is also required), he will

supply, cash, goods and services (or any of them) on credit, or

b. That were, on the production of it to third party (whether or not any other action is also

required), the third party supplies cash, goods and services (whether or not deducting any

discount or commission), in return for payment to him by the individual. In very simple

words credit card can be termed as an unsecured personal loan offered to customers by

the banks where the card-holder could purchase goods and services from authorised

merchant or merchant establishments (MEs) of the bank up to a fixed limit on credit.

Such credit is normally made available for a period of 30 to 45 days. This is turn helps

earn income by way of commission from its merchant establishments; the scheme

provided large scope for sale and increased turnover with assured and prompt payment.

In 1951, the Franklin National Bank in New York issued the first modern credit card.

Unsolicited credit cards were sent to prospective card-holders who were not subject to credit

screening prior to being sent a card. Merchants signed agreements to accept the cards. When a

purchase was made, the card-holder presented the card to the merchant, who would copy the

information on the merchant’s account at Franklin Bank in the amount of the transactions, less

the discount rate. If a purchase exceeded the merchant’s floor limit, the merchant was required

to call the bank for approval. Franklin National Bank’s Credit Card programme was copied by

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hundreds of other banks in the late 1950s and early 1960s.

The Bank of America issued Bank America in 1958 and eight years later, in 1966, the banks

comprising the Western State Bank Card Association issued the Master Charge Card. Bank

America and Master charge card became the focal points for the eventual groupings of all bank

cards throughout the world. The VISA and the MASTER the largest credit cards today appeared

in market in 1966. These two international cards are very popular and are accepted and

honoured all over the world in 170 countries. These two independent card companies led to

latest innovations in the credit card business. Now the credit card system has become universally

popular throughout the world including the Communist countries. At the end of 1995 and 1980 a

million cards were used in the world. The total number of credit card users in India is currently

in excess of 80 lakh and now more than 30 banks are chasing customers with their cards.

Credit cards in India

Credit cards have finally arrived in India. The card industry, which is growing at the rate of 20

per cent per annum is flooded with cards ranging from gold, silver, global, smart to secure…the

list is endless. From just two payments in the early ‘80s, the industry now houses over 10 major

players vying for a major chunk of the card pie. Currently, four major bishops are ruling the card

empire - Citibank, Standard Chartered Bank, HSBC and State Bank of India (SBI). The

industry, which is catering to over 3.8 million1 card users, is expected to double by the fiscal

2003. According to a study conducted by State Bank of India, Citibank is the dominant player,

having issued 1.5 million cards so far. Standard Chartered Bank follows way behind with 0.67

million, while Hongkong Bank has 0.3 million credit card customers. Among the nationlaised

banks, SBI tops the list with 0.28 million cards, followed by Bank of Baroda at 0.22 million.

The credit card market in India, which started out in 1981, is on the verge of an unprecedented

boom. Between 1987 and 2000, the market has virtually grown to over 3.8 million cards with

almost 25-30 per cent growth in new card-holders.

India is generating more credit card spenders than spending places. While card-base and

appends are growing at a spiffy 25-30 per cent2 annually, the number of merchant

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establishments which accept cards is growing selectively sluggish. The figure was put at

75,000–80,000 a couple of years ago, and now stands at 100,000 on both the Visa and

MasterCard loops. As opposed to that, there are 2.5 million card-holders and 3.3 million cards

(some, obviously, have more than one) and the numbers are growing very strongly.

The seven million Indian credit card industry has been growing over 25 per cent3 annually and

has now more than 30 banks chasing customers with their cards. Still, credit cards in India have

made business sense only to a few.

“The annual growth rate is good, but it is only 20 per cent of the card base, that is generating

revenue,” says Roopan Asthana, manager, Card Products Division of HSBC. Nearly 45-50 per

cent of the card-holders are estimated to be inactive, while another 30 per cent use the card as a

charge card without using the revolving facility cards are expected to account for 33 per cent of

all purchases by 2000 and 43 per cent by 2005.

The credit card embodies two essential aspects of the basic banking function - the transmission

of payments and the granting of credit. Therefore, in its true sense, a ‘credit’ card must offer the

opinion of revolving credit. This is very akin to the overdraft facility offered by banks to their

account holders. A credit card holder does not necessarily have to settle his entire account at the

end of the month for he has the option to make partial payment in subsequent months. In fact,

when the card-holder makes the full payment at the end of the month he is said to be using his

credit card as a ‘charge card’. Incidentally, the interest paid by the card-holder on the ‘credit’

utilized by him is what makes the business of credit cards profitable from the point of view of

the bank issuing the card.

Credit card frauds

In a recent case of credit card frauds busted by the Chennai Police, it was found that the credit

card particulars had been stolen from many hotels in several foreign cities such as Singapore.

These were used in preparing duplicate credit cards through which purchases were made from

shops in Chennai.

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The incident highlights the risks that are inherent in the use of credit cards. Citizens have always

been very skeptical about use of credit cards for online purchases fearing the stealing of credit

card information and their use on the Internet lack of “signature” was the principal reason for

fear. This fear has been one of the reasons for the slow growth of e-commerce and perhaps also

contributed to some of the dotcom failures also.

In the initial days of e-commerce, there were incidents where “pseudo sites” were created to

gather credit card information in exchange for some service. Many of the e-commerce sites used

to save the credit card details on the web server which were hacked into and information stolen.

Sometimes, the unencrypted flow of credit card information was collected by an eavesdropper.

All these are now things of the past. At present, the e-commerce sites use various measures to

prevent misuse of credit card data. First, there is encryption of data between the client’s browser

and the e-commerce site. The credit card information also is sent directly to the payment

gateway and the e-commerce site avoids storing of the data on its server. As a result of some of

these measures, exchange of credit card data online is saved even though the authorization itself

is done on the basis of information otherwise found on the face of a credit card.

Some of the e-commerce sites today take a precaution to ensure that the billing address on the

card and the destination of goods purchased are same to ensure that there is no third party who is

benefiting from the purchase. This sometimes creates an embarrassment when a person is trying

to send a gift to another person. One of the precautions that Indian e-commerce site owners are

adopting in such cases is to verify from the destination address the genuineness of the

transaction and the relationship between the credit card holder and beneficiary

It can therefore be said that the biggest risk for credit card frauds online is not from online

security problems but from the possibility of the credit card data being offline in a hotel or a

shop where the user parts with the card for sometime.

The problems that arise to the credit card users are many. There is harassment from the clutches

of bankers also. Some banks issued credit cards to people without verifying their credit

worthiness. This led the card-holders into a debt. Considering all these things, the Chennai

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chapter of the Credit Card Users Association was launched on April 25, 20074. It is organising

credit card surrender campaign for such card-holders. So the repaid growth of credit holders will

be going up.

The motto of credit cards, besides providing the facility of ‘buy now and pay later’, also

provides a range of benefits like free insurance cover , preferential treatment at airports, hotels,

restaurants, hospitals and other merchant establishments, discount offers and the like. Lured by

these benefits, middle class and upper class people are increasingly becoming interested in card

membership. The card-holder feels confident of his status and prestige. The financial health of

Indian banks is also expected to improve, allowing them to invest in technology and push the

card business strongly.

J. Sheebarani

The growth and popularity of plastic money in India has been phenomenal in the last few years.

The Indian economy is booming with a refreshing youthfulness in its march to success.

Credit Cards in India

India has come out of self-binding shackles to look "young" again and the enthusiasm shared by

the young work force of the country is driving the economy like never-before. In the present day

world, no one wants to be bothered by the presence of huge cash in his or her wallet and the

Indians are no exceptions. The unprecedented growth in the number of credit card users has

stimulated the Indian economy by a significant extent. The arrival of malls, multiplexes, online

shopping stores and shopping complexes have contributed to the growth of the use of plastic

cards.

It will not be wrong to say that such a scenario in context of the Indian market is not driven by

style statement and is driven more by needs. The benefits of plastic money have offered

unmatched ways to create an equilibrium and offer an amicable solution when it comes to

purchases and the inability to possess or carry cash. The modern day Indian customers find it

more easy to make physical payment (credit card payments) rather than carrying too much cash.

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Customer attitude towards plastic money The introduction of credit card facilities to pay for mobile, electricity, movie tickets and other

related transactions have also contributed to the growth of plastic money in the country.

Best credit cards (India):

In context of the Indian market, the leading credit card services providers are ICICI, HDFC,

HSBC and Standard Chartered to name a few. These financial institutions have tried their hands

on ensuring value-addition while offering customer-friendly credit card deals. The Best credit

cards in India are usually meant for specific user group such as women, students and small

business owners. These cards are offered to the prospective customers with appealing deals.

Statistics have clearly revealed that the number of credit card holders in India are close to 22

million as on January, 2007. It has been also revealed that the increasing consumerism in the

country has led to a two-fold increase in the number of credit card transactions from FY 2003-04

to 2005-06. The trends were as favorable as ever in the financial years, FY 2006-07 and 2007-08

and the same is likely to continue in the coming financial years.

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.

CH 9.Parties involved in trnsactions

Cardholder: - The holder of the card used to make a purchase; the consumer

Card-issuing bank: - The financial institution or other organization that issued the credit card to

the cardholder. This bank bills the consumer for repayment and bears the risk that the card is

used fraudulently. American Express and Discover were previously the only card-issuing banks

for their respective brands, but as of 2007, this is no longer the case.

Merchant: - The individual or business accepting credit card payments for products or services

sold to the cardholder

Acquiring bank: - The financial institution accepting payment for the products or services on

behalf of the merchant.

Independent sales organization: - Resellers (to merchants) of the services of the acquiring

bank.

Merchant account: - This could refer to the acquiring bank or the independent sales

organization, but in general is the organization that the merchant deals with.

Credit Card association:- An association of card-issuing banks such as Visa, MasterCard,

Discover, American Express, etc. that set transaction terms for merchants, card-issuing banks,

and acquiring banks.

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http://en.wikipedia.org/wiki/American_Express

http://en.wikipedia.org/wiki/Discover


http://en.wikipedia.org/wiki/Visa_(company)

http://en.wikipedia.org/wiki/Merchant_account

http://en.wikipedia.org/wiki/Independent_sales_organization

http://en.wikipedia.org/wiki/Acquiring_bank

http://en.wikipedia.org/wiki/Consumer

Customer attitude towards plastic money Transaction network: - The system that implements the mechanics of the electronic

transactions. May be operated by an independent company, and one company may operate

multiple networks. Transaction processing networks include: Card net, Nabanco, Omaha,

Paymentech, NDC Atlanta, Nova, Vital, Concord EFSnet, and Visa Net.

Affinity partner:- Some institutions lend their names to an issuer to attract customers that have

a strong relationship with that institution, and get paid a fee or a percentage of the balance for

each card issued using their name. Examples of typical affinity partners are sports teams,

universities and charities.

CH. 10 Customer attitude towards plastic money

Introduction

A notable change in consumer financial services over the past few decades has been

the growth of the use of credit cards, both for payments and as sources of revolving

credit. From modest origins in the 1950s as a convenient way for the relatively

well-to-do to settle restaurant and department store purchases without carrying cash,

credit cards have become a ubiquitous financial product held by households in all

economic strata.

In modern commerce, credit cards (along with debit cards) serve as a payment

device in lieu of cash or checks for millions of routine purchases as well as for

many transactions that would otherwise be inconvenient, or perhaps impossible (for

example, making retail purchases by telephone or over the Internet). Credit cards

have also become the primary source of unsecured open-end revolving credit, and

they have largely replaced the installment-purchase plans that were important to the

sales volume at many retail stores in earlier decades. Along with most major

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Customer attitude towards plastic money societal changes come questions about whether the trend is beneficial or detrimental

(or somewhere in between), and the rise of plastic cards for payments and open-end

credit is no exception. Credit cards certainly are widely used and accepted by the

public. But they have also raised concerns in two areas: (1) whether consumers fully

understand the costs and implications of using credit cards (the consumer

information–consumer understanding concern) and (2) whether credit cards have

encouraged widespread over indebtedness, particularly among those least able to

pay (the indebtedness–financial distress concern). The two issues are related,

because one result of lack of understanding may be over indebtedness. Both issues

remain prominent in public discourse, as debt and personal bankruptcy levels have

increased over the decades and media reports of confused consumers have

multiplied.

Although one can usually find anecdotes to illustrate a point—consumers who are

unaware of the costs of credit cards, for instance, or consumers who overspend

because of the wide availability of credit— such examples can never lead to a

definitive understanding of issues having broad social or economic impact.

Statistically representative surveys can contribute to a more complete understanding

of consumers’ experiences. Taken together, such surveys can serve as a status report

on the use of credit cards some fifty years after their introduction. This article

brings to the discussion some survey evidence on the use of credit cards in the

United States. It begins with an examination of long-term trends in consumer

indebtedness, with attention to the growth of card based credit. It then moves to an

exploration of the consumer information–consumer understanding issue, with

emphasis on consumers’ attitudes toward credit cards and their knowledge of costs.

Consumers’ Attitudes toward Credit Cards

To explore consumers’ attitudes toward and understanding of credit cards, as well

as to gather information about card use, the Credit Research Center in

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Customer attitude towards plastic money January 2000 sponsored interviews of nearly 500 households representative of

households in the forty-eight contiguous states. Interviewing was done by the

Survey Research Center of the University of Michigan as part of its monthly

Surveys of Consumers.

General Attitudes

Respondents—both those who used credit cards and those who did not—were

first asked their broad feelings about credit cards. So that attitude changes could be

tracked over time, the question was identical to the question asked in nationwide

Surveys of Consumer Finances in 1970 and again in 1977: ‘‘People have different

opinions about credit cards. Overall, would you say that using credit cards is a good

thing or a bad thing?’’

Overall opinions about credit cards are somewhat more negative and

polarized in 2000 than they were a generation ago, especially among holders of

banktype cards (table 3). Opinions among all families that credit card use is

‘‘good’’ register a bit higher in 2000 (33 percent) than in 1970 (28 percent) but a

bit lower than in 1977 (39 percent). The view that card use is ‘‘bad’’ is stronger in

2000 than in either of the earlier years.

In all three surveys, views among holders of banktype cards were more

favorable than those among the population generally. Nonetheless, unfavorable

views among cardholders have increased over the decades; negative attitudes among

cardholders are much more common in 2000 (42 percent) than they were in 1977 (14

percent). This finding is interesting because card use is also much greater in 2000.

In 2000, holders of bank-type cards are about equally divided in their opinions that

credit card use is good or bad, much different from 1977, when a considerably

larger proportion had a favorable opinion.

Consumers’ opinions about credit cards also vary depending on their use of

and experience with cards. Less enthusiastic viewpoints are somewhat more

common among those who use credit cards as credit devices rather than primarily as

substitutes for cash

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or checks. Specifically, cards are viewed less positively by those who have three or

more cards, have an outstanding balance of more than $1,500, have transferred a

balance between cards, hardly ever pay their outstanding balance in full, hardly ever

pay more than the monthly minimum, or have received a collection call.

Conversely, those who have fewer

cards, have no balance or a low balance

outstanding, generally pay more than the

minimum, or have not received a

collection call have more favorable

views (not shown in the table).

Demographic measures also appear to be

related to attitudes toward credit cards,

but the relationship is not as strong as

that associated with the variables related

to the use of cards.

Attitudes toward Card Features, Card Issuers, and Other Users

To examine why card users might have the general attitudes about credit cards that

they do, the 2000 survey also asked questions about specific features of

credit cards and about card issuers and users. The questions took the form of

statements with which respondents could agree or disagree. Although data

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Customer attitude towards plastic money from earlier years are not available for comparison, responses to these questions

reveal an interesting divergence of views that might help explain why

overall attitudes have deteriorated. The responses suggest that the current negativity

may have arisen in part from an individual’s perceptions of other consumers’

difficulties rather than from the individual’s own experiences. Without data from

earlier periods and questions designed specifically to address this hypothesis, one

cannot be certain, but from the 2000 survey results it seems likely that as card use

has become more common, negative opinions about card use may have increased as

a result of perceptions about ‘‘the other guy.’’ Views about personal experiences

with credit cards, in contrast, are much more positive.

Consumers in 2000 seem to be concerned about specific practices of credit

card issuers. Most holders of bank-type credit cards (more than 80 percent) believe

that the annual percentage rates charged on outstanding balances are too high (table

4). They also express concern over privacy practices. In contrast, relatively few

express concern about billing accuracy.

Consumers’ feelings about experiences with credit cards in general are even more

negative than their feelings about specific practices. Holders of bank-type

credit cards in 2000 believe that too much credit is available, that consumers are

confused about some practices, and that credit users have difficulty getting

out of debt. Somewhat over half said that issuers should not be allowed to market

cards to college students. Moreover, they appear to believe that consumers bring on

themselves many of the problems associated with credit cards: Ninety percent agree

to some extent that overspending is the fault of consumers, not of card issuers.

Survey evidence does not suggest that increasingly negative views of credit cards

have arisen from adverse personal experiences. Rather, consumers’

opinions about their own relations with their current card issuers are much more

favorable than their opinions about the relations of consumers in general.

Approximately nine in ten holders of bank-type credit cards said that they are

satisfied with their dealings with card companies, that their card companies treat

them fairly, and that it is easy to get another card if they are not treated fairly.

Almost seven in ten trust that their own card companies would keep their personal

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Customer attitude towards plastic money information confidential, substantially more than the proportion believing that card

companies in general show enough concern about protecting privacy (just under five

in ten). Cardholders’ opinions about their own experiences are almost the reverse of

their views about consumers’ experiences in general, suggesting considerable

concern over the behavior of

others and possibly a belief that ‘‘I can handle credit cards, but other people

cannot.’’

Despite expressed concerns about some practices and experiences, consumers

appear to be satisfied

with the credit card market in general. Approximately nine in ten holders of bank-

type credit cards said that credit cards provide a useful service to consumers, and

about seven in ten said that most people are satisfied in their dealings with card

companies. About six in ten disagreed that consumers would be better off without

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Customer attitude towards plastic money cards. These results are similar to those from a 1977 survey of users of

nonrevolving credit (memo items in table 4). It seems that credit and creditors are

not viewed completely favorably, even by users of the service, but that most users

are favorably inclined.

Many holders of bank-type cards in 2000 said that it would be helpful to

include on their billing statement information about the length of time it would

take to pay off the balance if only the minimum payment were made each month.

Exactness in such a calculation assumes, of course, that the consumer

does not use the card during the repayment period and that the balance declines on

schedule. If the balance were to fluctuate substantially, the calculation would be

difficult or impossible, and most likely meaningless (discussed further later).

Survey respondents probably did not consider the implications and complexity of

the calculations but were simply acknowledging a desire for a practical measure of

the burden they are incurring. Many respondents also reported that ‘‘teaser rates’’

are confusing. They could, of course, avoid teaser rates altogether by ignoring the

mailings that promote them; consequently, this survey finding may reflect concerns

among consumers that card issuers have complicated promotions sufficiently that it

is difficult to understand and accept advantageous offers when they are made.

What emerges from these responses to opinion questioning, in sum, is a

multifaceted set of attitudes about credit cards. Multifaceted opinions are not

especially surprising, given that consumers overall seem to think that credit cards

are both good and bad. They believe that finance percentage rates on outstanding

balances are too high, are suspicious of how personal information is used, and have

relatively little confidence in other individuals who use credit

cards. When they imagine ‘‘the other guy’’ in contact with card issuers, whose

behavior is already suspect, they imagine possibly negative consequences, for

example, excessive credit use. When the focus shifts to more-personal experience,

however, they view the outcome much more favorably, suggesting that actual

problems with credit cards are not nearly as widespread as consumers imagine them

to be when they think about the population of largely unknown ‘‘others.’’ On

balance, holders of bank-type credit cards in

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Customer attitude towards plastic money 2000 believe that credit cards are useful and that consumers are better off with them

than without them—despite concerns over the inability of ‘‘other (unknown)

consumers’’ to exercise self-discipline and avoid overuse; these opinions seem to

mirror earlier views about installment credit. Finally, consumers believe that

additional, and less-confusing, information about payments and rates would be

useful.

CASE STUDY

BANK PROFILE

The Industrial Development Bank of India Limited, now more popularly known as IDBI Bank,

was established as a wholly-owned subsidiary of Reserve Bank of India. The foundation of the

bank was laid down under an Act of Parliament, in July 1964. The main aim behind the setting

up of IDBI was to provide credit and other facilities for the Indian industry, which was still in the

initial stages of growth and development. In February 1976, the ownership of IDBI was

transferred to Government of India.

After the transfer of its ownership, IDBI became the main institution, through which the

institutes engaged in financing, promoting and developing industry were to be coordinated. In

January 1992, IDBI accessed domestic retail debt market for the first time, with innovative Deep

Discount Bonds, and registered path-breaking success. The following year, it set up the IDBI

Capital Market Services Ltd., as its wholly-owned subsidiary, to offer a broad range of financial

services, including Bond Trading, Equity Broking, Client Asset Management and Depository

Services.

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Customer attitude towards plastic money The year 2005 witnessed the merger of IDBI Bank with the Industrial Development Bank of

India Ltd. The new entity continued to its development finance role, while providing an array of

wholesale and retail banking products (and does so till date). The following year, IDBI Bank

acquired United Western Bank (which, at that time, had 230 branches spread over 47 districts, in

9 states). In the financial year of 2008, IDBI Bank had a net income of Rs 9415.9 crores and total

assets of Rs 120,601 crores.

Today, IDBI Bank is counted amongst the leading public sector banks of India, apart from

claiming the distinction of being the 4th largest bank, in overall ratings. It is presently regarded

as the tenth largest development bank in the world, mainly in terms of reach. This is because of

its wide network of 509 branches, 900 ATMs and 319 centers. Apart from being involved in

banking services, IDBI has set up institutions like The National Stock Exchange of India (NSE),

The National Securities Depository Services Ltd. (NSDL) and the Stock Holding Corporation of

India (SHCIL).

REPORT FROM IDBI BANK

QUESTIONNAIRE

Q. How many types of cards do you issue?

A. Debit card and Credit card. In credit card silver card, gold card etc.

Q. When such cards are issued what customers should do for that?

A. They should maintain an account with the bank.

Q. What are the new ideas coming in respect of plastic money?

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Customer attitude towards plastic money A. Air ticket, Railway reservation ticket, Mobile banking all this can be made

through plastic cards.

Q. How do you issue pin no. to customers why precautions to be taken?

A. The card and pin is issued to customers by two different couriers to avoid frauds for

e.g. If same courier is made to issue both card and pin then he can use the customer’s card.

The card and pin issued by the two different couriers is verified by the bank through

customers.

Q. How many customers in your bank use plastic card?

A. Out of 20,000 customers not less than 1,000 people use plastic cards.

Q. What is your opinion about plastic money?

A. Plastic money is an way to deal with daily needs. Some people in our bank especially old

people even if they had applied for plastic money and they got it still they return it because

they are habitual to paper currency they feel that plastic money is more risky as compared

to paper money but which is not the case if plastic money is lost you can stop the payment

by contacting to the bank but if plastic money is lost it is lost forever. Plastic money are

more used by middle and younger generation people. So according to me plastic money is

still growing.

Q. What do you think about fake notes?

A. Now-a-days fake notes are available of many denomination such as 1000, 500,100, 50,

20. The fake notes can be identified by our finger tip which is sensitive because the original

notes quality i.e. paper quality is far more different than fake notes and as we are very

habitual to paper notes so it is easily identifiable.

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CONCLUSION

Plastic money is of great use in todays busy world and as far as time saving is

concerned. Since paper notes are more risky than plastic money. The transactions

take place in plastic money is very easy and customers get satisfied easily.

Out of 100% only 10-20% people use plastic money approx. out of which

many of the people are unaware of it and many of the people are not comfortable

or don’t want use it as they feel that paper notes are more safer than plastic

money.

People can take credit through plastic money i.e. credit card as and when

required. It is also observed that there are frauds in plastic money some of them

can be solved and some of them cannot be solved.

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84

attitude of customers towards plastic money

Documents

special privileges offered

eliminates physical contact

small business owners

online shopping stores

identification card bearing

offered unmatched ways

gate access applications

typical credit card