CREDIT CARD

• A credit card is a payment card issued to users as a system of payment. It allows the cardholder to pay for goods and services based on the holder's promise to pay for them.

History of Credit Card

• Invented in 1887 by Edward Bellamy.• 1st - credit card - 1920s in US.• Bank of America - BankAmericard in 1958

Chargex – Visa Card • MasterCard - 1966 Group of Banks in US • In 1966 - 1st Non-US Credit Card was issued by

Barclays’ Bank in the UK.

CREDIT CARD NUMBER STRUCTURING

• 1ST – 6 No’s – Bank of Credit Card.• Next – 9 No’s – Individual A/c No.• Final Digit – Validity Check Code.• Extra Codes - Will be Issue & Security Codes.

CREDIT CARD MARKET SHARE IN INDIA

• RBI - 17.4%(2012 – up to Apr) 16.2 %(2011)

• State Bank of India & Punjab National Bank Contributes More for the Growth.

• Card base of public sector banks expanded 7.4 % yoy to 3.09mn.

• Private and foreign banks declined 1.5 % yoy to 14.7 million.

• New Entrance - IndusInd Bank acquired Deutsche Bank’s Standard Chartered Bank bought Barclays’ card business in India

• Credit Cards in India - 17.77 million

PROTOTYPE CREDIT CARD FRONT SIDE

• Issuing bank logo• EMV chip on "smart cards"• Hologram• Credit card number• Card brand logo• Expiration Date• Card Holder Name• contactless chip

BACK SIDE• Magnetic Stripe• Signature Strip• Card Security Code

Parties involved

• Cardholder• Card-issuing bank• Merchant• Acquiring bank• Credit Card association• Transaction network• Affinity partner• Insurance providers

TRANSACTION STEPS

Authorization

Batching

Clearing and SettlementFunding

Chargebacks

Benefits to customers

• The main benefit to each customer is convenience.

• Compared to debit cards and cheques, a credit card allows small short-term loans to be quickly withdraw.

• Different countries offer different levels of protection.

Benefits to merchants

• More secure than other forms of payment• They discourage theft by the merchant's

employees and reduce the amount of cash on the premises.

• Finally, credit cards reduce the back office expense of processing cheques/cash and transporting them to the bank.

Grace period• A credit card's grace period is the time the

customer has to pay the balance before interest is assessed on the outstanding balance.

• Grace periods may vary, but usually range from 20 to 55 days depending on the type of credit card and the issuing bank.

• There are some credit cards that will only apply finance charge.

FACTORS DETERMINING CREDIT CARD INTEREST RATES IN INDIA

• Repo rate• Reverse repo rate• Prime Lending Rate (PLR)

VARIOUS KEY FACTOR TO CHOOSE THE BEST CREDIT CARD

• Credit Limit • Credit Time Offered• Rate of Interest • Eligibility Criteria • Acceptance of the Card • Joining fee• Annual fee

DEBIT CARDS VS CREDIT CARDS

• The differences and comparative advantages and disadvantages of the two types of popular plastic money on offer in India.

• The basic difference between the two is the fact that a credit card takes the form of a personal loan from the issuing bank to the consumer, while a debit card is more like a cheque: money is directly deducted from a person’s bank account to pay for transaction.

THE DISADVANTAGES OF THE DEBIT CARD:

• There are almost no security measures and a person can use a debit card to clean out the cardholder’s account, if he knows the PIN.

• A debit card does not prevent the account from being overdrawn, and has less affordability than a credit card.

• A debit card also has a narrower acceptable area in India, with many merchants not accepting it since they are charged a fee every time they do.

• The major problems of a debit card are negated by instant notifications of transactions via sms and emails. A credit card or a debit card are both useful tools that must be used carefully and sparingly to maximize your advantage.

ADVANTAGES OF A CREDIT CARD

• Flexile spending limit• Most features of a debit card such as withdrawal of cash are

available on credit cards as well. • Wider acceptance and recognition, especially in online

transactions. • Greater security measures and checks than debit card.• Credit cards allow for cash back and bonus points schemes

that a debit card is not eligible. • A credit card can be used as a convenient way to check and

record your spending.• There is a fixed credit limit, a cardholder cannot overstretch

his purchases.

THE DISADVANTAGES OF CREDIT CARD

• Hidden costs.• A debt trap for the cardholder.• Cases of fraud are extremely common today.• Credit cards can be used at ATM cards, but considerable processing fee

required. • Debit cards provide access to ready money in a more convenient and

less invasive form than cheques, and allow for a faster withdrawal of cash.  

• Debit card user who are not qualify for a credit card, the advantage is spent on money he/she possess in their accounts.

• A debit card can be used to withdraw money from an ATM with no processing charge.  

• A debit card is a more convenient way of carrying cash around. 

Security problems and solutions

• Credit card security relies on the physical security of the plastic card as well as the privacy of the credit card number.

• Whenever a person other than the card owner has access to the card or its number, security is potentially compromised.

• Merchants would often accept credit card numbers without additional verification for mail order purchases.

• Many require the card and also requires signature for security purpose.

• A lost or stolen card can be cancelled, if this is done quickly, will greatly limit the fraud that can take place in this way.

• Code 10 calls are made when merchants are suspicious about accepting a credit card.

• The operator then asks the merchant a series of YES or NO questions to find out whether the merchant is suspicious of the card or the cardholder.

Inflated pricing for all consumers

• Merchants that accept credit cards must pay interchange fees and discount fees on all credit-card transactions.

• In some cases merchants are barred by their credit agreements from passing these fees directly to credit card customers, or from setting a minimum transaction amount.

• The result is that merchants may charge all customers higher prices to cover the fees on credit card transactions.

Different Credit Cards AdvantagesICICI Bank Preferred Gold Credit

Card

Purchase Interest Rate: 3.15% p.mCash Withdrawal Rate: 3.15% p.mAnnual Fee: No Rewards: YesMin. Monthly Payment: 5Grace Period: 20 to 50 days

Barclays Bank Smart Budget Credit Card

Purchase Interest Rate: 2.95% p.mCash Withdrawal Rate: 0.00% p.mAnnual Fee: No Rewards: NoMin. Monthly Payment: Rs. 400Grace Period: 50 days

Jet Airways Citibank Platinum Credit Card

Purchase Interest Rate: 3.19% p.mCash Withdrawal Rate: 2.50% p.mAnnual Fee: YesRewards: YesMin. Monthly Payment: 5%Grace Period: 30 days

State Bank Cash Plus ATM-cum-Debit Card

Purchase Interest Rate: 0.00% p.mCash Withdrawal Rate: 0.00% p.mAnnual Fee: Yes Rewards: NoMin. Monthly Payment: NAGrace Period: Not Applicable

SBI Platinum Credit Card

Purchase Interest Rate: 3.10% p.mCash Withdrawal Rate: 3.10% p.mAnnual Fee: No Rewards: YesMin. Monthly Payment: 5% of outstanding balance or Rs 200, whichever is higherGrace Period: Upto 50 days

HDFC Bank Titanium Credit Card

Purchase Interest Rate: 2.65% p.mCash Withdrawal Rate: 2.50% p.mAnnual Fee: Yes Rewards: YesMin. Monthly Payment: 5%Grace Period: 50 days