TABLE OF CONTENT

 INTRODUCTION
 DEFINITION
 MEANING
 ADVANTAGES & DISADVANTAGES OF CREDIT
CARD
 THE MECHANICS OF CREDIT CARD TRANSACTION
 CREDIT CARD OPERATIONS OF BANK
 BENEFITS OF DEBIT CARDS
 FEATURES OF DEBIT CARD
 DRAWBACKS OF DEBIT CARDS
 PLASTIC FRAUD
 CONCLUSION
 BIBLIOGRAPHY

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INTRODUCTION:-

A credit card is a small plastic card issued to users as a system of

payment. It allows its holder to buy goods and services based on the holder's
promise to pay for these goods and services. The issuer of the card grants a
line of credit to the consumer or the user) from which the user can borrow
money for payment to a merchant or as a cash advance to the user. Usage of
the term "credit card" to imply a credit card account is a metonym.

When a purchase is made the user would indicate consent to pay by

signing a receipt with a record of the card details and indicating the amount
to be paid. Issuer agrees to pay the merchant and the credit card user agrees
to pay the card issuer.

DEFINITION:-

The credit card can be defined as “A small plastic card that allows its
holder to buy goods and services on credit and to pay at fixed intervals
through the card issuing agency

MEANING:-

A credit card is a card or mechanism which enables card holder to

purchase goods, travels and dine in a hotel without making immediate
payments. The holders can use the cards to get credit from banks up to 45
days.

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 The credit card relieves the consumers from the botheration of
carrying cash and ensures safety. It is a convenience of extended credit
without formality. Thus credit card is a passport to, “safety, convenience,
prestige and credit.

 ADVANTAGES & DISADVANTAGES OF

CREDIT CARD

 ADVANTAGES OF CREDIT CARD

 The benefits of credit card can be grouped as

follows:

A) BENEFITS TO THE BANK

B) BENEFITS TO THE CUSTOMERS
(CARD HOLDER)

 BENEFITS TO THE BANK

a) A credit card is an integral part of banks major services these days. The
credit card provides the following advantages to the bank: the system
provides an opportunity to the bank to attract new potential costumers.

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b) To get new customers the bank has to employee special trained staff. This
gives the bank an opportunity to find the latent talent from among existing
staff that would have been otherwise wasted.

c) The more important function of a credit card, however, is simply to yield

direct profit for the bank. There is a scope and a potential for a better
profitability out of income / commission earned from the traders turn over.

d) This also provides additional customer services to the existing clients. It

enhances the customer satisfaction.

e) More use by the car holder and consequently the growth of banking habits
in general.

(B) BENEFITS TO CARD HOLDER

The principal benefits to a card holder are:

a) He can purchase goods and services at a large number of outlets without

cash or cheque. The card is useful in emergency, and can save
embarrassment.

b) The risk factor of carrying and storing cash is avoided. It is convenient for
him to carry credit card and he has trouble free travel and may purchase his
without carrying cash or cheque.

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c) Months purchases can be settled with a single remittance, thus, tending to
reduce bank and handling charges.

d) The card holder has the period of free credit usually between 30-50 days
of purchase

 DISADVANTAGES OF CREDIT CARD:-

The following are the common disadvantages of the credit card:

a) Some credit card transactions take longer time than cash transactions
because of various formalities.

b) The customer tends to overspend out of immerse happiness.

c) Discounts and rebates can rarely be obtained.

d) The cardholder is responsible for charges due to loss or theft of the card
and the bank may not be party for loss due to fraud or collusion of staff, etc

e) Customers may be denied cash discount for payment through card.

f) It might lead to spending habits and cardholders may end up in big debts

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  THE MECHANICS OF CREDIT CARD
TRANSACTION

Card transactions are processed through a chain of connected parties. The

five primary parties involved in processing a Visa or MasterCard credit card
transaction are:

1. THE CARD HOLDER

2. THE CARD ISSUER
3. THE MERCHANT

The card issuer is the bank that issues the credit card to the
cardholder. The merchant acquirer, often a bank, processes transactions on
behalf of the merchant. "Card Association" is another term used to describe
Visa and MasterCard.
The use of a card involves an exchange of value between a consumer and
a business. The card represents an offer for payment in exchange for the
merchant’s goods or services. The sales draft itself is the cardholder’s
promise to pay. When an acquirer accepts a draft from merchants, the bank
is buying the value represented by the draft and paying the merchant the face
value of that sales draft. Collecting payment through the interchange
systems is a two-part process

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1. Clearing:

During the clearing process the acquirer provides the appropriate

issuer with information on the sale. No money is exchange during
clearing. Clearing involves the exchange of data only. The acquirer
provides data required to identify the cardholder’s account and provide the
dollar amount of the sales. When the issuing bank gets this data, the bank
posts the amount of the sale as a draw against the cardholder’s available
credit and prepares to send payment to the acquirer.

2. Settlement:

The second step is the actual exchange of funds. The issuer sends a
record of money that is being transferred from its account to that of the
acquirer. From this account the acquirer pays the merchant. Funds are
settled between issuers and acquirers through accounts with large banks that
are members of the Federal Reserve System and have been selected for that
purpose. Payments to merchants are made usually through the Federal
Reserve’s Automated Clearing House (the “ACH”) which is an electronic
funds transfer system.

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3. Transaction Processing

Transaction processing involves front-end processing and back-end

processing: Front-end processing involves authorization and data capture
services and message connections via various communication networks to
pint of sale devices.
Back-end processing provides financial accounting for acquirers and issuers
and prepares and submits clearing and settlement data into the Visa and
MasterCard interchange networks.

 CREDIT CARD OPERATIONS OF BANK

RBI Guidelines

Pursuant to the announcement made in the Annual Policy Statement

2004-05, the Reserve Bank of India had constituted a Working Group on
Regulatory Mechanism for Cards. The Group has suggested various
regulatory measures aimed at encouraging growth of credit cards in a safe,
secure and efficient manner as well as to ensure that the rules, regulations,
standards and practices of the card issuing banks are in alignment with the
best customer practices. The following guidelines on credit card operations
of banks have been framed based on the recommendations of the Group as
also the feedback received from the members of the public, card issuing
banks and others. All the credit card issuing banks / NBFCs should
implement these guidelines immediately.

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 Each bank / NBFC must have a well documented policy and a Fair
Practices Code for credit card operations. In March 2005, the IBA released a
Fair Practices Code for credit card operations which could be adopted by
banks / NBFCs. The bank / NBFC's Fair Practice Code should, at a
minimum, incorporate the relevant guidelines contained in this circular.

Different Types of Credit Cards

Credit cars are of various types, every one has to select credit cards on
the basis of the pros and cons of each type of credit card and at the same
time the nature of use. This article gives an insight into the several types of
credit cards available in the market
Today, credit card customers enjoy more options and choices than ever
before. To gain new customers, credit card companies compete by offering
new services and cards to customers. No matter what your needs, chances
are good that there is a card out there that would be ideal for you. If you are
looking for the right card, you can begin by considering the many types of
cards available to you:

Low Interest Credit Cards

These types of credit cards offer very low interest. In some cases,
these cards just charge a few percent interests. The reasons for this are
numerous. In most cases, the low interest rate is for a limited time only.
After a set number of months, you will begin paying higher interest rates. In
some cases, low interest credit cards are not really credit cards at all - they

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are debit cards linked to a low-interest loan such as a line of credit. Check
your agreement to find out what type of card you have. If you need to
consolidate debts or if you like the idea of having low interest for a while,
this type of credit card can be perfect for you.

Instant Approval Credit Cards

These cards are really a product of our fast-paced society. The idea
behind this type of credit card is that once you fill out your application, you
will be told whether you are approved or not right away. The approval
process only takes a few minutes. Instant approval credit cards are very
popular online and applicants can apply via the internet or over the phone.

If you are very impatient or need credit right away, these types of
cards can be for you. However, you should be aware that these cards do not
guarantee that you will be approved right away - sometimes, more time is
needed to process your application. Another drawback to these cards is that
they rely heavily on your credit score. If you have poor credit or any
extenuating financial circumstances, these types of cards may not be for you.

Balance Transfer Cards

Balance transfer cards are a type of temporary low-interest card that is

meant to help you consolidate your debt. They work this way: if you have
several credit cards with a balance, you can get a balance transfer card. You
then transfer all your credit card debt onto the new card and work to pay it
off. Since the new card has a low interest rate, you can quickly repay your

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bills.

If you are in debt, a balance transfer card can be a great way to get out
of debt. It offers the convenience of one bill and low rates. However, some
cards have high fees. Also, if you run up your other cards after consolidating
your debts or if you are unable to pay off your new card in the limited time
before the low interest rate increases, you may find yourself even more in
debt than before.

 Rewards Credit Cards

Rewards credit cards offer you points, rewards, or bonuses for every
cash purchase made with your credit card over time. As you accumulate
rewards or points, you can redeem your bonus for entertainment events,
purchases, travel, and other fun prizes. Some cards even offer customers
extra automatic-enter sweepstakes and draws. Each time you use your card,
you are entered into a draw to win specific prizes.

These types of cards are really a marketing tool for card companies.
Companies know that customers love rewards and prizes and so offer these
enticements to lure customers. The major advantage of these cards is that
they can help you get more cash value for your money. They can also be fun
and rewarding for almost any credit card customer. However, not all reward
credit cards are a deal. Some charge high fees to offset the costs of the
bonuses. Some also have very low points systems, meaning that you need to

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spend a lot with your credit card to get any rewards at all. Read the fine print
carefully before signing.

 Cash Back Credit Cards

Cash back credit cards give you money rewards. When you make a purchase
with this type of credit card, you get some points based on the amount of
money you have spent with your credit card. When you accumulate enough
points, you get cash back. On most cards, you can get back about 1% of your
total purchases.

These cards are great for those who are budget-conscious as they give you
some money back from your purchases. However, there are several
drawbacks to these types of cards. Some cards have low cash-back
percentage rates. Some charge high fees or have limits on how much money
you can get back each year. Most cards only offer you cash back advantages
on purchases - not on your balance. If you decide this card is right for you,
do compare several card offers to find the best cash back credit card option.

 Airline Credit Cards

This type of card allows you to accumulate frequent flyer points on all your
credit card purchases. If you travel a lot or love to travel, this card can help
you accumulate points for a free trip or for a discount ticket. In many cases,
these cards are great because they allow you to gather points for every
purchase. However, these cards can also charge high fees. In some cases,

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your points will expire if you do not use them within a specified time.
Worse, some airline credit cards make use of a point system that is not very
user-friendly. You may have to slowly accumulate an enormous amount of
points to qualify for a trip. If you do not love to travel and if you do not use
your Credit card a lot, then, your ability to get rewards you like may be very
limited.

 Prepaid Debit Cards

These cards are sometimes called junior credit cards. They are not truly
credit cards at all, since you are not getting credit or loans from the credit
card company. Instead, these cards work by having you deposit some money
into the card account. You can then use your card to charge any amount up
to the amount in the account. When you add more money, you can charge
more to your card.

Secured Credit Cards

Secured credit cards use collateral to ensure that the card company
will be paid back. Often, these cards are used by people with no credit or bad
credit. With secured credit cards, you can enjoy credit card convenience
even if you do not qualify for traditional cards. However, you will also have
to cope with the additional fees and low credit limits that these credit cards
have.

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Business Credit Cards

Business credit cards are created especially for business use. They
offer many of the same advantages as traditional credit cards, but also offer
services that can really help a business. With some business credit cards, for
example, you can enjoy higher interest rates, extra cards for business
employees, monthly reports on your expenses, and services that let you keep
your personal and business expenses separate on the same card. These
advantages mean that using this card for your business is more convenient.

 Types of Credit Cards offered by Indian Banks

Silver Cards

Silver credit cards rank lowest among the metal named cards, and, because
of lower prestige when compared to gold and platinum cards, are commonly
known as basic and standard credit cards. Silver credit cards come with
advantages such as lower annual membership fees if there is any, and a
lower threshold salary which banks use to evaluate your application in case
you should apply.

Silver credit cards will provide you with almost the same credit limit
as other cards provided you have a good credit history. You can also avail of
0% interest balance transfer schemes which are made available for a period
of 6-9 months for silver card holders.

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 There are also some disadvantages to using silver credit cards. One
would be the lower cash advance limits, less rewards and promotional
packages, and less travel perks compared to gold and platinum cards.
HDFC Bank, ICICI offer silver credit cards through their HDFC Bank Silver
cards and ICICI Sterling Silver credit card

Gold and Platinum Cards

Gold and platinum credit cards are a status symbol for any credit card
holder, bringing prestige since getting gold and platinum cards usually
require that you have good credit rating and a higher income levels. Gold
and platinum cards offer higher limit for cash advance withdrawals and
sometimes can provide higher credit limits as compared to standard or silver
cards.

If you have a gold or platinum card, you also get better perks and
privileges such as travel insurance, extended warranties for appliance
purchases and special deals on specific products, and purchase protection
insurance.
You can also engage in some loyalty schemes that are offered for gold and
platinum credit card holders which can sometimes involve cash back promos
and reward points systems.
Some popular gold and platinum cards available are the American Express
Gold card, and the ICICI Solid Gold Credit Card.

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 It is not possible to cover them the exact offerings of these cards but I
will highly advice you to check all these websites of the banks to get all the
info about the credit cards they are offering. Also try to talk to your friends
who are having credit cards to get more info.

BENEFITS OF DEBIT CARDS

The following are the benefits of the debit card services

 FREE WITH OUR BANK ACCOUNT

Obtaining a debit card is easy. If we qualify to open a bank account, we

usually get a debit card, if our bank offers the service.

 NO BACKGROUND CHECK

When we are applying for a debit card, the ban does not need to look into
our credit history. All we need is the documentation to open a bank, account,
and money in our bank when we use our debit card.

 CASH WITHDRAWALS

The customer can withdraw a minimum of Rs. 100/- and a maximum

Rs.25,000/- per day

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  CONVENIENCE

A Debit card fees us from carrying a lot of cash or a cheque book. In case,
we are an international traveler, we don’t need to stock up on Traveler’s
Cheques or cash. We can use our debit card to withdraw Cash from over
500,000 ATMs around the world in over 100 countries. We can withdraw in
the local currency of the country we are in, limited only by the money we
have back home in our account, and Business Travel Quota (BTQ) limit
arability.

 FAIR EXCHANGE

If we return merchandise or cancel services paid for with a Debit card, the
transaction is treated as if it were made with cash or a check. Customers
usually get cash back for offline purchases; for on-line transactions, the
amount is credited to our account.

 STATEMENT OF ACCOUNT

A statement of transactions can be obtained from the customer’s branch. For

example, a mini statement containing the last four transactions and balance
can be obtained at a State Bank Group during the working hours of the
customer’s branch.

BANKING CUM SHPPING CARD

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Your Debit card can be used as ATM card at any ATM across the world, as
well as for making purchase at merchant locations. You can also withdraw
cash from any of the 12000 ATMs in India.

 FEATURES OF DEBIT CARD

The following are features of Debit cards

A) It is a combination of a Cheque and ATM card. Therefore, there are no

fees for using the ATM for cash withdrawal, or as a debit card for purchase.

B) The Debit Card services in meant for withdrawals against the balance
already available in the designated account.

C) It is the card holder’s obligation to maintain sufficient balance in the

designated account to meet withdrawals and service charges.

D) A Debit card is more affordable than credit card. We just our bank
account for all our transactions.
No credit period. Our bank account is debited immediately.

 DRAWBACKS OF DEBIT CARDS

NO GRACE PERIOD

A) Unlike a credit card, debit card transactions are on a “pay now” basis
LIMITED PROTECTION

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B) Using a debit card may mean we have less protection than we would have
with a credit card for undelivered or defective goods.

 Process Debit Card Transactions

A successful business will usually accept debit cards as a part of their

overall profile of payment solutions. If you don’t process debit cards, you
may not be taking full advantage of all the potential that your merchant
account can deliver. There are essentially two ways you can accept debit
cards, online and offline.

Off line debit card transactions

An offline debit card transaction is still the way most merchants accept debit
cards. This is essentially the same as processing credit cards. You swipe
your customer’s debit card through a credit card terminal and have them sign
the receipt.

If you choose to accept debit cards offline, be sure that the debit card has a
VISA or MasterCard logo. Otherwise, the debit card won’t be approved
and you won’t be able to process the debit card offline

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  Plastic Fraud

State-of-the-art thieves are concentrating on plastic cards. In the past, this

type of fraud was not very common. Today, it is a big business for criminals.
Plastic cards bring new convenience to your shopping and banking, but they
can turn into nightmares in the wrong hands. This pamphlet describes credit
and debit cards and some common schemes involving card fraud with tips to
help you avoid them

The following are the types of frauds

1. Stolen Cards at the Office

2. Extra Copies of Charge Slips
3. Discarded Charge Slips

New Technology

New technology is making it more difficult for criminals to use, alter,

or counterfeit credit and debit cards. Some of the innovations are already in
use.

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These security features have been added to major credit cards:

Holograph –
A three-dimensional, laser produced optical device that changes its color and
image as the card is tilted.

Fine-line printing –
A repeated pattern of the card company name positioned as background for
the company logo.

Ultra-violet ink –
Special ink that is visible only under ultra-violet light, which will display the
credit card company's logo.

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 CONCLUSION

21ST Century banking has become wholly customer-driven & technology

driven by challenges of competition, rising customer expectations &
shrinking margins, banks have been using technology to reduce cost &
enhance efficiency, productivity & customer convenienence. Technology
intensive delivery channels like net banking, mobile banking, etc have
created a win-win situation by extending great convenienence. & multiple
options for customer.

From educating customers about credit cards there is a need to educate them
about the differentiating factors of the cards. Because visa and master card
are advertising regularly and thereby increases awareness. The strategy
should be to emphasize on its differentiating characteristics.

They also need to identify potential customers and target those using
mailers. As internet is growing at a fast rate the net users can be targeted by
having interactive sites. The prospective company’s card personality could
also be used in the home page to solve customer queries in the ‘Best
Possible Manner’.

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 BIBLIOGRAPHY

BOOKS

 INOVATION IN BANKING & INSURANCE

 FINANCIAL MARKET & SERVICES
 INDIAN BANKING INDUSTRIES
 INDIAN BANKING
 TIMES OF INDIA NEWS PAPER (1st OCT 2017)

WEBSITE

 WWW.GOOGLESERCH.COM
 WWW.YAHOO.COM
 WWW.RBI.ORG
 WWW.INFOSEE.COM
 WWW.INDIANMBA.COM
 WWW.INDINBANKING.ORG

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