A PRESENTATION ON

CREDIT CARDS
 MEANING
A credit card is a financial instrument, which can
be used more than once to buy products and
services on credit.

It is a plastic card, with a encoded magnetic strip

at the back,connected to a credit account .

It is issued by a bank that allows the holder to

buy goods and services and pay for them later.
If, on the due date, the holder does not pay the
balance, the bank charges interest on the unpaid
balance.
 HISTORY
The concept of using a card for purchases
was described in 1887 by Edward Bellamy
in his utopian novel.
The modern credit card was the successor
of a variety of merchant credit schemes.
In 1938 several companies started to
accept each other's cards. Western Union
had begun issuing charge cards to its
frequent customers in 1914.
The concept of paying different merchants
using the same card was invented in 1950
by Ralph Schneider and Frank X.McNamara.
 They produced the first "general purpose"
charge card, & required the entire bill to be
paid with each statement.
This was followed by American Express,in
1958, which created a worldwide credit card
network.
Bank of America created the Bank
Americard in 1958, a product which evolved
into the Visa system.
Master card came to being in 1966 when
a group of credit-issuing banks established
MasterCharge; it received a significant boost
when Citibank merged its proprietary
Everything Card, launched in 1967, into
Master Charge in 1969.
 DESCRIPTION
The FRONT of the credit
card consist of the
following:
Issuing bank logo

EMV chip
Hologram
Credit card number
Card brand logo
Expiry Date
Cardholder's name
The REVERSE of
the credit card
consist of the
following:

Magnetic Strip
Signature Strip
Card Security Code
 TYPES OF CREDIT CARDS
1.Standard credit cards
Balance Transfer Credit Cards
These cards are normally those that offer a
very low interest rate on balance transfer or
in many cases a 0% interest.
Low Interest Rate Cards
Low-interest-rate cards means carrying a
balance from one month to the next less
costly. The card has a low annual percentage
rate so,finance fees stay low, but these
cards have limited benefits and services
 There are a number of offers that come with
2.Reward program credit
different credit cards available and these
cards
come shapes and sizes as with any
in all
product. Common offers are:

Air mile Credit Cards

Cash back Credit Cards
General reward points credit cards
Hotel or travel points credit cards
Retail rewards credit cards
 3.Credit cards for bad
credit
Secured credit cards
These are secured on an asset.

Prepaid credit cards

In this you have to put money into the
account to use your card.
4.Specialty credit cards
Student Credit cards
These cards may only be available if
you are a student .

Business Credit Cards

All businesses need a good cash flow
& credit cards are an essential means of
credit for many businesses.
 TRANSACTION STEPS
1. Authorization:
The cardholder pays for the purchase.
The merchant submits the transaction to the
acquiring bank.
The acquirer verifies the credit card number,
the transaction type & the amount with the
issuer & reserves that amount of the
cardholder's credit limit for the merchant.
An authorization will generate an approval
code, which the merchant stores with the
transaction.
2. Batching :
Authorized transactions are stored in
"batches", which are sent to the acquirer.
Batches are typically submitted once per
day at the end of the business day.

3. Clearing and Settlement:

The acquirer sends the batch transactions
through the credit card association, which
debits the issuers for payment and credits
the acquirer.
4. Funding:
Once the acquirer has been paid, the
acquirer pays the merchant.
The merchant receives the amount totaling
the funds in the batch minus the "discount
rate,.

5. Chargebacks:
A chargeback is an event in which money in
a merchant account is held due to a dispute
relating to the transaction. Chargebacks are
typically initiated by the cardholder.
 INTEREST CHARGES
Credit card issuers usually waive interest
charges if the balance is paid in full each
month, but typically will charge full interest on
the entire outstanding balance from the date of
each purchase if the total balance is not paid.

Interest can vary considerably from card to

card, and the interest rate on a particular card
may jump dramatically if the card user is late
with a payment on that card or even if the
issuing bank decides to raise its revenue.
 MAJOR BRANDS OF CREDIT
CARDS
VISA
MASTER CARDS
VISA MINI
AMERICAN EXPRESS
DISCOVER
DINERS
 VISA CREDIT CARDS
The Visa International Service Association is
an USA based association which is joint
venture of more than 20,000 financial
institutes.
Visa Cards is one of the biggest Credit Card
providing services and it is accepted world
wide.
In this system the payments are made by the
customer on monthly basis on his purchase
and if he's not able to pay the amount within a
specified period of time then some interest will
be charged on his purchases.

MASTER CARDS
Master Card is one of the major credit
cards which are used regularly by the
people around the world and especially in
United States of America.
Master Cards are not in one dimension but
the company has introduced many types
of cards after its arrival in the market.
Some of them are Platinum MasterCard,
Gold MasterCard, BMO MasterCard and
Prepaid MasterCard.
 AMERICAN EXPRESS
American Express is also known as Amex
is a world wide financial services company.
The company is best known due to its
famous cards. These cards include :

American Express Credit Cards

American Express Reward Credit Cards
American Express Platinum Cards.
 Banks Issuing Credit Cards
ABN Amro
American Express
Citi Bank
HSBC
Standard Chartered
HDFC
ICICI
BOB
BOI
SBI
Canara Bank
 Costs
Credit card issuers have several types of costs.
Interest expenses Banks generally borrow
the money which they 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.

Operating costs It is the cost of running the

credit card portfolio,including everything like
paying the executives who run the
company,printing the plastics,mailing the
statements,running the computers that keep
track of cardholder's balance.
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.
The item will include relevant dates, and
the amount of the bad debt.
 Revenues
Credit card issuers have several types of
revenues.
1.Interchange fee: In addition to fees
paid by the card holder, merchants must
also pay interchange fees to the card-
issuing bank and the card association.

2. Interest on outstanding
balances:Interest charges vary widely
from card issuer to card issuer.
3.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,called overlimit fees
Returned cheque fees or payment
processing fees
Membership fees (annual or monthly)
Exchange rate loading fees
 ADVANTAGES
They allow you to make large purchases on
credit without carrying around a lot of cash.
They allow convenient remote purchasing -
ordering/shopping online or by phone.
They allow accurate record-keeping by
consolidating purchases into a single
statement.
Carrying a Credit card is more safe &
convenient than carrying cash or a cheque
book.
 DISADVANTAGES
You may become an impulsive buyer and
tend to overspend because of the ease of
using credit cards as these encourage the
purchasing you cannot really afford.
Credit card system will increase
indebtedness among the card holders.
Credit cards are a relatively expensive way
of obtaining credit,if you don't use them
carefully, especially because of the high
interest rates and other costs.
THANK YOU