CHAPTER1

CREDIT CARD

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

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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.

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.

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FIRST CREDIT CARD INTRODUCE

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HISTORY OF CREDIT CARDS

In 1914 there was credit system that was used by Western Union to
give to their more prominent customers in the interest of good customer
service. Prominent (prestigious) customers were given a metal card that was
used to defer payments (interest free) on services used by them. This credit
system was called

Metal Money

In 1924 General Petroleum Corporation (an oil company) saw the

success and being aware of the value of goodwill this could offer to their
customers, also issued their own metal money for gasoline and automotive
services. This was first offered to their employees followed by selected
customers then the general public after its great success. During the 1920s
and 1930s this form of credit card system spread to other companies such as
Railroad, hotel chains, airline, oil companies and department stores In the
late 30’s American Telephone and Telegraph (AT&T) introduced their
“credit card” called the Bell System Credit Card. The use of such “credit
cards” greatly increased after World War II due to the rapid growth of
businesses, increase in travel and the great demands for goods and services
and thus, it popularity grows significantly.

In 1950, the first universal credit card was introduced by Diners Club,
Inc (invented by Diners' Club founder Frank McNamara). This was a new

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kind of credit card which set the foundation on which today’s card credit is
established, unlike the other cards where they could only used for specific
goods and services, the Diner Club had a more general use. It was first used
by members for restaurant services but quickly expanded beyond that
service to cover general travel And entertainment expenses thus covering a
variety of establishments. Cardholders were charged an annual fee and
billed on a monthly or yearly basis. During the 1950s, because of its
convenience and efficiency, its popularity increased and many merchants
were very eager to accept the card because customers spend a lot more than
if it was cash since they can charge it to their cards

In 1951 the first bank to implement this credit system was the
Franklin National Bank in New York Customers would submit an
application for a loan and were screened for credit. Approved customers
were then given a card (Charge-It card) to make retail purchases. This credit
card system was similar to today’s system where consumers could make a
purchase using the card at participating merchants. This merchant would
copy the customers

Information from the unto a sales slip then obtain authorization from
the bank thus, completing the purchase. The bank would then, in turn,
reimburse this participating retailer and collect the debt from the consumer
at a later date with a flat fee to cover the costs of providing this credit loan.
This system was very successful and after a couple of years, other banks
impressed with this credit system jumped on board and offered their
customers similar services.

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 In 1958, the American Express Company (a traveler’s check
business) entered the credit card business with their version of the universal
credit card “Don’t leave home without it”. Their credit card was used for
travel and entertainment purposes and accepted at participating airline
merchants, restaurants and hotels. Their credit system policy at the time
(which changed in 1987) required cardholders to pay off their balances each
month.

In 1959 the Bank of America in California introduced the

Bank of America card. They were the first to introduce the revolving credit
card. This means customers were now given the option to make regular
monthly payments on the balance owed rather than having to pay off the
entire balance at one time. In other words, customers could carry a balance
from month to month. Many other banks then followed offering this
revolving credit option.

In 1965, Bank of America foresaw more income potential and control

and began issuing license agreements to other banks of all sizes in the US.
These licensing agreements allowed other banks to issue BankAmerica
Blue, White, and Gold BankAmerica card and also to interchange
transactions through these issuing banks

In 1966 a group of 14 US banks came together to form a new

bankcard processing association that provides the ability to exchange
information on credit card transactions.

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 In 1967 a group of four California banks formed a new
Association entity called Master Charge (Renamed MasterCard in 1979)
which is now known as

MasterCard International.

This was done to compete with the BankAmerica card (later became
Visa in 1977). This new bankcard processing association would expand
their services and increase their income potential, thus, these small banks
formed a mutual relationships with large national or international banks.

In 1969 banks interested in issuing cards of their own, became

members of either the Master Charge program (MasterCard Association) or
BankAmerica card program (Visa Association). This also means that most
independent bank charge cards would now change over to either credit card
programs. This was mutually beneficial to all banks and small financial
institutions since, they shared card program costs. Both organizations issued
credit cards through their member banks for their customers. Also, they both
lay down standards for credit card processing. In 1977 Bank Americard
spreading its credit card business globally had difficulty achieving this due
to the association of "America" in BankAmericard. Thus, its name was
changed to Visa. This changing of name was followed shortly (2 years after)
by Master Charge to Master Card.

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 In 1979 Master Charge changed its name to Master Card. Also, the
electronic processing of credit cards improved through electronic dial-up
terminals and magnetic stripes on the back of credit cards. This allowed
consumers credit cards swiped by merchants to accessed issuing bank card
holder information. This method decreased fraud, increased speed of
processing authorizations and decreases the usage of paper.

In the early 1980s the first Automatic Teller Machines (ATMs) came
into existence. This gave credit card holders access to cash in different
currencies from different countries around the world as well as locally.

ATMs give consumers the opportunity to have access to cash from their
bank account or from their credit card. Also, this gives an extra benefit to
card holders since they could make deposits 24 hours a day from most
countries around the world.

2005 and beyond: Today, MasterCard, American Express, VISA, and

Discovery, are the most popular and also have the most respected symbols
when it comes to credit cards. The credit card/payment system will continue
to evolve as a new technology payment system developed through the
advancement in science and technology. Read articles below under the
heading: Additional Info. On credit Card- “future credit cards” that are in
the making for the near future. Only a few are listed but there are other
bigger futuristic developments out there in the making

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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)

C) BENEFITS TO THE RETAILER

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(A) 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.

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.

f) Better network of card holders and increased use of cards means higher
popularity and image of the bank

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g) Savings of expense on cash holdings, i.e. stationery, printing and man
power to handle clearing transactions while considerably is reduced. It
increases

h) customer- base of the bank

i) It brings into banks fold high net worth customers by introducing various
types of credit card like Gold Card, Executive Card.

j) It brings in new customers from various merchants outlet which accepts

credit cards against sale of their goods/services.

k) It creates a brand name and popular image for the bank.

l) Large scale use of credits card and shops etc accepting them help to
increase deposit base of the bank

m) It increases interest income of the bank when card users avail of loan
facilities to settle the bills.

n) This may increase the chances of relationship banking and there by

retaining the customers.

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(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.

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

e) Cash can usually be obtained with the card, either on card account or by
using it as identification when encasings a cheque at the bank.

f) Availing credit with minimum formality.

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g) The credit card saves trouble and paper work to traveling business man.

h) The card holder has the option of taking extended credit up to a pre
arranged limit without reference to anyone, in additional to an initial credit
and interest free period. Future, revolving credit becomes automatically
available as the outstanding balance is reduced.

i It provides a proof of spending through banking channels to strengthen his

position incase of disputes with sellers.

j) It also gives him exposures to banking operation since systematic

accounting for spending and payments are routed through banking channels.

k) It also allows him to delegate spending power to add on members

l) Credit card is considered as a status symbol.

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BENEFITS TO THE MERCHANT ESTABLISHMENT
The principal benefits offer credit card to the retailer is

a) This will carry prestigious weight to the outlets.

b) Increases in sale because of increased purchasing power of the cardholder

due to unbilled credit available to the card holder.

c) The retailers gain from the impulse buying and trading up the tendency to
buy the bigger or better article

d) Credit card ensures timely and certainly of payments.

e) Suppliers/sellers no longer have to send reminders of outstanding debits.

f) Systematic accounting since sales receipts are routed through banking

channels.

g) Advertising and promotional support on national scale.

h) Development of prestigious clientele base.

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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

i) Avoid the entire cost and security problem involved in handling cash.

j) Losses to bad debts and reduced an additional liquidity is

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k) It also allows him to delegate spending power to add on members

l) Credit card is considered as a status symbol.

BENEFITS TO THE MERCHANT ESTABLISHMENT

The principal benefits offer credit card to the retailer is

a) This will carry prestigious weight to the outlets.

b) Increases in sale because of increased purchasing power of the cardholder

due to unbilled credit available to the card holder.

c) The retailers gain from the impulse buying and trading up the tendency to
buy the bigger or better article

d) Credit card ensures timely and certainly of payments.

e) Suppliers/sellers no longer have to send reminders of outstanding debits.

f) Systematic accounting since sales receipts are routed through banking

channels.

g) Advertising and promotional support on national scale.

h) Development of prestigious clientele base.

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i) Avoid the entire cost and security problem involved in handling cash.

j) Losses to bad debts and reduced an additional liquidity is achieved.

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MARKETING STRATEGIES

American companies spend billions of dollars each year on

marketing. As a matter of fact, in 2001, U.S. advertising expenditures alone
topped $230 billion, more than doubling the $105.97 billion spent in 1980.
(Source: "Advertising: Exposure and Statistics“
November 2003 newsletter of the Media Education Foundation)

Now, these figures may seem staggering to the independent

professional on a budget, but don’t panic; there are lots of effective
strategies you can utilize that will help you grow your business fast. Here
are some of my favorites:

Identify your niche.

One of the easiest ways to attract customers is to figure out which

group of prospective customers you get your very best results for and go
after them exclusively. Many professionals are afraid to do this claiming that
they’ll be leaving someone out, but many marketing experts agree that niche
marketing as the easiest and
fastest way to get business.

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Position yourself as an expert.

Why? Experts make more money and get more media attention and
that’s free advertising! Let’s face it; it’s easier to trust a specialist than a
generalist who’s trying to be everything to everyone. Once you’ve identified
your niche, let the world know about how you can help. Provide free
information products, write articles and white papers about the problems
your clients face and how they can solve them.

Conduct workshops, seminars and tele-classes specifically geared

towards helping your prospective customers and before long you’ll be
regarded as an expert in your field. And, while you’re at it don’t forget to,
collect names, emails and addresses of prospects to keep filling your
pipeline.

Develop ongoing relationships with complementary

professionals and build your referral team.

These are other professionals who sell non-competing services or

products to the same niche customers you are targeting. For instance, my
clients often need the services of bookkeepers, accountants and business

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attorneys. Likewise, they refer business to me. Here are a couple of other
examples:

• Residential realtor, mortgage broker, real estate attorney, home

improvement contractor, architect and interior designer.

• Commercial printer, copywriter, graphic designer.

Institute a system to keep track of all of the people who are

interested in your product or services, and find creative ways
of keeping in touch with them on a regular basis.

To start, go through your notes. Put together a list of all of the people
you’ve spoken to in the last 6-9 months who’ve showed interest in you but
haven’t become paying customers. Follow up with them in a variety of
ways: call them to touch base, use email, ask them to subscribe to a
newsletter, send them interesting articles, or invite them to join you at
events. It takes numerous impressions to make the sale; that’s why you see
commercials on TV over and over again for the same products.

By Keeping track of all of the people who’ve showed interest and

keeping your business on their radar screen you’ll turn more of them into
paying customers.

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Let your satisfied customers help you sell your products or
services.

Here are a couple of ways to do this:

• Ask them for referrals - right away (if you were a car salesman you
wouldn’t wait for the new car to get dirty and dented!)

• Ask them to write testimonials for you, (also right away) and compile a list
of testimonials to use in your all of your marketing collateral.

Create a marketing calendar and keep to it consistently.

Scheduling marketing activities that take place weekly, bi monthly,

monthly and quarterly will help you to avoid the feast or famine syndrome
that most independent professionals fall prey to. And, by doing so,
marketing will become easier since it becomes a regular part of your
business life.

Identify innovative ways to get more business from existing customers.

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 It’s much easier to get business from customers who are already
happy with your services or products. So develop additional services or
products to keep customers coming back for more.

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
4. THE ACQUIRE
5. THE CARD ASSOCIATION

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

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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

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

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Reserve’s Automated Clearing House (the “ACH”) which is an electronic
funds transfer system.

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.

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1. Front End Processing

Authorization is the acknowledgement by the issuer that a

particular account may be charged for the amount of the sale. The preferred
method to obtain an authorization and the one that will receive the lower
interchange rate is to swipe a card’s magnetic strip through the point of sale
terminal’s card reader. If the card cannot be electronically read by the
terminal for any reason, the information may be keyed into the terminal in
order to get an electronic response. The request is then routed through the
processor’s VAP or MIP to the issuer’s authorization center. The response
is returned to the merchant’s terminal. The terminal records the response
code which becomes part of the transaction and is included in the clearing
data sent through interchange to the issuer

Authorization may also be obtain through other methods such as

voice authorization. The merchant can call an 800 number to verbally
provide cardholder information and receive an operator’s response. Other
methods such as electronically generated audio responses (ARU) that permit
the merchant to use the telephone like a key pad to enter sale information

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can also be used. If for any reason the issuer or its authorization center
cannot be reached, the card Associations will act as stand-in processors to
provide authorizations.

Electronic Draft Capture

Draft capture is the process of transferring sales draft data into

electronic format so that it may be sent through the interchange networks for
clearing and settlement. Data identifying the cardholder account and
expiration date is put into the point of sales terminal, either by swiping the
card thorough a card reader or manually keying the information into the
terminal’s keypad. The amount of the sales is then entered and an
authorization requested. Once an authorization code has been received, the
terminal is prompted to store data on the completed sale in its memory.
.

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2. Back-End Processing

Back-end processing involves the various accounting functions that

enable transactions to be recorded to the proper merchant or cardholder
account. During back-end processing reports are created for distribution to
the acquirers that include:

1) Settlement data
2) Security/fraud data
3) Retrieval/chargeback data
4) Funds disbursements data

Transactions for internet and other card not present environments

work similarly but can have additional processing steps. Both Visa and
MasterCard have Internet authentication programs (not to be confused with
authorization) named Verified by Visa (By) and MasterCard Secure Code
(MCSC) that do alter the transaction process somewhat. If the cardholder is
registered with one of these programs, they must provide a pre-registered
password at the time of purchase. This password is then passed along as

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part of the information flow of the transaction (these programs and other
techniques for controlling fraud are discussed in more detail later in this
section).
Visa and MasterCard offer both signature debit and credit cards to
consumers. The primary difference between signature debit transactions and
credit transactions are that debit cards are linked to a bank account.
Rather than offering the cardholder 30 days of float and the option to
finance ongoing balances, debit cards simply debit the cardholder’s bank
account for authorized purchases. Signature debit transactions (which are
sometimes also referred to as offline debit, a misleading reference and not to
be confused with an offline EFT debit transaction) are different from PIN
debit transactions in that the transaction does not involve use of a PIN
number at the time of purchase. PIN transactions also are processed on
entirely different networks referred to as EFT networks and are discussed in
Section IV.

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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.

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

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banks / NBFCs. The bank / NBFC's Fair Practice Code should, at a
minimum, incorporate the relevant guidelines contained in this circular.

Guidelines for Implementation

1. Issue of cards

a) Banks / NBFCs should independently assess the credit risk while issuing
cards to persons, especially to students and others with no independent
financial means. Add-on cards i.e. those that are subsidiary to the principal
card, may be issued with the clear understanding that the liability will be
that of the principal cardholder.

b) As holding several credit cards enhances the total credit available to any
consumer, banks / NBFCs should assess the credit limit for a credit card
customer having regard to the limits enjoyed by the cardholder from other
banks on the basis of self declaration/ credit information.

c) The card issuing banks / NBFCs would be solely responsible for

fulfillment of all KYC requirements, even where DSAs / DMAs or other
agents solicit business on their behalf.

d) While issuing cards, the terms and conditions for issue and usage of a
credit card should be mentioned in clear and simple language (preferably in

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English, Hindi and the local language) comprehensible to a card user. The
Most Important Terms and Conditions (MITCs) termed as standard set of
conditions, as given in the Appendix, should be highlighted and advertised/
sent separately to the prospective customer/ customers at all the stages i.e.
during marketing, at the time of application, at the acceptance stage
(welcome kit) and in important subsequent communications

2. Interest rates and other charges

a) Card issuers should ensure that there is no delay in dispatching bills and
the customer has sufficient number of days (at least one fortnight) for
making payment before the interest starts getting charged.

b) Card issuers should quote annualized percentage rates (APR) on card

products (separately for retail purchase and for cash advance, if different).
The method of calculation of APR should be given with a couple of
examples for better comprehension. The APR charged and the annual fee
should be shown with equal prominence. The late payment charges,
including the method of calculation of such charges and the number of days,
should be prominently indicated. The manner in which the outstanding
unpaid amount will be included for calculation of interest should also be
specifically shown with
Prominence in all monthly statements. Even where the minimum amount
indicated to keep the card valid has been paid, it should be indicated in bold
letters that the interest will be charged on the amount due after the due date
of payment. These aspects may be shown in the Welcome Kit in addition to

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being shown in the monthly statement.

c) The bank / NBFC should not levy any charge that was not explicitly
indicated to the credit card holder at the time of issue of the card and getting
his / her consent. However, this would not be applicable to charges like
service taxes, etc. which may subsequently be levied by the Government or
any other statutory authority.

d) The terms and conditions for payment of credit card dues, including the
minimum payment due, should be stipulated so as to ensure that there is no
negative amortization.

e) Changes in charges (other than interest) may be made only with

prospective effect giving notice of at least one month. If a credit card holder
desires to surrender his credit card on account of any change in credit card
charges to his disadvantage, he may be permitted to do so without the bank
levying any extra charge for such closure

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3. Wrongful billing

a) The card issuing bank / NBFC should ensure that wrong bills are not
raised and issued to customers. In case, a customer protests any bill, the
bank / NBFC should provide explanation and, if necessary, documentary
evidence to the customer within a maximum period of sixty days with a
spirit to amicably redress the grievances.

b) To obviate frequent complaints of delayed billing, the credit card issuing

bank / NBFC may consider providing bills and statements of accounts
online, with suitable security built therefore.

4. Use of DSAs / DMAs and other agents

a) when banks / NBFCs outsource the various credit card operations, they
have to be extremely careful that the appointment of such service providers
does not compromise with the quality of the customer service and the bank /
NBFC’s ability to manage credit, liquidity and operational risks. In the

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choice of the service provider, the bank / NBFCs have to be guided by the
need to ensure confidentiality of the customer’s records, respect customer
privacy, and adhere to fair practices in debt collection.

b) The Code of Conduct for Direct Sales Agents (DSAs) formulated by the
Indian Banks’ Association (IBA) could be used by banks / NBFCs in
formulating their own codes for the purpose. The bank / NBFC should
ensure that the DSAs engaged by them for marketing their credit card
products scrupulously adhere to the bank / NBFC’s own Code of Conduct
for credit card operations which should be displayed on the bank / NBFC’s
website and be available easily to any credit card holder.

c) The bank / NBFC should have a system of random checks and mystery
shopping to ensure that their agents have been properly briefed and trained
in order to handle with care and caution their responsibilities, particularly in
the aspects included in these guidelines like soliciting customers, hours for
calling, privacy of customer information, conveying the correct terms and
conditions of the product on offer, etc.

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 Protection of Customer Rights

Customer’s rights in relation to credit card operations primarily relate

to personal privacy, clarity relating to rights and obligations, preservation of
customer records, maintaining confidentiality of customer information and
fair practices in debt collection. The card issuing bank / NBFC would be
responsible as the principal for all acts of omission or commission of their
agents (DSAs / DMAs and recovery agents).

I. Right to privacy

a) unsolicited cards should not be issued. In case, an unsolicited card is

issued and activated without the consent of the recipient and the latter is
billed for the same, the card issuing bank / NBFC shall not only reverse the
charges forthwith, but also pay a penalty without demur to the recipient
amounting to twice the value of the charges reversed.

b) Unsolicited loans or other credit facilities should not be offered to the

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credit card customers. In case, an unsolicited credit facility is extended
without the consent of the recipient and the latter objects to the same, the
credit sanctioning bank / NBFC shall not only withdraw the credit limit, but
also be liable to pay such penalty as may be considered appropriate
c) The card issuing bank / NBFC should not unilaterally upgrade credit
cards and enhance credit limits. Prior consent of the borrower should
invariably be taken whenever there is any change/s in terms and conditions.

d) The card issuing bank / NBFC should maintain a Do Not Call Registry
(DNCR) containing the phone numbers (both cell phones and land phones)
of customers as well as non-customers (non-constituents) who have
informed the bank / NBFC that they do not wish to receive unsolicited calls /
SMS for marketing of its credit card products. The DNCR should be set up
within two (2) months from the date of this circular and wide publicity
should be given to the arrangement

e) The intimation for including an individual’s telephone number in the Do

Not Call Registry (DNCR) should be facilitated through a website
maintained by the bank / NBFC or on the basis of a letter received from
such a person addressed to the bank / NBFC.

f) The card issuing bank / NBFC should introduce a system whereby the
DSAs/ DMAs as well as its Call Centers have to first submit to the bank /
NBFC a list of numbers they intend to call for marketing purposes. The bank
/ NBFC should then refer to the Do Not Call Registry (DNCR) and only
those numbers which do not figure in the Registry should be cleared for
calling.

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g) The numbers cleared by the card issuing bank / NBFC for calling should
only be accessed. The bank / NBFC would be held responsible if a Do Not
Call Number (DNCN) is called on by its DSAs / DMAs or Call Centre/s.

h) The card issuing bank / NBFC should ensure that the Do Not Call
Registry (DNCR) numbers are not passed on to any unauthorized person/s
or misused in any manner.

I.)Banks / NBFCs/ their agents should not resort to invasion of privacy viz.,
persistently bothering the card holders at odd hours, violation of "do not
call"

37
(ii) Customer confidentiality

a) The card issuing bank / NBFC should not reveal any information relating
to customers obtained at the time of opening the account or issuing the
credit card to any other person or organization without obtaining their
specific consent, as regards the purpose/s for which the information will be
used and the organizations with whom the information will be shared. Banks
/ NBFCs should satisfy themselves, based on specific legal advice that the
information being sought from them is not of such nature as will violate the
provisions of the laws relating to secrecy in the transactions. Banks / NBFCs
would be solely responsible for the correctness or otherwise of the data
provided for the purpose.

B) In case of providing information relating to credit history / repayment

record of the card holder to a credit information company (specifically
authorized by RBI), the bank / NBFC may explicitly bring to the notice of
the customer that such information is being provided in terms of the Credit
Information Companies (Regulation) Act, 2005.

c) Before reporting default status of a credit card holder to the Credit

Information Bureau of India Ltd. (CIBIL) or any other credit information
Company authorized by RBI, banks / NBFCs may ensure that they adhere to
a procedure, duly approved by their Board, including issuing of sufficient

38
notice to such card holder about the intention to report him/ her as defaulter
to the Credit Information Company. The procedure should also cover the
notice period for such reporting as also the period within which such report
will be withdrawn in the event the customer settles his dues after having
been reported as defaulter. Banks / NBFCs should be particularly careful in
the case of cards where there are pending disputes.

The Disclosure/ release of information, particularly about the default,

should be made only after the dispute is settled as far as possible. In all
cases, a well laid down procedure should be transparently followed. These
procedures should also be transparently made known as part of MITCs

d) The disclosure to the DSAs / recovery agents should also be limited to

the extent that will enable them to discharge their duties. Personal
information provided by the card holder but not required for recovery
purposes should not be released by the card issuing bank / NBFC. The card
issuing bank / NBFC should ensure that the DSAs / DMAs do not transfer or
misuse any customer information during marketing of credit card products.

39
(iii) Fair Practices in debt collection

a) In the matter of recovery of dues, banks / NBFCs may ensure that they, as
also their agents, adhere to the extant instructions on Fair Practice Code for
lenders (circular DBOD. Leg. No. BC. 104 /09.07.007 / 2002–03 dated May
5, 2003) as also IBA’s Code for Collection of dues and repossession of
security. In case banks / NBFCs have their own code for collection of dues it
should, at the minimum, incorporate all the terms of IBA's Code.

b) In particular, in regard to appointment of third party agencies for debt

collection, it is essential that such agents refrain from action that could
damage the integrity and reputation of the bank / NBFC and that they
observe strict customer confidentiality. All letters issued by recovery agents
must contain the name and address of a responsible senior officer of the card
issuing bank whom the customer can contact at his location.

c) Banks / NBFCs / their agents should not resort to intimidation or

harassment of any kind, either verbal or physical, against any person in their
debt collection efforts, including acts intended to humiliate publicly or
intrude the privacy of the credit card holders’ family members, referees and
friends, making threatening and anonymous calls or making false and
misleading representations.

40
6. Redresses of Grievances

a) generally, a time limit of sixty (60) days may be given to the customers
for preferring their complaints / grievances.

b) The card issuing bank / NBFC should constitute Grievance Redresses

machinery within the bank / NBFC and give wide publicity about it through
electronic and print media. The name and contact number of designated
grievance redresses officer of the bank / NBFC should be mentioned on the
credit card bills. The designated officer should ensure that genuine
grievances of credit card subscribers are redressed promptly without
involving delay.

c) The grievance redresses procedure of the bank / NBFC and the time
frame fixed for responding to the complaints should be placed on the bank /
NBFC's website. The name, designation, address and contact number of
important executives as well as the Grievance Redresses Officer of the
bank / NBFC may be displayed on the website. There should be a system of
acknowledging customers' complaints for follow up, such as complaint
number / docket number, even if the complaints are received on phone.

41
d) If a complainant does not get satisfactory response from the bank /
NBFC within a maximum period of thirty (30) days from the date of his
lodging the complaint, he will have the option to approach the Office of the
concerned Banking Ombudsman for redresses of his grievance/s. The bank /
NBFC shall be liable to compensate the complainant for the loss of his time,
expenses, financial loss as well as for the harassment and mental anguish
suffered by him for the fault of the
Bank and where the grievance has not been redressed in time.

7. Internal control and monitoring systems

With a view to ensuring that the quality of customer service is

ensured on an on-going basis in banks / NBFCs, the Standing Committee on
Customer Service in each bank / NBFC may review on a monthly basis the
credit card operations including reports of defaulters to the CIBIL, credit
card related complaints and take measures to improve the services and
ensure the orderly growth in the credit card operations. Banks / NBFCs
should put up detailed quarterly analysis of credit card related complaints to
their Top Management. Card issuing banks should have in place a suitable
monitoring mechanism to randomly check the genuineness of merchant
transactions.

8. Right to impose penalty

42
 The Reserve Bank of India reserves the right to impose any penalty
on a bank / NBFC under the provisions of the Banking Regulation Act, 1949
for violation of any of these guidelines.

Different Types of Credit Cards

43
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

44
 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
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

45
 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
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

46
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
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

47
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,
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

48
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.

Credit Cards for Bad Credit

Bad credit credit cards are designed for people with poor credit
histories. These cards generally have very low credit limits and charge extra
fees. This is because they are designed for people who are considered far
less likely to repay their debts. If you have a bad credit rating, these types of
credit cards can be a great way to rebuild your credit history. These cards
can also allow you to have credit even if you would be rejected for most
other cards due to your credit history.

Student Credit Cards

Student credit cards are cards meant to attract college and university
students. These cards often offer sign-up bonuses for students. They are also
easier to apply for, since credit card companies recognize that students have

49
much shorter credit histories than the average customer.

If you are a student, student credit cards can be a great option. They
are simple to use and can help you build a good credit rating before you
graduate. However, there are some disadvantages to student credit cards.
These cards may have no reward programs and may have fewer benefits,
including fewer bonuses and services, than other cards.

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.

50
51
Types of Credit
Cards offered
By
Indian Banks

52
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.

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

53
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.

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.

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 CHAPTER 2
DEBIT CARD

A debit card (also known as a bank card or check card) is a plastic

card that provides an alternative payment method to cash when making
purchases. Functionally, it can be called an electronic cheque, as the funds
are withdrawn directly from either the bank account or from the remaining
balance on the card. In some cases, the cards are designed exclusively for
use on the Internet, and so there is no physical card.

In many countries the use of debit cards has become so widespread

that their volume of use has overtaken the cheque and, in some instances,
cash transactions.

Like credit cards, debit cards are used widely for telephone and
Internet purchases and, unlike credit cards, the funds are transferred
immediately from the bearer's bank account instead of having the bearer pay
back the money at a later date.

Debit cards may also allow for instant withdrawal of cash, acting as
the ATM card for withdrawing cash and as a cheque guarantee card.
Merchants may also offer cash back facilities to customers, where a
customer can withdraw cash along with their purchase.

55
Types of debit card systems

Online Debit System

Online debit cards require electronic authorization of every
transaction and the debits are reflected in the user’s account immediately.
The transaction may be additionally secured with the personal identification
number (PIN) authentication system and some online cards require such
authentication for every transaction, essentially becoming enhanced
automatic teller machine (ATM) cards. One difficulty in using online debit
cards is the necessity of an electronic authorization device at the point of
sale (POS) and sometimes also a separate PIN pad to enter the PIN, although
this is becoming commonplace for all card transactions in many countries.
Overall, the online debit card is generally viewed as superior to the offline
debit card because of its more secure authentication system and live status,
which alleviates problems with processing lag on transactions that may only
issue online debit cards. Some on-line debit systems are using the normal
authentication processes of Internet banking to provide real-time on-line
debit transactions. The most notable of these are Ideal and POL

Offline Debit System

56
 Offline debit cards have the logos of major credit cards (e.g. Visa or
MasterCard) or major debit cards (e.g. Maestro in the United Kingdom and
other countries, but not the United States) and are used at the point of sale
like a credit card (with payer's signature). This type of debit card may be
subject to a daily limit, and/or a maximum limit equal to the
current/checking account balance from which it draws funds. Transactions
conducted with offline debit cards require 2–3 days to be reflected on users’
account balances. In some countries and with some banks and merchant
service organizations, a "credit" or offline debit transaction is without cost to
the purchaser beyond the face value of the transaction, while a small fee
may be charged for a "debit" or online debit transaction (although it is often
absorbed by the retailer). Other differences are that online debit purchasers
may opt to withdraw cash in addition to the amount of the debit purchase (if
the merchant supports that functionality); also, from the merchant's
standpoint, the merchant pays lower fees on online debit transaction as
compared to "credit" (offline) debit transaction

Electronic Purse Card System

Smart-card-based electronic purse systems (in which value is stored

on the card chip, not in an externally recorded account, so that machines
accepting the card need no network connectivity) are in use throughout
Europe since the mid-1990s, most notably in Germany (Geldkarte), Austria
(Quick), the Netherlands (Chipknip), Belgium and Switzerland (CASH). In
Austria and Germany, all current bank cards now include electronic purses.

57
Prepaid Debit Card

Prepaid debit cards, also called reload able debit cards or reload able
prepaid cards, are often used for recurring payments. The payer loads funds
to the cardholder's card account. Prepaid debit cards use either the offline
debit system or the online debit system to access these funds. Particularly
for companies with a large number of payment recipients abroad, prepaid
debit cards allow the delivery of international payments without the delays
and fees associated with international checks and bank transfers. Providers
include Caxton FX prepaid cards, [ Escape prepaid cards and Travelex
prepaid cards. [ Whereas, web-based services such as stock photography
websites (stockpot), outsourced services (odes), and affiliate networks
(Media Whiz) have all started offering prepaid debit cards for their
contributors/freelancers/vendors.

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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.10,
000/- per day

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

59
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

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.

WIDELY ACCEPTED, INTERNATIONALLY VALID

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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.

E) No credit check is required to get a Debit card.

F) Use of card is terminated without notice, upon the death, bankruptcy or

insolvency of the cardholder or for other valid reasons.

G) Spending is limited to our bank balance.

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DRAWBACKS OF DEBIT CARDS

NO GRACE PERIOD

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

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

62
63
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

64
Online debit card transactions

The most advantageous way to process debit cards is to do it online.

You will still be able to accept debit cards at the point of sale, but you will
need to install a PIN pad on your credit card terminal.

An online debit card transaction works much like a credit card

transaction, except that after your customer swipes his or her debit card, they
will enter a PIN instead of signing the receipt.

At this point the encrypted debit card information is sent to the

customer’s bank for authorization, and you’ll receive the funds just as you
would for a credit card transaction.
Your business has many advantages when you accept debit cards.

For example, you pay a flat fee for each debit card transaction that
you process, instead the flat fee plus percentage rate that you are charged
when you accept credit cards. Over time, this can potentially save you a lot
of money.

Another advantage when you process debit cards is that you can’t be
charged higher “downgrade” fees.

In a credit card transaction, you are usually charged the “discount

rate.” However, some transactions are considered to be a higher risk or
expense to the bank, and you are charged a higher rate as a result.

65
 But when you accept debit cards, you always pay the same flat rate,
with no danger of the rate increasing.

You can also cut down on checkout time when you accept debit cards.
It takes an average of 30 seconds to hand over the pen, wait for the customer
to sign the receipt, and then take the pen back.

If you process 20 credit card transactions a day, you’re losing 100

minutes a day just passing a pen back and forth! That’s almost two hours

66
 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
4. Unsigned Credit Cards
5. Loss of Multiple Cards
6. Strange Requests for Your PIN Numbers
7. Legitimate Cards
8. Altered Cards
9. Counterfeit Cards

New Technology

67
 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.

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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Credit Card Data:
Credit Card is either Visa or MasterCard which is the
Most popular and in some instance American Express.

The Top 10 Credit Card Issuers in India are

as follows,

ICICI Bank - 5.07 Mn

HDFC Bank - 4.42 Mn
SBI Cards - 2.65 Mn
Citibank - 2.54 Mn
HSBC Cards - 1.3 Mn
ABN Amro - 0.78 Mn
Axis Bank - 0.57 Mn
Deutsche Bank - 0.495 Mn
American Express - 0.45 Mn

Data Courtesy - The Reserve Bank of India

69
 CHAPTER 5

QUESTIONNARIES

1. Meaning of credit card

Credit is a privilege and a convenience. Credit lets you charge a meal on a

credit card, pay for an appliance on an installment plan, take out a loan to
buy a house, or pay for schooling. Credit allows you to make a purchase
without ready cash.

A credit card enables you to buy things now and pay for them later. You get
credit by promising to pay in the future for something you receive in the
present. Credit usually costs something, and what is borrowed must be paid
back.

2. The reason for the neediness of credit

Convenient, hassle-free shopping. When you use a credit card to make a

purchase, you don't have to carry a lot of cash, pay by check, or present
additional identification. A credit card also simplifies and speeds up catalog
ordering and currently is virtually the only way to make Internet purchases.

Emergency help. Credit cards are the ultimate financial security blanket.
They can get you through nearly any emergency situation.

70
Easier budgeting. With a credit card, you can make purchases and pay them
off on a schedule that fits your budget. Credit cards also allow you to take
advantage of sales and special offers.

3. Reason to establish a good credit history

Establishing a good credit history is an important part of your personal and

financial future. It can help open doors for you or keep them locked.

A variety of people and businesses make decisions affecting your future that
are based on your credit history. Banks and other lenders consider your
credit report when reviewing applications for mortgages, revolving lines of
credit, or other loans. Landlords sometimes use credit reports to decide
among rental applicants. And a potential employer may even assess an
applicant's credit report before extending a job offer.

4. Meaning of debit card

Debit Card is an electronic purse, which allows the holder to withdraw cash
from ATMs and also enables him to purchase goods or services from the
member establishments. Debit Cards are mostly issued in collaboration
either with VISA or MasterCard.

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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 (30TH AUG 2007)

WEBSITE

WWW.GOOGLE.COM

WWW.YAHOO.COM

WWW.RBI.ORG

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