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E-mail: administration@srisim.org; Website: www.srisim.org

PROJECT REPORT ON

“EVALUATION OF PAPER MONEY –MOVING TOWARDS PLASTIC

MONEY”

SUBMITTED TO: SUBMITTED BY:

PRF. HARPEET SINGH ARJIT JAIN(161)

ARNAB BANERJEE(162)

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ACKNOWLEDGEMENT

We present this project report on “Financial statement analysis” with a sense

of great pleasure and satisfaction. We undersign with pleasure to take this

opportunity to thank all those related directly or indirectly in preparation of

this project report.We express our sincere thanks to Prof. HARPEET SINGH

for his support & guidance.

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Money

Coins and banknotes – the two most common physical forms of money.

Money is any object that is generally accepted as payment for goods and services and

repayment of debts in a given country or socio-economic context. The main functions of

money are distinguished as: a medium of exchange; a unit of account; a store of value;

and, occasionally, a standard of deferred payment.

Money originated as commodity money, but nearly all contemporary money systems are

based on fiat money. Fiat money is without intrinsic use value as a physical commodity,

and derives its value by being declared by a government to be legal tender; that is, it must

be accepted as a form of payment within the boundaries of the country, for "all debts,

public and private".The money supply of a country consists of currency (banknotes and

coins) and demand deposits or 'bank money' (the balance held in checking accounts and

savings accounts). These demand deposits usually account for a much larger part of the

money supply than currency. Bank money is intangible and exists only in the form of

various bank records. Despite being intangible, bank money still performs the basic

functions of money, being generally accepted as a form of payment.

The use of barter-like methods may date back to at least 100,000 years ago, though there

is no evidence of a society or economy that relied primarily on barter. Instead, non-

monetary societies operated largely along the principles of gift economics. When barter

did occur, it was usually between either complete strangers or potential enemies

Many cultures around the world eventually developed the use of commodity money. The

shekel was originally a unit of weight, and referred to a specific weight of barley, which

was used as currency. The first usage of the term came from Mesopotamia circa 3000

BC. Societies in the Americas, Asia, Africa and Australia used shell money – often, the

shells of the money cowry (Cypraea moneta L. or C. annulus L.). According to

Herodotus, the Lydians were the first people to introduce the use of gold and silver coins.

It is thought by modern scholars that these first stamped coins were minted around 650 -

600 BC.The system of commodity money eventually evolved into a system of

representative money. This occurred because gold and silver merchants or banks would

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issue receipts to their depositors – redeemable for the commodity money deposited.

Eventually, these receipts became generally accepted as a means of payment and were

used as money. Paper money or banknotes were first used in China during the Song

Dynasty. These banknotes, known as "jiaozi" evolved from promissory notes that had

been used since the 7th century. However, they did not displace commodity money, and

were used alongside coins. Banknotes were first issued in Europe by Stockholms Banco

in 1661, and were again also used alongside coins. The gold standard, a monetary system

where the medium of exchange are paper notes that are convertible into pre-set, fixed

quantities of gold, replaced the use of gold coins as currency in the 17th-19th centuries in

Europe. These gold standard notes were made legal tender, and redemption into gold

coins was discouraged. By the beginning of the 20th century almost all countries had

adopted the gold standard, backing their legal tender notes with fixed amounts of gold.

After World War II, at the Bretton Woods Conference, most countries adopted fiat

currencies that were fixed to the US dollar. The US dollar was in turn fixed to gold. In

1971 the US government suspended the convertibility of the US dollar to gold. After this

many countries de-pegged their currencies from the US dollar, and most of the world's

currencies became unbacked by anything except the governments' fiat of legal tender and

the ability to convert the money into goods via payment.

Medium of exchange

When money is used to intermediate the exchange of goods and services, it is performing

a function as a medium of exchange. It thereby avoids the inefficiencies of a barter

system, such as the 'double coincidence of wants' problem.

Unit of account

A unit of account is a standard numerical unit of measurement of the market value of

goods, services, and other transactions. Also known as a "measure" or "standard" of

relative worth and deferred payment, a unit of account is a necessary prerequisite for the

formulation of commercial agreements that involve debt. To function as a 'unit of

account', whatever is being used as money must be:

Divisible into smaller units without loss of value; precious metals can be coined from

bars, or melted down into bars again.

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Fungible: that is, one unit or piece must be perceived as equivalent to any other, which is

why diamonds, works of art or real estate are not suitable as money.

A specific weight, or measure, or size to be verifiably countable. For instance, coins are

often milled with a reeded edge, so that any removal of material from the coin (lowering

its commodity value) will be easy to detect.

Store of value

To act as a store of value, a money must be able to be reliably saved, stored, and retrieved

– and be predictably usable as a medium of exchange when it is retrieved. The value of

the money must also remain stable over time. Some have argued that inflation, by

reducing the value of money, diminishes the ability of the money to function as a store of

value.

Standard of deferred payment

While standard of deferred payment is distinguished by some texts, particularly older

ones, other texts subsume this under other functions. A "standard of deferred payment" is

an accepted way to settle a debt – a unit in which debts are denominated, and the status of

money as legal tender, in those jurisdictions which have this concept, states that it may

function for the discharge of debts. When debts are denominated in money, the real value

of debts may change due to inflation and deflation, and for sovereign and international

debts via debasement and devaluation.

Money supply

In economics, money is a broad term that refers to any financial instrument that can fulfill

the functions of money. These financial instruments together are collectively referred to

as the money supply of an economy. Since the money supply consists of various financial

instruments (usually currency, demand deposits and various other types of deposits), the

amount of money in an economy is measured by adding together these financial

instruments creating a monetary aggregate. Modern monetary theory distinguishes among

different types of monetary aggregates, using a categorization system that focuses on the

liquidity of the financial instrument used as money

.

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Market liquidity

Market liquidity describes how easily an item can be traded for another item, or into the

common currency within an economy. Money is the most liquid asset because it is

universally recognised and accepted as the common currency. In this way, money gives

consumers the freedom to trade goods and services easily without having to barter.

Liquid financial instruments are easily tradable and have low transaction costs. There

should be no (or minimal) spread between the prices to buy and sell the instrument being

used as money.

Measures of money

The money supply is the amount of financial instruments within a specific economy

available for purchasing goods or services. The money supply is usually measured as

three escalating categories M1, M2 and M3. The categories grow in size with M1 being

currency (coins and bills) and checking account deposits. M2 is currency, checking

account deposits and savings account deposits, and M3 is M2 plus time deposits. M1

includes only the most liquid financial instruments, and M3 relatively illiquid

instruments.

Another measure of money, M0, is also used, although unlike the other measures, it does

not represent actual purchasing power by firms and households in the economy. M0 is

base money, or the amount of money actually issued by the central bank of a country. It

is measured as currency plus deposits of banks and other institutions at the central bank.

M0 is also the only money that can satisfy the reserve requirements of commercial banks.

Types of money

Currently, most modern monetary systems are based on fiat money. However, for most of

history, almost all money was commodity money, such as gold and silver coins. As

economies developed, commodity money was eventually replaced by representative

money, such as the gold standard, as traders found the physical transportation of gold and

silver burdensome. Fiat currencies gradually took over in the last hundred years,

especially since the breakup of the Bretton Woods system in the early 1970s.

Commodity money

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Many items have been used as commodity money such as naturally scarce precious

metals, conch shells, barley, beads etc., as well as many other things that are thought of

as having value. Commodity money value comes from the commodity out of which it is

made. The commodity itself constitutes the money, and the money is the commodity.

Examples of commodities that have been used as mediums of exchange include gold,

silver, copper, rice, salt, peppercorns, large stones, decorated belts, shells, alcohol,

cigarettes, cannabis, candy, etc. These items were sometimes used in a metric of

perceived value in conjunction to one another, in various commodity valuation or Price

System economies. Use of commodity money is similar to barter, but a commodity

money provides a simple and automatic unit of account for the commodity which is being

used as money. Although some gold coins such as the Krugerrand are considered legal

tender, there is no record of their face value on either side of the coin. The rationale for

this is that emphasis is laid on their direct link to the prevailing value of their fine gold

content. American Eagles are imprinted with their gold content and legal tender face

value.

Representative money

In 1875 economist William Stanley Jevons described what he called "representative

money," i.e., money that consists of token coins, or other physical tokens such as

certificates, that can be reliably exchanged for a fixed quantity of a commodity such as

gold or silver. The value of representative money stands in direct and fixed relation to the

commodity that backs it, while not itself being composed of that commodity.

Fiat money

Fiat money or fiat currency is money whose value is not derived from any intrinsic value

or guarantee that it can be converted into a valuable commodity (such as gold). Instead, it

has value only by government order (fiat). Usually, the government declares the fiat

currency (typically notes and coins from a central bank, such as the Federal Reserve

System in the U.S.) to be legal tender, making it unlawful to not accept the fiat currency

as a means of repayment for all debts, public and private.

Some bullion coins such as the Australian Gold Nugget and American Eagle are legal

tender, however, they trade based on the market price of the metal content as a

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commodity, rather than their legal tender face value (which is usually only a small

fraction of their bullion value).

Fiat money, if physically represented in the form of currency (paper or coins) can be

accidentally damaged or destroyed. However, fiat money has an advantage over

representative or commodity money, in that the same laws that created the money can

also define rules for its replacement in case of damage or destruction. For example, the

U.S. government will replace mutilated Federal Reserve notes (U.S. fiat money) if at

least half of the physical note can be reconstructed, or if it can be otherwise proven to

have been destroyed. By contrast, commodity money which has been lost or destroyed

Commercial bank money

Demand deposit in cheque form.

Commercial bank money or demand deposits are claims against financial institutions that

can be used for the purchase of goods and services. A demand deposit account is an

account from which funds can be withdrawn at any time by check or cash withdrawal

without giving the bank or financial institution any prior notice. Banks have the legal

obligation to return funds held in demand deposits immediately upon demand (or 'at

call'). Demand deposit withdrawals can be performed in person, via checks or bank

drafts, using automatic teller machines (ATMs), or through online banking.

Commercial bank money is created through fractional-reserve banking, the banking

practice where banks keep only a fraction of their deposits in reserve (as cash and other

highly liquid assets) and lend out the remainder, while maintaining the simultaneous

obligation to redeem all these deposits upon demand. Commercial bank money differs

from commodity and fiat money in two ways, firstly it is non-physical, as its existence is

only reflected in the account ledgers of banks and other financial institutions, and

secondly, there is some element of risk that the claim will not be fulfilled if the financial

institution becomes insolvent. The process of fractional-reserve banking has a cumulative

effect of money creation by commercial banks, as it expands money supply (cash and

demand deposits) beyond what it would otherwise be. Because of the prevalence of

fractional reserve banking, the broad money supply of most countries is a multiple larger

than the amount of base money created by the country's central bank.

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Plastic Money

Plastic money or polymer money, made out of plastic, is a new and easier way of paying

for goods and services. Plastic money was introduced in the 1950s and is now an

essential form of ready money which reduces the risk of handling a huge amount of cash.

It includes debit cards, ATMs, smart cards, etc. Credit cards, variants of plastic money,

are used as substitutes for currency. This book on plastic money is divided into two

sections titled Concepts and Experiences. The former covers articles on the the

emergence of plastic money, different types of plastic cards and their growth in India and

other related issues. An experience discusses the experiences of banks like Standard

Chartered, Citibank, which deal with plastic money and their growth in the market.

Meaning

Plastic money refers to credit cards, you use them whenever you want and pay

later (with interest, of course). It makes it too easy for people to buy things they normally

could not afford, which makes it easier to get into debt.

The History Of Credit Cards and Debit Cards In Plastic Money

Credit cards have evolved into a safe and secure manner to purchase goods and services.

The Internet has given credit card users additional purchasing power. Banks have options

like cash-back rewards, savings plans and other incentives to entice people to use their

cards. Debit cards allow people the convenience of cards without the worry of racking up

debt. The convenience, security and rewards offered by credit and debit cards keep

shoppers using their cards as opposed to checks or cash.

Credit Card Origins

The first credit cards were issued by individual stores and merchants.

These cards were issued in limited locations and only accepted by the businesses that

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issued them. While the cards were convenient for the customers, they also provided a

customer loyalty and customer service benefit, which was good for both customer and

merchant. It was not until 1950 that the Dinner's Club card was created by a restaurant

patron who forgot his wallet and realized there needed to be an alternative to cash only.

This started the first credit card specifically for widespread use, even though it was

primarily used for entertainment and travel expenses.

Plastic Becomes the Standard

The first Diner's Club cards were made out of cardboard or celluloid. In 1959

American Express changed all that with the first card made of plastic. American Express

created a system of making an impression of the card presented at the register for

payment. Then that impression was billed to the customer and due in full each month.

Several American Express cards still operate like this as of 2010. It was not until the late

1980s that American Express began allowing people to pay their balance over time with

additional card options.

Bank Card Associations

In 1966, Bank of America created a card that was a general purpose card or "open

loop" card. These "closed loop" agreements limited cards like Diners Club and American

Express to certain merchants, unlike the new "open loop" cards. The new general purpose

system required interbank cooperation and additional regulations. This created additional

safety features and began building the credit card system of today. Two systems emerged

as the leaders--Visa and Master Card. However, today there is little difference between

the two and most merchants accept both card associations.

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Debit Cards Emerge

The Visa association of cards took credit cards to a new level in 1989 when they

introduced debit cards. These cards linked consumers to their checking accounts. Money

was now drawn from a checking account at the point of sale with these new cards and

replaced check writing. This helped the merchants check that money was available and

made it easier to track the customer if the funds could not be obtained. Consumers liked

the convenience of not having to write checks at the point of sale, which made debit cards

a safe alternative to cash and checks.

The Future

There were almost 29 million debit card users as of 2006, with a projected 34.4

million users by 2016. However, online services like PayPal are emerging as a way for

people to pay their debts in new, secure and convenient ways. Technology also exists to

have devices implanted into phones, keys and other everyday devices so that the ability to

pay at the point of sale is even more convenient.

TYPES OF PLASTIC MONEY

Different types:-

Credit card

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

20 Million locations around the world. All you need to do is produce the card and

sign a charge slip to pay for your purchases. The institution which issues the card

makes the payment to the outlet on your behalf; you will pay this 'loan' back to

the institution at a later date.

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Debit card

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

credit cards are. However, banks only issue them to you if you hold an account

with them. When a debit card is used to make a payment, the total amount

charged is instantly reduced from your bank balance.

• Don't borrow on your credit card! Here's why

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

check and deduct amounts from your bank balance online.

Charge card

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

charge card you will have to pay off the entire amount billed, by the due date. If

you fail to do so, you are likely to be considered a defaulter and will usually have

to pay up a steep late payment charge.

• When you use a credit card you are not declared a defaulter even if you miss your

due date. A 2.95 per cent late payment fees (this differs from one bank to another)

is levied in your next billing statement.

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Amex card

• Amex stands for American Express and is one of the well-known charge cards.

This card has its own merchant establishment tie-ups and does not depend on the

network of MasterCard or Visa.

• Credit cards: Remember these dos and don'ts.

• This card is typically meant for high-income group categories and companies and

may not be acceptable at many outlets. There are a wide variety of special

privileges offered to Amex cardholders.

Dinner club card

• Diners Club is a branded charge card. There are a wide variety of special

privileges offered to the Diners Club cardholder. For instance, as a cardholder

you can set your own spending limit. Besides, the card has its own merchant

establishment tie-ups and does not depend on the network of MasterCard or

Visa.

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• However, since this card is typically meant for high-income group categories, it

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

a member establishment does accept the card or not in advance.

Global card

• Global cards allow you the flexibility and convenience of using a credit card

rather than cash or travelers cheque while traveling abroad for either business or

personal reasons.

Co-branded card

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

a popular brand for the purpose of offering certain exclusive benefits to the

consumer.

• A debit card with a difference

• For example, the Citi-Times card gives you all the benefits of a Citibank credit

card along with a special discount on Times Music cassettes, free entry to Times

Music events, etc.

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Master card & Visa

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

growth of the card business across the world.

• They have built a vast network of merchant establishments so that customers

worldwide may use their respective credit cards to make various purchases.

Smart card

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

useful when you have to pay for small purchases, for example bus fares and

coffee. No identification, signature or payment authorization is required for using

this card.

• The exact amount of purchase is

deducted from the smart card during

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payment and is collected by smart card reading machines. No change is given.

Currently this product is available only in very developed countries like the

United States and is being used only sporadically in India.

Photo card

• If your photograph is imprinted on a card, then you have what is known as a

photo card. Doing this helps identify the user of the credit card and is therefore

considered safer. Besides, in many cases, your photo card can function as your

identity card as well.

CREDIT CARD

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.

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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.

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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ADVANTAGES & DISADVANTAGES OF CREDIT CARD

ADVANTAGES OF CREDIT CARD

The benefits of credit card can be grouped as follows:

(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.

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

image of the bank

g) Savings of expense on cash holdings, i.e. stationery, printing and man power to handle

clearing transactions while considerably is reduced. It increases

(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.

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

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(C) 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.

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.

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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

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

l) Credit card is considered as a status symbol.

STEPS FOLOWED IN CREDIT CARD TRANSACTION

1. AUTHORIZATION

For Internet Merchants, the shopping card is connected to or integrated with a

Payment Gateway. For Retail Merchants, the card is swiped through a magnetic

reader on the point of sale terminal the authorization is transmitted to the

appropriate card issuer for approval. The issuing bank of card issuer authenticates

the card holder and approves or declines the transaction amount.

It is important to note that no money changes hands during the authorization.

Merchants must re-present the transaction to receive payment.

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2. Merchant balancing

This is also known as batching out. Most pos terminals and all payment gateway

per firm an auto close functions at the and of the day and batch out automatically.

3. Capture

The front end processor matches the authorization data to the settlement data and

transmits the card capture file to a back end processor for V/MC transactions or to

the appropriate card issuer for other card types.

4. Clearing

During this stage the back end processor performs compliance checks and risk

management procedures and transmits the transaction to V/MC or to the

appropriate card issuer for other card types.

5. Interchange (VS/MC Only)

During this stage the V/MC Association sort the transactions by issuing bank and

transmit them to the appropriate issuing banks for settlement.

6. Settlement

During this stage the Issuing Bank calculates fees and deductions and routs the

net funds to the appropriate Card Issuer which determines the daily deposits for

the merchants.

7. Merchant ACH

During this stage the acquiring bank or card issuer transmits the merchant deposit

to the merchant’s checking account.

Different Types of Credit Cards

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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 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.

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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.

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 spend a lot with your credit card to get any rewards at all. Read

the fine print carefully before signing.

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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, 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.

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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.

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 much shorter credit histories.

00000000000

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

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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.

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

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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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Types of Credit Cards offered ByIndian Banks

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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.

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)

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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

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

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Switzerland (CASH). In Austria and Germany, all current bank cards now include

electronic purses.

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 & FEATURES OF DEBIT CARDS

BENEFITS OF THE DEBIT CARD

• 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 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

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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

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.

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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.

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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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.

0000000000000000000000000000000000000000000000000

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.

But when you accept debit cards, you always pay the same flat rate, with no

danger of the rate increasing.

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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

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

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Advantages & Disadvantage

Advantages

Plastic money, unlike paper money, will not burn easily and can resist higher

temperatures than paper money.

You have no fear to be theft. And its easy to use.

Plastic money, unlike paper money, will not burn easily and can resist higher

temperatures than paper money.

Paper money also picks up dirt and stains more easily than plastic money.

Plastic money is the debit and credit cards. Plus point of plastic money is

that you won't have to carry your cash around all the time.

It also doesn't wear after time as paper does nor does it rip and tear.

Give you incentives, such as reward points, that you can redeem.

Be more convenient to carry than cash.

Provide a convenient payment method for purchases made on the Internet

and over the telephone.

Help you establish a good credit history.

Disadvantage

Cost much more than other forms of credit, such as a line of credit or a

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Personal loan, if you don't pay on time.

Damage your credit rating if your payments are late;

Allow you to build up more debt than you can handle;

Have complicated terms and conditions;

It also doesn't wear after time as paper does nor does it rip and tear.

Paper money also picks up dirt and stains more easily than plastic money.

I can't really see any advantages to have paper money, unless it is cheaper to make.

Its disadvantage is that, some extra money will be deducted for the bank services.

It’s around 2.5% of the money you spent.

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

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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’.

BIBLIOGRAPHY

BOOKS

INOVATION IN BANKING & INSURANCE

FINANCIAL MARKET & SERVICES

INDIAN BANKING INDUSTRIES

INDIAN BANKING

TIMES OF INDIA NEWS PAPER (1st OCT 2010)

WEBSITE

WWW.GOOGLESERCH.COM

WWW.YAHOO.COM

WWW.RBI.ORG

WWW.WIKIPEDIA .COM

WWW.INFOSEE.COM

WWW.INDIANMBA.COM

WWW.INDINBANKING.ORG

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