1. Credit Cards

2. What are Credit Cards? Pre-approved credit which can be used for thepurchase of items now and payment of them later. 3. Credit cards It is a plastic card having a magnetic strip,issued by a bank or business authorizing theholder to buy goods or services on credit. Alsocalled charge cards The concept of using a card for was firstdescribed in 1887 by Edward Bellamy in hisutopian novel Looking Backward. The size of most credit cards is 85.60 53.98 mm 4. Eligibility For Getting The Card Person should have a savings current accountin the bank. His assets and liabilities on a particular dateare reported to bank. A statement of annual or monthly income. He is considered credit worthy up to certainlimit depending upon his income, assets andexpenditure. 5. Particulars Displayed On Credit Cards Name of the customer 16-digit card number Validity date The VISA hologram and the VISA logo Name of the issuing bank Signature period Magnetic strip PIN 6. What does 16 digit means 7. CLASSIFICATION OFCREDIT CARDS Based on modeBased onBased onBased on Based onof credit status of geographical franchise/ issuerrecovery credit card validityTie-upCategoryIndivid- Corpor-ChargeRevolvingDomestic Internation-ualate Cardcredit card cardal Card CardsCardsDomesticProprie- MasterVISA Tie-uptary card Card CardStandardBusinessCard Gold CardCardCard 8. Based on mode of credit recovery Charge Card-A card that charges no interest butrequires the user to pay his/her balance in full uponreceipt of the statement, usually on a monthly basis.While it is similar to a credit card, the major benefitoffered by a charge card is that it has much higher, oftenunlimited, spending limits. Revolving credit card-A line of credit wherethe customer pays a commitment fee and is then allowedto use the funds when they are needed. It is usually usedfor operating purposes, fluctuating each monthdepending on the customers current cash flow needs 9. Based on status of credit card Standard Card- it is a generally issued credit card Business Card- (Executive cards ) it is issued tosmall partnership firms , solicitors, tax-consultants ,for use by executives on theirbusiness trips. Gold Card-a credit card issued by credit-cardcompanies to favoured clients, entitling them tohigh unsecured overdrafts, some insurance cover,etc 10. Based on geographical validity Domestic card- Cards that are validonly in India and Nepal are calleddomestic cards. International Card- credit Cards thatare valid internationally are calledinternational cards. 11. Based on franchise/ Tie-up Proprietary card- A bank issues such cards under itsown brands. Eg. SBI card Cancard of canara bank Master Card- this card is issued under the umbrella ofMasterCard International VISA Card it is issued by any abnk having tie up withVISA international Domestic Tie-up Card- it is issued by any abnkhaving tie up with domestic credit card brands such asCanCard and IndCard. 12. Based on issuer Category Individual Cards- Non-corporatecards that are issued to individuals Corporate Cards- Issued to corporateand business firms. 13. Innovative Cards ATM Cards Debit Crds- debits designated saving bank a/c. Private label Card- issued by retailers and canbe used only in that retailers store. Affinity Group Cards- it can be used bycollection of people with some form ofcommon interest or relation ( professional,alumni,retired persons org. ) 14. Credit card cycle A card holder makes purchase , and present itto the merchant instead of cash . The retailer will check the number on the card, and he will tally signature of voucher andcredit card . Vouchers are send to banks, which in turnreimburses it for the customers purchase. 15. Credit card cycle Purchase of goods andservice on cardCredit purchase marchant delivers goods after taking an authenticated credit cardand noting the number and taking signature on certain forms.Credit card processing Marchant raises the bill for the purchase and sends it tothe credit card issuing bank for paymentBill raising Issuing bank pays amount to the merchantestablishmentpayment Issuing bank raises bill on the credit cardholder and Bill to card holder sends it for payment Credit card holder makes the payment to the issuing bank Card payment 16. Mechanics of Credit Card OperationContract for credit card (1) Issue of credit card (2) Card User /Card Issuing Bank Payment of credit card(3)CustomerClearing and settlements (7)Charging of credit cardPurchase ofand raising bills (4) goods andservices (3)Submission of billMarchants bankfor collection (5) MerchantestablishmentPayment for bills (6) 17. AdvantagesTo Cardholders : Simple, convenient and can be substituted for cash Convenient method of payment He need not approach a bank for taking credit Credit cards issued by leading banks are acceptable in manycountries Holders can withdraw cash from any branch of major banksworldwide. Issuer of card provides 24 hrs customer helpline availableacross the world in case of any emergency. 18. To Merchants/ Shopkeepers : Guaranteed payment Lessens the security risk of holding thecash Overseas visitors may purchase more,providing new market for retailer 19. To credit card companies/ Banks : Source of revenue - Joining fee - card renew fee - services charges from retailers - Interest charged to customer 20. DisadvantagesTo cardholders : Loss or stealing of cardTo Merchants/ Shopkeepers : Retailers are required to pay a certain fee and servicecharges at an agreed percentage of their credit cardsales.To credit card companies : Risk of bad debt Risk of fraud 21. Safety Tips Sign card with signature Do not leave cards lying around Close unused accounts in writing and by phone, then cut upthe card Do not give out account number unless making purchases Keep a list of all cards, account numbers, and phone numbersseparate from cards Report lost or stolen cards promptly