POPULARITY OF CREDIT CARDS ISSUED BY DIFFERENT BANKS

10/2/2010

XI-B

To

Mrs.Amala Annie Mohammed

Bussiness Studies Teacher

2

CONTENTS

S.NO TOPIC PAGE NO.

1 ACKNOWLEDGEMENT 3

2 LIST OF FIGURES 4

3 LIST OF TABLES 5

4 INTRODUCTION 6

5 OBJECTIVES 7

6 METHADOLOGY 8

7 BACKGROUND INFORMATION 9

●HISTORY OF CREDIT CARDS 9-10

●TYPES OF CREDIT CARDS 10-11

●ABOUT SOME BANKS OF BAHRAIN 11-15

8 SURVEY 16

●QUESTIONNAIRE 1 6-17

9 ANALYSIS 18-24

10 CONCLUSION 25

3

ACKNOWLEDGEMENT

First and foremost I thank the god for his blessings,

showered on me in completing the project successfully.

I am heartily thankful to my Business Studies teacher Mrs. Amala Annie Mohammed whose encouragement, guidance and support from the initial to the final level enabled me to

develop an understanding of the subject. I would also like to express my special thanks of gratitude to our principal Dr.

Moh'd Tayyab who gave me the golden opportunity to do this wonderful project on the topic "POPULARITY OF

CREDIT CARDS ISSUED BY DIFFERENT BANKS", which also helped me in doing a lot of Research and i came to

know about so many new things.

Secondly, I would also like to thank my parents and friends who helped me a lot in finishing this project

within the limited time.Lastly, I offer my regards and blessings to all of those

who supported me in any respect during the completion of the project.

4

LIST OF FIGURES

S.NO FIG. NAME PAGE NO.

1 NO. OF CREDIT CARDS 18

2 ARE INTEREST RATES REASONABLE? 19

3 CREDIT CARD USAGE BY TEENS 20

4 BANKS 21

5 CREDIT CARD COMPANIES 22

6 CREDIT CARD TYPES 23

7 INCREASE IN EXPENDITURES 24

5

LIST OF TABLES

S.NO TABLE NO. PAGE NO.

1 NO. OF CREDIT CARDS 18

2 ARE INTEREST RATES REASONABLE? 19

3 CREDIT CARD USAGE BY TEENS 20

4 BANKS 21

5 CREDIT CARD COMPANIES 22

6 CREDIT CARD TYPES 23

7 INCREASE IN EXPENDITURES 24

6

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 creates a revolving account and

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.

A credit card is different from a charge card: a charge card requires the balance to

be paid in full each month. In contrast, credit cards allow the consumers a

continuing balance of debt, subject to interest being charged. Most credit cards are

issued by banks or credit unions, and are the shape and size specified by the

ISO/IEC 7810 standard as ID-1. This is defined as 85.60 × 53.98 mm (3.370 ×

2.125 in) (33/8 × 21/8 in) in size.

7

Objectives:1. To find the popularity of credit cards in Bahrain.2. To know the history of credit cards.3. To know about different types of credit cards.4. To know about the functions of different Banks.

8

Methodology:1. Collection of Primary and Secondary data’s.

a)Primary data will be collected from different people with the help of a structured questionnaire.

b)Secondary data will be collected from the internet.

2. Methods for analysis of data.a)The data will be coded and tabulated.b)The result will be represented in bar diagrams,

charts and pie diagrams.

9

Background Information:

History of credit cards:Credit was first used in Assyria, Babylon and Egypt 3000 years ago. The bill of exchange – the forerunner of banknotes – was established in the 14th century. Debts were settled by one-third cash and two-thirds bill of exchange. Paper money followed only in the 17th century.

The first advertisement for credit was placed in 1730 by Christopher Thornton, who offered furniture that could be paid off weekly.

From the 18th century until the early part of the 20th, tallymen sold clothes in return for small weekly payments. They were called “tallymen” because they kept a record or tally of what people had bought on a wooden stick. One side of the stick was marked with notches to represent the amount of debt and the other side was a record of payments. In the 1920s, a shopper’s plate – a “buy now, pay later” system – was introduced in the USA. It could only be used in the shops which issued it.

The first credit card:In 1950, Diners Club and American Express launched their charge cards in the USA, the first “plastic money”. In 1951, Diners Club issued the first credit card to 200 customers who could use it at 27 restaurants in New York. But it was only until the establishment of standards for the magnetic strip in 1970 that the credit card became part of the information age.

The first use of magnetic stripes on cards was in the early 1960′s, when the London Transit Authority installed a magnetic stripe system. San Francisco Bay Area Rapid Transit installed a paper

10

based ticket the same size as the credit cards in the late 1960′s.

Types of credit cards:Since each consumer's financial needs are different, it makes sense that there are different types of credit cards. Before you apply for a credit card, become familiar with the various kinds of credit cards to make sure you're choosing the best credit card for you.

1. Standard Credit Cards:The most common type of credit card allows you to have a revolving balance up to a certain credit limit. Credit is used up when you make a purchase and made available again once you've made a payment. A finance charge is applied to outstanding balances at the end of each month. Credit cards have a minimum payment that must be paid by a certain due date to avoid late-payment penalties.

2. Premium Credit Cards:These cards offer incentives and benefits beyond that of a regular credit card. Examples of premium credit cards are Gold and Platinum cards that offer cash back, reward points, travel upgrades, and other rewards to cardholders. Premium cards can have higher fees and usually have minimum income and credit score requirements.Both standard credit cards and premium credit cards have specific types of credit cards. Student credit cards, zero percent interest cards, and travel cards are just a few types available.

3. Charge Cards:Charge cards do not have a credit limit. The balance on a charge card must be paid in full at the end of each month. Charge cards typically do not have a finance charge or minimum payment since the balance is to be paid in full. Late payments are subject to a fee, charge restrictions, or card cancellation depending on your card agreement.

4. Limited Purpose Cards:Limited purpose credit cards can only be used at specific locations. Limited purpose cards are used like credit cards with a minimum payment and finance charge. Store credit cards and gas credit cards

11

are examples of limited purpose credit cards.

5. Secured Credit Cards:Secured credit cards are an option for those without a credit history or those with blemished credit. Secured cards require a security deposit to be placed on the card. The credit limit on a secured credit card is equal to the amount of the deposit made. Secured credit cards have revolving balances depending on the purchases and payments made.

6. Prepaid Credit Cards:Prepaid credit cards require the cardholder to load money onto the card before the card can be used. Purchases are withdrawn from the card's balance. The credit limit does not renew until more money is loaded onto the card. Prepaid cards do not have finance charges or minimum payments since the balance is withdrawn from the deposit. Prepaid cards are similar to debit cards, but are not tied to a checking account.

7. Business Credit Cards:Business credit cards are designed specifically for business use. They provide business owners with an easy method of keeping business and personal transactions separate. There are standard business credit and charge cards available.

ABOUT BANKS:1. BISB

Bahrain Islamic Bank (BisB) was established in 1979 as the first Islamic commercial bank in the Kingdom of Bahrain. The authorized capital is BD 100 million and paid up capital is BD 66.235 million.

Since its inception, BisB has recorded a steady growth. At the end of 2008, the shareholders’ funds reached nearly BD 166 million Bahraini Dinars, with assets in excess of BD 874 million.

The Bank had recently launched its new identity with the core objective of radiating its new and fresh mandate of exceeding expectations, both from an aspirational and a functional perspective.

The Bank has been maintaining its leading position in the Islamic banking sector through adopting innovative Islamic investment and

12

financing products, supported by superior retail and corporate banking services. The Bank is listed on the Bahrain Stock Exchange. The major shareholders are leading local and regional financial institutions. The Bank operates under supervision and the regulatory framework of the Central Bank of Bahrain.

The Bank, with 13 local branches, has established the largest network among Islamic banks in the Kingdom. These branches offer quality banking services, financing and investment opportunities compliant with Sharia’a requirement for individual and corporate customers.

2. ICICIICICI Bank (formerly Industrial Credit and Investment Corporation of India) is a major banking and financial services organization in India. It is the second largest bank in India and the largest private sector bank in India by market capitalization. The bank also has a network of 2,016 branches (as on 31 March 2010) and about 5,219 ATMs in India and presence in 18 countries, as well as some 24 million customers (at the end of July 2007). ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and specialization subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. (These data are dynamic.) ICICI Bank is also the largest issuer of credit cards in India.ICICI Bank's shares are listed on the stock exchanges at BSE, NSE, Kolkata and Vadodara ; its ADRs trade on the New York Stock Exchange (NYSE).

The Bank is expanding in overseas markets and has the largest international balance sheet among Indian banks. ICICI Bank nowhas wholly-owned subsidiaries, branches and representatives offices in 19 countries, including an offshore unit in Mumbai. This includes wholly owned subsidiaries in Canada, Russia and the UK(the subsidiary through which the HiSAVE savings brand is operated), offshore banking units in Bahrain and Singapore, an advisory branch in Dubai, branches in Belgium, Hong Kong and Sri Lanka, and representative offices in Bangladesh, China, Malaysia, Indonesia, South Africa, Thailand, the United Arab Emirates and USA.

13

Overseas, the Bank is targeting the NRI (Non-Resident Indian) population in particular.

ICICI reported a 1.15% rise in net profit to Rs. 1,014.21 crore on a 1.29% increase in total income to Rs. 9,712.31 crore in Q2 September 2008 over Q2 September 2007. The bank's CASA ratio increased to 30% in 2008 from 25% in 2007.

ICICI Bank is one of the Big Four Banks of India, along with State Bank of India, Axis Bank and HDFC Bank — its main competitors.

3. NBKNBK set up in Bahrain in 1987 as an offshore bank to provide treasury and wholesale banking services to customers. In 2003, the bank obtained a commercial banking license to widen its offering and customer base. Today, NBK Bahrain offers full commercial banking services across a broad spectrum of areas including trade, contractor and corporate financing, treasury and retail. It has fully dedicated relationship managers trained to tailor solutions that meet customers’ needs. NBK Bahrain works as well closely with its counterparts within NBK’s network of branches and subsidiaries to support customers with their cross-border transactions and global investment needs.

4. Al ahli united bankAhli United Bank BSC (AUB) is a full fledged commercial and investment banking group providing wealth management, retail, corporate, treasury, offshore and private banking services. The Group's businesses consist of the operations in Bahrain, a wholly owned subsidiary in the UK and associates in Kuwait, Qatar, Oman, Egypt, Iraq and Libya. In Kuwait, AUB has an effective holding of 74.9% in Ahli United Bank Kuwait while in Qatar, AUB has a 36.4% stake in Ahli Bank QSC. In Oman, AUB has a 35% stake in Ahli Bank SAOG while in Iraq AUB has a 54.8% stake in the Commercial Bank of Iraq and 40% in United Bank for Commerce and Investment in Libya. In Egypt, AUB, its associate banks and other Gulf financial institutions together hold an 85.1% stake in Ahli United Bank SAE. Apart from these banks, AUB has a nominal stake of 75% in KMEFIC, a brokerage, asset management and corporate finance company based in Kuwait with operations around the Arabian Gulf.

14

AUB also has 50% stake in a joint venture with Legal & General incorporated in 2009 to form Legal and General Gulf. Overall, the AUB Group, through its subsidiaries and associates, operates through a network of 130 branch offices and employs over 3,200 people.

5. HSBCHeadquartered in London, HSBC is one of the largest banking and financial services organizations in the world. HSBC's international network comprises around 8,000 offices in 87 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa.

With listings on the London, Hong Kong, New York, Paris and Bermuda stock exchanges, shares in HSBC Holdings plc are held by around 220,000 shareholders in 119 countries and territories. The shares are traded on the New York Stock Exchange in the form of American Depositary Receipts.

Through an international network linked by advanced technology, including a rapidly growing e-commerce capability, HSBC provides a comprehensive range of financial services: personal financial services; commercial banking; corporate, investment banking and markets; private banking; and other activities.

6. Standard Chartered bankStandard Chartered – leading the way in Asia, Africa and the Middle East.

Standard Chartered Bank is the first bank in Bahrain, having started in 1920 and played a pivotal role in establishing Bahrain as a key financial centre. In its 88th year, the Bank enjoys the position of having the most extensive branch network among foreign international banks in Bahrain with 5 branches and 1 sales center.

In Bahrain, we are one of the leading banks, offering an extensive range of products and services for personal customers, local companies, multinational corporate and financial institutions. Our main objective is to offer outstanding value to our customers by

15

providing a knowledgeable, efficient and reliable service in a personal, helpful and responsive manner. Central to this service philosophy is the professional consultative approach we take with each customer. By getting to know them better, we can identify their needs and match them with quality products which suit them best.

Standard Chartered PLC, listed on both the London Stock Exchange and the Hong Kong Stock Exchange, ranks among the top 25 companies in the FTSE-100 by market capitalization. The London head quartered group has operated for over 150 years in some of the world’s most dynamic markets, leading the way in Asia, Africa and the Middle East. Its income and the number of employees have more than doubled over the last five years primarily as a result of organic growth and supplemented by acquisitions.

Standard Chartered aspires to be the best international bank in its markets through leading by example to be the right partner for its stakeholders. The group now employs 73,000 people, representing 115 nationalities, in more than 1,700 branches and outlets located in over 70 countries.

The bank derives more than 90 per cent of its operating income and profits from Asia, Africa and the Middle East, with balanced income derived from both Wholesale and Consumer Banking. The group is committed to building a sustainable business over the long term and is trusted worldwide for upholding high standards.

7. Shamil bank of BahrainShamil Bank is a Bahrain-based Islamic retail bank licensed and regulated by the Central Bank of Bahrain, with commercial and investment banking activities. It has grown steadily to become one of Bahrain’s leading financial institutions.

Shamil Bank provides a diverse range of products and services that cater to the financing and investment needs of individuals and institutions. Conducting its business in compliance with the principles of Sharia’a, it operates a network of local branches and maintains a presence in overseas markets through its subsidiaries, associated and affiliated companies. Shamil Bank is a wholly owned subsidiary

16

of Ithmaar Bank BSC, a full service investment bank.

SURVEY

The survey for this project has been conducted among 20 sample

persons to analyze the popularity of credit cards issued by different

banks of Bahrain.The questionnaire for this survey is given below:

QUESTIONNAIRE:

1. How many credit cards do you have?

a) 1.

b) 2.

c) 3.

d) More than 3.

2. What can you say about the credit card Interest rates?

17

a) Same as usual.

b) Don’t know.

c) Often it is more.

d) Often it is less.

3. Would you give your teenage child their own credit card?

a) Yes.

b) Yes, but one that I can control.

c) No way!

d) Not sure.

4. What is the name of the bank that issued your credit card ?

5. Which company’s credit card do you mostly use?

6. What type of credit card do you use?(gold,platinum,silver or classic)

7. After taking a credit card is there any increase in your expenditure?

a) Yes.

b) No.

18

Analysis

1. How many credit cards do you have?

TABLE NO.11.1 NO. OF CREDIT CARDS

FIG.11.1 NO. OF CREDIT CARDS

OPTIONS NO.OF RESPONDENTS PERCENTAGE%

1 15 75%

2 3 15%

3 2 10%more than

3 0 0%

19

75%

15%

10%

NO.OF CREDIT CARDS

1 2 3

This show that about 75% of people use 1 credit card.

2.What can you say about the credit card Interest rates?

TABLE NO.11.2 ARE INTEREST RATES REASONABLE?

FIG. NO.11.2 ARE INTEREST RATES REASONABLE?

OPTIONS NO. OF

RESPONDENTS PERCENTAGE%

same as usual 12 60%

often more 2 10%

often less 6 30%

don’t know 0 0%

20

60%

10%

30%

NO. OF RESPONDENTS

same as usual often more often less

This shows that about 60% of the people think that the

interest rates are same as usual, about 30% say that it is

often less and about 10% say that it is often more.

3.Would you give your teenage child their own credit card?

TABLE NO.11.3 CREDIT CARD USAGE BY TEENS

FIG. NO.11.3 CREDIT CARD USAGE BY TEENS

OPTIONS NO. OF RESPONDENTS PERCENTAGE%YES 9 45%NO 6 30%

YES, BUT ONE THAT I CAN CONTROL 3 15%

MAYBE 2 10%

21

45%

30%

15%

10%

CREDIT CARD USAGE BY TEENS

YESNOYES, BUT ONE THAT I CAN CONTROLMAYBE

This shows that about 45% of the parents agree to give their credit cards

to their teen child.

4.What is the name of the bank that issued your credit card?

TABLE NO.11.4 BANKS

BANKNO. OF

RESPONDENTS PERCENTAGE%HSBC 10 25%

OTHER 8 20%ICICI 7 18%NBK 4 10%

STANDARD CHARTERED

BANK 3 8%SHAMIL BANK OF BAHRAIN 3 8%

BISB 3 8%AL AHLI

UNITED BANK 2 5%

22

25%

20%

18%

10%

8%

8%8%

5%

NO. OF RESPONDENTS

HSBC OTHERICICI NBKSTANDARD CHARTERED BANK SHAMIL BANK OF BAHRAINBISB AL AHLI UNITED BANK

HSBC bank stands as the highest credit card issuer.

5.Which companies credit cards do you mostly use?

CREDIT CARD NO. OF RESPONDENTS PERCENTAGE%VISA 17 85%

MASTERCARD 3 15%OTHER 0 0%

TABLE NO.11.5 CREDIT CARD COMPANIES

FIG.11.5 CREDIT CARD COMPANIES

FIG.11.4 BANKS

23

85%

15%

CREDIT CARD COMPANIES

VISAMASTERCARD

This shows that about 85% of the people in Bahrain use VISA card.

6.What credit card types do you use? (gold,platinum,silver,classic)

TABLE NO.11.6 CREDIT CARD TYPES

TYPE OF CREDIT CARDS NO. OF RESPONDENTS PERCENTAGE%PLATINUM 1 5%

GOLD 4 20%SILVER 6 30%

CLASSIC 9 45%

24

5%

20%

30%

45%

CREDIT CARD TYPES

PLATINUMGOLDSILVERCLASSIC

This shows that majority of the people use platinum credit cards.

FIG.11.6 CREDIT CARD TYPES

25

7.After taking credit cards is there any increase in your

expenditure?

60%

40%

INCREASE IN EXPENDITURES

YESNO

This shows that about 60% of the people say that their expenditures has increased after taking credit cards while 40% disagree.

TABLE NO.11.7 INCREASE EXPENDITURE

FIG NO.11.5 INCREASE IN EXPENDITURES

OPTIONS NO.OF RESPONDENTS PERCENTAGE%YES 12 60%NO 8 40%

26

CONCLUSION

After analyzing the surveys we find that most of the people (i.e. 75%) have only 1 credit card.

About 60% of the people agree that the interest rates put on credit cards is same as usual,30% think that it is often less while 10% say that it is often more.

About 45% of the parents say that they will be willing to give their teen child their own credit card, while 30% disagree about that. Some say that they are willing to give but 1 that is under their control.

HSBC bank is the major credit card issuer in Bahrain according to the survey.

About 45% of the people use classic credit card types and 30% of the people use silver classic card types which are among the major credit card types use by the people.

About 60% of the people agree that there is an increase in their expenditures after issuing the credit card while 40% of them disagree.