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Credit Card

Credit Card

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Published by: simivy on Nov 23, 2010
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The growth and popularity of plastic money in India has been phenomenal in the last few years.

The Indian economy is booming with a refreshing youthfulness in its march to success. Credit Cards in India: India has came out of self-binding shackles to look "young" again and the enthusiasm shared by the young work force of the country is driving the economy like never-before. In the present day world, no one wants to be bothered by the presence of huge cash in his or her wallet and the Indians are no exceptions. The unprecedented growth in the number of credit card users has stimulated the Indian economy by a significant extent. The arrival of malls, multiplexes, online shopping stores and shopping complexes have contributed to the growth of the use of plastic cards. It will not be wrong to say that such a scenario in context of the Indian market is not driven by style statement and is driven more by needs. The benefits of plastic money have offered unmatched ways to create an equilibrium and offer an amicable solution when it comes to purchases and the inability to possess or carry cash. The modern day Indian customers find it more easy to make physical payment (credit card payments) rather than carrying too much cash. The introduction of credit card facilities to pay for mobile, electricity, movie tickets and other related transactions have also contributed to the growth of plastic money in the country. Best credit cards (India): In context of the Indian market, the leading credit card service providers are ICICI, HDFC, HSBC and Standard Chartered to name a few. These financial institutions have tried their hands on ensuring value-addition while offering customer-friendly credit card deals. The Best credit cards in India are usually meant for specific user group such as women, students and small business owners. These cards are offered to the prospective customers with appealing deals. Statistics have clearly revealed that the number of credit card holders in India are close to 22 million as on January, 2007. It has been also revealed that the increasing consumerism in the country has led to a two-fold increase in the number of credit card transactions from FY 2003-04 to 2005-06. The trends were as favourable as ever in the financial years, FY 2006-07 and 2007-08 and the same is likely to continue in the coming financial years.Read more at http://www.articlealley.com/article_573633_19.html?ktrack=kcplink

India , the developing economy, is witnessing a new revolution every fortnight. Yes, fortnight might sound like an exaggeration, but you would have understood that we have used it to indicate the concurrent set of changes entering this era. The economy is booming and purchasing power is increasing by leaps and bounds. It is the age of malls, shopping complexes, multiplexes, buying cars, expensive watches, owning a house and most importantly flashing a string of `Credit Cards `. Some like to flaunt it, some misuse it, some underutilize it and some benefit from it. Ultimately, we all love to own credit cards. Need Driven `Credit

card is the trend of today.` We hear this statement from lot of people. But if you sit back and think, you

this growth is for good. If you are one of the top executives in a company and travel a lot by flights. 4. 2. The card carries a predetermined limit up to which the holder can spend. Using credit cards is also lot safer than carrying large amounts of cash. you want to gift a washing machine to your wife but do not carry enough balance. electricity. Benefits of credit cards: 1. This lessens the pressure. . The current growth in the credit card industry is estimated to be around 28 percent.5 to 3% per month is charged as interest. inflation has added to the expenses. Moreover. Today.On outstanding balance. Moreover.will understand that the increasing trend to use credit cards in India is more need driven rather than just being a fashion statement. the Banks and the interest rates and offering lucrative deals. gives you more scope of making plans and also helps you gain many of your favorite products the moment you want them. and if you move in the sensible direction with sensible handling of cards. you can easily predict the growing popularity of credit card. apart from issuing of credit cards. the payment structures are getting easier. A cardholder need not have the required amount in his account to the extent of the transaction made. At the end of each billing cycle. Credit cards also help you in planning things. Credit cards have become a convenience to the travelers and business people. a nominal rate of 1. the industry experts believe the increase in the transactions should be around 20 percent each year. Figure out the figures Statistics show that there were about 22 million credit cards in India in January 2007. 3. This increase can be attributed to the increasing consumerism in India. the payment by credit card is a wiser step. stay in good hotels. As you see these figures. the credit card transactions have also doubled from the FY 2003-4 to 2005-6. Paying by your credit card can help you present the bill as well as the copy of credit card statement for reimbursements in the company. the modern Indian generation is opting to use credit cards. Credit can be availed for a period of 30-50 days. So. movie tickets and other related transactions have also contributed to the growth of plastic money in the country. the cardholder has to pay a minimum sum of the bill normally 5-10% and the rest can be paid in installments over the next few months/years. to bridge the gap between the purchases and inability to carry cash. People have become more mobile and it is becoming riskier to carry cash every day. The introduction of credit card facilities to pay for mobile. but it is also about the simple mode of payment. Safe Sides It is not just about the comfort of carrying a plastic rectangular card in pocket. All this will certainly add up to this growth of credit card industry. which is further predicted to be on an increase. The competition in industry has further fuelled the usage of financial institutions have started cutting down credit cards in India . India is on a continuous move towards new advancements. The banks are cutting down on interest rates and over head charges owing to the increasing competition. On the other hand. The number of credit cards has more than doubled in past three years. which is further expected to boost owing to the intensifying competition between credit card companies and more lucrative offers in the market each day. In an aim to overpower the peers and to sustain and prosper themselves. credit cards enable you to purchase it right now and plan your EMIs. For example.

Businesses such as repair shops. The bank assumes all credit risks provided that one follows instructions for approval of credit card purchases. . are provided with add-on cards on payment of a specified fee. In addition to the above benefits. parents and children. Receipts from bank credit card purchases can be deposited daily and are immediately credited. Besides that following are the additional benefits available to the credit card holders. Regular use of the credit card by the user earns him additional points that provide the cardholder with discounts on purchases. of the cardholder. Personal Accident Insurance. Credit card service is available from one¶s regular commercial bank. Credit cards are most often used for retail accounts. credit arrangements for customers are available through the use of these cards. Cardholders with a good credit track record are provided with_t¶1 increased credit limit for a short period of time. However. Increase in Credit. often find it convenient and economical to extend credit card service to small commercial accounts. They also minimize one¶s commitment of capital and virtually eliminate the risk of uncollectible accounts. and collections. and stationery stores. Leveraged Investment Facility: This facility enables the cardholders to subscribe to designated equity or debenture issues in the primary market and schemes floated by mutual funds. and the costs and risks of administration and collection are almost entirely the responsibility of the Credit Card Company or bank. Credit card services are particularly vital for businesses with a large number of relatively small accounts. whenever required. They eliminate the need for credit approval. which have a mixture of consumer and commercial accounts. they have also been used successfully in selling to small commercial accounts. namely. A pre-determined credit and cash limit is provided to the cardholder at Automated Teller Machine (ATM) facilities. Credit card issuers have introduced a free insurance cover to the cardholder against loss of life due to accidents. Under these plans. Typically. there is little or no commitment of the business¶s own capital. Add-On cards: The spouse. over eighteen. the availability of instant credit could often encourage a customer to buy immediately.5. From a marketing standpoint. many problems associated with credit can be avoided through the use of credit cards. Benefits provided by credit cards are not limited to the credit facility alone. supply firms. invoice preparation. In many businesses. these instructions require that one checks the validity of the card against a master list of canceled cards and contact the credit service before accepting the customer¶s card for purchase above a certain limit. record maintenance. Cash Withdrawal Facility. rather than postpone the decision to a later date or bypass it completely. particularly in the retail and consumer service fields.

3 times. strong brand recognition etc. new categories of merchants are coming up. Currently. but the market share of the top five exceeds 75%. The change in mindset is clear from the growth. Competition in acquiring business. and most banks started their credit card operations. Over the last ten years. so for new banks. The foreign banks have a dominant share due to various reasons like having been in the field for decades. Credit card is a low-margin but high-volume business. sound operational and financial strength. The income per card is low. both in terms of absolute numbers and growth rates. They were catering to the upper segments and charged high annual fees. Indian banks were not willing to venture it. Indians viewed the cards as a luxury and so. . The initial investments required by a bank are very high. India ranks at the bottom in terms of usage of credit cards when compared to China. braking into this business and convincing a merchant is increasing because the banks are shifting towards lower end merchants. Taiwan and Malaysia. Usage of credit card picked up only last ten years. things have changed drastically since the idea of owning a credit card has had its roots in the minds of millions of Indians. According to Visa International. an average Indian cardholder uses his card 9. there are more than 20 banks offering credit cards. thereby requiring large volumes in terms of cards issued and the transactions finance to make the operations profitable.Factors that contributed to the increased uses of credit cards: The perception to own credit cards has changed and cards are being viewed as a convenient substitute to carrying cash and also availing credit for short periods. A number of card owners do not use their cards and almost 20-30% cards are inactive. Enlightened customer has started viewing the card as a convenient substitute to carrying cash. The bigger businesses and merchants are already acquired by the existing players. The importance of having a pie in the credit cards segment was not lost on any bank.

two players dominate the credit cards industry.In India. 42.8% annualized). Banks adopted a strategy of reaching lower down the income strata by lowering down their eligibility norms. the credit limits are set at lower levels as compared to the foreign banks.e.5% per month (i. Annual Fee There are no joining fees or annual fees for the ING Vysya .e. 18% annualized) from the date of withdrawal to the date of billing and regular interest rate as applicable will be charged beyond the bill date.e.-Visa and MasterCard and 15 out of 17 banks provide credit card services through Visa or MasterCard. This can change periodically based on your spend.15% per month (i. payback and utilization patterns Rate of interest can increase up to 3.5% per month (i. For Cash withdrawals. 37. in case of default. As a result of this strategy. ING Vysya Credit Cards Description of Charges Interest Charges The initial interest rate is 3.0% annualized). rate of interest is 1. the credit cards base is widening day by day with the increase of base in B-grade cities.

700 for bills above Rs. . Late Payment Charges Rs. 25000 Over Limit Charge 2.5% of transaction value (subject to a minimum of Rs. 25) Railway Ticket Booking Surcharge (Internet booking) 1.8% of transaction value for regular transactions. 600 for bills from Rs. 300 for bills up to Rs.5% of the amount over the Credit Limit (subject to a minimum of Rs. 500) Cheque/ECS Bounce Charge Rs. 10000 Rs. 250 per returned cheque/ECS Railway Ticket Booking or Cancellation Surcharge (Counter booking) 2.25000 Rs.Bank Classic Card. 10001 .

100001 .Rs. 10000 .8% of transaction value for 3 EMI transaction Statement Request (beyond 3 months) Rs.Rs.5% (service taxes as applicable) Transactions Petrol Transaction Charge No transaction fees on petrol purchase Cash Advances . 100 Outstation Cheque Charge (Charge based on the value of the cheque/instrument) Up to Rs. 100000 .Rs. 150 per cheque Foreign Currency Mark up of 3. 100 Card Replacement Fee Rs. 50 per cheque Rs. 100 per cheque Above Rs. 10001 to Rs.2.

NOTE: The ING Vysya Credit Card programme is a programme jointly formulated by ING Vysya Bank (hereinafter referred to as "ING Vysya") and Citibank for issue of Credit Cards to the customers of ING Vysya.0% on advanced amount (subject to a minimum of Rs.there's credit cards. manage the operations.Advantages vs. service and recovery of dues of the Credit Cards while sourcing of applications and marketing of the Credit Card may be carried out either by ING Vysya and Citibank jointly or independently. Disadvantages Advantage and disadvantages of credit cards . Why don't we call on the credit card companies to be accountable? They need to be held accountable for their predatory lending practices. I haven't reported my missing credit card to the police because whoever stole it is spending less than my wife.5 at International ATMs) Service tax. The Credit Cards are issued by Citibank pursuant to an agreement entered into between Citibank and ING Vysya. is applicable on all fees. By virtue of the said agreement. Paul Wellstone Money isn't everything .Transaction Fees 2. Citibank shall issue Credit Cards. interest and other charges and is subject to change. as notified by the Government of India. as per relevant regulations of the Government of India. 300 and US$7. money orders. and travelers' checks Why I need a credit card .

cash back. Under certain circumstances. They allow convenient remote purchasing . They allow you to pay for large purchases in small. International credit cards you financial flexibility when you travel abroad. They allow accurate record-keeping by consolidating purchases into a single statement. wherever you are. from one country to another. 1. 1.interest is only paid on the remaining debt. Many cards offer additional benefits such as additional insurance cover on purchases. not the full loan amount. that require full payment of the borrowed amount each month. Have the option of paying only a part of the total expenses. This allows you a lot of flexibility. MasterCard. through ATMs and other withdrawal centers. air miles and discounts on holidays. The balance amount can be carried forward. Then there are charge cards. You then repay by making monthly payments towards the amount borrowed. Advantages: 1. they allow you to withhold payment for merchandise which proves defective. with an interest charged. or any other network allows you to pay for purchases or services by borrowing from the credit card company. you do not have to repay the whole borrowed amount in full at one go. Other facilities afforded on a credit card include reward points on card usage. Enjoy a revolving credit limit without any charges for a limited period (mostly 20 to 50 days) Transact money of more than one currency. and so on. the credit card is a very convenient alternative to paying by cash. Withdraw cash whenever. They are cheaper for short-term borrowing . monthly installments. That is.Basha Shaikh 29 Feb 2008 A credit card from VISA. loss of baggage. 1. Either way. 1. 1. They allow you to make purchases on credit without carrying around a lot of cash.ordering/shopping online or by phone. . Essentially a credit card allows you to: Purchase products or services whenever and wherever you want. without ready cash and paying for them at a later date. All credit cards have built-in safety features like signatures and personal identification numbers. insurance cover against air and road accidents. such as the American Express card.

especially because of the high interest rates and other costs. the card usage is increasing at more than 22% per year with last year¶s transaction volume being Rs. Lost or stolen cards may result in some unwanted expense and inconvenience. Using a credit card. Retailers are being asked questions regarding their acceptance and perceptions of various payment methods which primarily includes cash. This has been a very big issue for the merchants in various countries. including . As is correctly suggested by RBI.903 crore. debit cards and credit cards to obtain data on the costs incurred by retailers for each payment method to understand possible indirect subsidization provided by cash consumers for card consumers The survey also addresses some of the existing rules of major credit card networks (MasterCard/Visa) and its impact on retail business. In India. The survey is so designed as to achieve a representative sample of different categories of retail businesses based on company size (as measured by number of employees and annual sales) and activity. ABOUT THE MERCHANT SURVEY 2009 Objective: The merchant survey on card payments is being conducted with an objective to understand the payment system from the perspective of an India retail merchant and to try rationalizing its costing structure. and resolve. Conduct and Coverage: This web based survey is being conducted by reaching company management and/or senior-level employees familiar with the payment methods accepted by their businesses. debit cards and credit cards. 2. 4.Disadvantages: 1. especially remotely. Credit cards are a relatively expensive way of obtaining credit if you don't use them carefully. The survey aims to analyze several aspects of these rules and their behavioral and social impact on Indian merchants. You may become an impulsive buyer and tend to overspend because of the ease of using credit cards. opinions on having an appropriate system in place is being sought from all players. The use of a large number of credit cards can get you even further into debt. An approach paper is under preparation and in this connection. The purpose of the survey is y y y y to determine retailers¶ acceptance of various payment methods to estimate the share of retail sales proceeds from cash. 5. 83. for such matters. introduces an element of risk as the card details may fall into the wrong hands resulting in fraudulent purchases on the card. merchant participation/consultation is very crucial. Fraudulent or unauthorized charges may take months to dispute. Cards can encourage the purchasing of goods and services you cannot really afford. 3. It is expected that the study will be able to highlight several issues that the regulator may find useful in its endeavour towards bringing in an efficient payment system for the good of all players including the merchants and the customers. Background: In India the MasterCard and Visa rules prohibit surcharging by merchants unlike in Europe and Australia. investigate.

a credit card transaction usually costs more than the corresponding cash transaction because someone has to pay for the credit (or loan) taken while using a credit card. But there are alternate (though less popular. Some merchants correctly believe that not accepting credit cards would lead to downslide of their business since consumers want to make use of their plastic money rather than carrying cash in hand. merchants allow consumers to perceive that all payment systems have the same transaction costs. This leads them to choose among the modes of payment available on the basis of one¶s convenience and without giving due consideration to the costs that merchants have to bear.ac. inherent system in the credit cards payments which is convenient to use but forces one to take loan (and thus increase the cost of the payment). To merchants. Your responses would not associate your company name at the time of collating the data. that they incur on every card transaction. for example the (pinbased) debit cards. merchants are prohibited to pass the bank imposed merchant discount rate. debit cards and cash in terms of the cost associated with the payment modes. Your opinion is therefore very valuable to us.in. . the survey results that are expected to bring in rationalization of costing structure of the payment system cannot be completed without active support from the merchants. Kindly respond to all the questions. This usually leads to unwarranted cost pressures on the merchants necessitating adjustment in pricing structure of their merchandise. as of now.y y y y the no surcharge rule (i. Needless to say.iitb. in India) plastic money which is relatively cheap for the merchants and a good substitute of credit cards. Ashish Das at ashish@math.e. you may contact Prof. on to their customers). For any enquires. This will help in building opinions across the cross-sections of the retail sector.. Europe and Australia applying mechanisms to differentiate credit cards. less popularity of debit cards vis-a-vis credit cards. By not passing the surcharge.

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