SUBMITTED TO: Mr. Vasim Khan

SUBMITTED BY: Sourabh Kharade MBA(Fs)4th Sem Roll No.-9349

In completing this project I am deeply conscious of my debt to all those, without whose warm support, enragement & guidance this project was not possible to complete. I am specially greatful to Mr. Vasim Khan my guide to this project, He actually gave the life to this project. I am also grateful to my parents for their support because of them this project took shape. They provided me much needed criticism & encouragement.

Sourabh Kharade


I am Sourabh Kharade studying in MBA [FS] IV Sem declare that I have done a project on “CREDIT CARD ANALYSIS AND SUGGESTIONS TO ITS SAFETY”. As required by the university rules, I state that the work presented in this thesis is original in nature and to the best my knowledge, has not been submitted so far to any other university. Whenever references have been made to the work of others, it is clearly indicated in the sources of information in references.

Student (Sourabh Kharade)

Place: Indore Date: May, 2011



the proprietor was kind enough to allow him a later settlement of bill.system of availing instant credit upon confirming the identity of cardholder. Thus was born the first ‘Travel and Entertainment Card’. risky and sometimes. What is a Credit Card? “Credit Cards . In the 1980s credit card concept was launched in India through the Diners Club card. In the present time American Express leads the travel and entertainment (T&E) card industry. Not only did these establishments pay a commission on member’s purchases but the members also paid an annual subscription fee. A Credit card is the smart solution to these problems. Such cardholders could use their card 1966 offered to license its successful blue. At the end of meal he discovered that he had forgotten his wallet at home. McNamara.INTRODUCTION ORIGIN The credit card had its beginning in an embarrassing incident that took place in the early 1950’s in America. Thus was born the Diners Club Cards. later renamed Master Charge and later still Master Card. The next great leap-forward came from Bank of America. It is a convenient and safe alternative for cash. white and gold Bank America card to at any accepting merchant establishments around the globe. and soon. just when you most need it. you run short of it. the pioneer of today’s multibillion-dollar plastic money business. Not to be outdone. As McNamara stepped out of the restaurant he had the brainwave for the introduction of credit cards . Diners Club vetted its members for credit worthiness and guaranteed payment to participating establishment. within a couple of months both Visa and Master card entered into the Indian market. Later in 1977 all the national and international Bank America licenses were pulled together under the single name of Visa. It was followed by American Express. Ever since Master Card and Visa and their affiliates have carved the world credit card market. . The story goes that Mr. and by 1959 by Carte Blanche. which in other banks. Carrying a lot of cash on you can be cumbersome. Diners Club adopted a promising approach by recruiting various hotels and restaurants to act as member establishments for accepting the cards. a rival group of American Banks came together in 1966 under the name of Interbank.It's credit to you!” A Credit Card is referred to as 'plastic money'. a New York businessman took his friends out to dinner. after many vicissitudes is now a part of Citi Bank Empire Together With Diners Club. which is now a dominant force in the Travel and Entertainment cards industry. (Remember the SALE at your favorite ready-mades store?).

when you get yourself a card. it says things about be extended credit! So.Besides. Most people associate a credit card with a prestige. which it most certainly bestows on you. remember that. but more importantly. it says that you have taken the onus of being responsible . because your bank does! .

Often called the introductory rate. The cardholder can usually change the number. Most credit cards offer revolving credit. Joint Credit . Banks usually take an initial fixed amount in the first year and then a lower amount as yearly renewal fees. Banks. Teaser Rate . why not become familiar with the various terms and jargons used by the credit card industry. which ranges depending upon the type of card one possesses.Issued to a couple based on both of their assets. Revolving Line Of Credit . . retail stores and other businesses generally issue these.Before i go any further. Credit limit – The maximum amount of charges a cardholder may apply to the account. incomes and credit reports. Annual fee – A bank charge for use of a credit card levied each year. Personal Identification Number (PIN) .An agreement to lend a specific amount to a borrower and to allow that amount to be borrowed again once it has been repaid. It generally results in a higher credit limit. but makes both parties responsible for repaying the debt. some cards require a number to be punched into a keypad before a transaction can be completed. which can be used more than once to borrow money or buy products and services on credit. Credit Card – A credit card is a financial instrument.As a security measure. it is the below-market interest rate offered to entice customers to switch credit cards.

contain a computer chip embedded in the plastic. whose users spent $650 billion in more than 16.  Smart Card – Smart cards.2 million locations. smart cards are now available with 16K of memory.A card offered by two organizations.  Affinity Cards . In addition.  VISA Card – VISA cards are financial institutions around the world distribute a product of VISA USA and along with MasterCard. use of the card entitles holders to special discounts or deals from the non-financial group. When read by a special terminal. the other a non-financial group. Where a typical credit card's magnetic stripe can hold only a few dozen characters. Usually.  Titanium Card – A card with an even higher limit than a platinum card. These cards can be . pro wrestlers. one a lending institution. Cardholders borrow money against a line of credit and pay it back with interest if the balance is carried over from month to month.  Standard Card – It is the most basic card (sans all frills) offered by issuers. A VISA cardholder borrows money against a credit line and repays the money with interest if the balance is carried over from month to month in a revolving line of credit.  Platinum Card – A credit card with a higher limit and additional perks than a gold card. or people trying to rebuild their poor credit ratings. it had almost 700 million cards in circulation. non-profit groups. Schools. 23.  Classic Card – Brand name for the standard card issued by VISA.  Secured Card – A credit card that a cardholder secures with a savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. the cards can perform a number of functions or access data stored in the chip. Nearly 600 million cards carry one of the VISA brands and more than 14 million locations accept VISA cards. sometimes called chip cards. It is used by people new to credit. issuers provide extra perks or incentives to cardholders.  Gold Card/Executive Card – A credit card that offers a higher line of credit than a standard card.000 financial institutions in 220 countries and territories issue its products. In 1998.TYPES OF CARDS  MasterCard – MasterCard is a product of MasterCard International and along with VISA are distributed by financial institutions around the world. popular singers and airlines are among those featured on affinity cards. Income eligibility is also higher.

or used as ID cards with stored-in passwords. in other words. merchandise or services based on card usage.  Rebate Card – This is a card that allows the customer to accumulate cash. Open an account with a bank that offers a debit card. and payments for purchases are deducted from your bank account. SBI-GE Capital has a cobranded card for retail loans. no revolving credit facility either. Works like the latter and you don't have to be an accountholder. Participating retailers will use the reader to debit the card in increments until the value is gone.  Charge Card – fall between a debit and credit card. they can be used by anyone.used as cash cards or as credit cards with a preset credit limit. American Express.  Cash Card – Cash cards. The retailer swipes the card over an electronic terminal at his outlet. No outstanding are allowed.they have no built-in security. American Express and Diners are providers. you enter the personal identification number on a PIN pad and the money is immediately debited at the bank. so if lost or stolen.  Travel Card – these works mostly as debit cards for the limited purpose of travel. Stan chart and Hindustan Lever Limited have a cobranded card to sell Aviance beauty products.  Co-Branded Card – This is a marriage of convenience between two service providers who want a trade-off with the other's strengths. Specific facilities are made to members through these tie-ups. which can be read by a special cash card reader. . contain a set amount of value. Citibank and a few domestic banks like Times Bank offer this. Just pay up in full when the bill arrives with the mail. Bob card Global and Hong bank Thomas Cook International Card are among the players in this section. similar to pre-paid phone cards.  Debit Card – It is the accountholder's mobile ATM. The cards are like cash -. Times Bank and Citibank have a co-branded card that allows concessional rates for add-on cards or telephone banking. So. Citibank Dollar Card.

SALIENT FEATURES  Annual Fee: All credit card issuers charge an annual fee which is payable at the start of the year. is your membership year. this fee is sometimes waived the first time. It might sound low at 3%. Most card issuers will tell you their monthly rate of interest. You can spend now .lets you withdraw cash from designated ATMs using your credit card. every month. it turns out to be as high as 43%. When the time comes for renewal of your card. of course. around 2. Use discretion when withdrawing cash on your credit card because the charges for this facility are high. but when you look at the interest rate over the year. you can expect to be billed the annual fee every March until you cancel your card. Billing cycles are structured in such a way that you definitely get at least 30 days out of these as clean credit time. which is especially beneficial to salaried people.  Convenience: With a credit card on you. if you got yourself a card in March.  Forwarding Balance (or Revolving): The most attractive feature of a credit card is that you need not pay off your dues in whole. As a privilege. Better still.  APR or Annual percentage Rate: The interest rate that reflects the yearly cost of the interest the outstanding on your card is called the annual percentage rate. every month.  Cash Advance: An important feature . you can even use the reward points you have accumulated from using the credit card over the year to settle your annual fee. The start of the year. But there's a price to pay for this extended credit interest! Normally. and not the calendar year. This rate is charged to the cardholder on the amounts carried forward beyond the due date for the payment of balances. interest varies between 2.5% to 3% per transaction! BENEFITS:  Credit: When you use a Credit card to pay for anything. So. you can opt to pay your bill in full when you receive it or you can carry forward your payments by paying as little as 5% of the total amount on or before the due date. . the rest is carried forward. you don't need to run the risk of carrying a lot of cash. pay later.5% and 3% per month. You can opt to pay 5% of the total amount on or before the due date. you get an interest-free period of 45 days.

It typically starts with a flat fee going up to a percentage-based fee on the amount of the withdrawal. Cash Advance: Another advantage of a Credit card is that you can use it as an ATM card too! But remember. . there's a fee to it.

Remember. like an investment! . a timely help in an emergency or taking advantage of an opportunity that you would have otherwise lost out on. it is an extremely expensive way to borrow money! View it as a convenient and safe way to carry cash.DRAWBACKS:  Greed! Just because you have credit being extended to you doesn't mean that you should go on a rampage! Use your card with discretion and caution.

or you suspect it is being used fraudulently. don't just thrash into the bin. should the need arise. keep your receipts filed or in one place .you'll find them easily. In fact. report it immediately to your bank. unless you've made the call.  If your card is lost or stolen.  Hold on to receipts from your transactions.Do's & Dont's  Do not leave your Credit Card lying around the house or on your desk at work. shred or tear them before you do. and it is to your bank or someone you trust.  Never give your Credit Card number over the phone. and you really. And when you want to throw them away. really need to! .

These respondents each hold credit cards. customer retention is also one of the most important factors influencing a card issuer’s success. . The level of services provided by these organizations is increasing day by day. In order to ensure that the existing customers stay loyal. people have started using cards on a more regular basis. those in the industry say. There has been a seven-fold increase. With the influx of new financial institutions in the card market. but the usage pattern of credit cards remains a point of conc0ern. If they feel they have received good value for their money. with the number of cardholders touching over 38 lakh. You want customers to be happy with the products and services you provide. helps you to be sure that your business measures up to their expectations. While issuing the cards may seem to be easy. your business will prosper. These figures point towards the fact that the credit card industry in India is growing at a brisk annual rate of 30 per cent and is expected to grow at a similar rate in the coming years.EXECUTIVE SUMMARY OF CREDIT CARD INDUSTRY The credit card industry in India has registered an encouraging growth in recent times. This research has tried to study the satisfaction levels of a sample of 100 credit card holders. ----. the challenge for the banks lies in being able to manage their portfolios by keeping the delinquency levels at the lowest and customer satisfaction levels at the highest. Organization has to ascertain whether its existing customers are satisfied with its current service offerings. and where you need improvement. Customer satisfaction is the key to success. which may be of different kinds. Getting your customers to tell you what’s good about your business. Apart from attracting potential card users.

It is upon him to find out the facts of regulatory life. With this in mind.300 and 3. This fortifies the view that conservative purchasing ideas are giving way to the big in-thing. These figures point towards the fact that the credit card industry in India is growing at a brisk annual rate of 30 per cent and is expected to grow at a similar rate in the coming years. India had a base of around five lakh credit cards. Going by estimates. it is entirely his responsibility to make sure that exchange controls have been complied with. those in the industry say. in India it is only 11 times. At present there are over a dozen players in the credit card market in India. limited telecommunication infrastructure and emerging . But the alarm has been raised for the banks by the figures that show that while the average usage in Malaysia is 27 times annually. Seven years back. The whole idea behind the introduction of the credit cards was to increase the purchasing capacity of the cardholder. The markets like the United States and England have an average annual card spend of 1.500). wide geographical spread. Some of the key factors impacting the cards business in India are limited credit. The credit card players will have to think about simplifying the foreign exchange transactions. 71 per cent of first time credit card applicants in the country have expressed the need for advice on appropriate card selection despite the plethora of cards available in the market. whereas in Indonesia. and the bank now has a base of more than half a billion.600 dollars respectively. According to estimates. India has a long way to be anywhere near the matured markets.154). with the number of cardholders touching over 38 lakh. Through this survey it has come to realize a long felt need of potential and existing cardholders for advice on suitable selection of a credit cards. The innovations have already begun to show their effect. The leaders will surely be identified by the innovations for the card users. When one uses the card. the foreign banks launched a credit card blitzkrieg on the Indian customer. it is about 678 dollars (Rs 29. The Standard Chartered Bank has seen its credit card base shoot up after the launch of its Global Rupee Card in March last year. but the usage pattern of credit cards remains a point of concern. According to a survey by the Credit Card & Management Consultancy (CCMC). But it is the usability that raises doubts. The real point of worry is the spending on the credit cards. But the real challenge for the banks is to make the holder spend more on the card. Those in the credit card business say that per capita credit card spending in India is about five hundred dollars (Rs 21. The banks that issue the cards have made it abundantly clear that one has to look out for him. There has been a seven-fold increase. and the fact is the foreign banks are clearly the leaders. the average card spending in India is even less than that in Indonesia.INDIAN CREDIT CARD SCENARIO The credit card industry in India has registered an encouraging growth in recent times. It has seen the fresh issuance of global card increase by more than one lakh.

He also highlighted Speed.5 lakh credit cards…25 cities…16 months.5 lakh credit cards across 25 cities (the largest distribution network in the payment card industry) within 16 months. The joint venture between India’s largest bank – State Bank of India and one of the world’s leading financial services companies – GE Capital. India’s fastest growing credit card company . There is talk of widening the card business with new features. more than ten per cent of them are cardholders. coupled with availability of the SBI Card in 25 cities in just 16 months. Of the twenty million taxpayers in India. The other players feel that the card acceptance base in India has to be widened. Those in the industry point out that this figure is not bad. SBI Cards & Payment Services (SBI Cards) has issued 2. SBI Cards & Payments Services attributed this success to SBI’s enormous brand equity. Less than two per cent of private consumption spending in India is done on cards. Thereby achieving the target in the fastest period seen in India’s payment card industry. to grab a sizeable share of the expanding pie. the cards business is still in its initial stages.regulatory controls. and unparalleled retail branch network coupled with GE Capital’s payment card process and technology expertise. the challenge for the banks lies in being able to manage their portfolios by keeping the delinquency levels at the lowest. despite the fact that it has more than one million credit card holders. They also point out that though the cards business has been in the country for long. the State Bank of India in association with GE Capital entered the card business. a necessity. considering the fact that. Suggestions include credit card usage at petrol pumps and railway bookings.000 card holders in 1997. While issuing the cards may seem to be easy. The spurt in the card business has gathered momentum during the past couple of years. the players feel that the business has not reached an optimum level to say that they are making money. For instance. Huge investments in systems and infrastructure are. Not to be left behind in this race.SBI Cards 2. but the present scenario does not paint a positive picture. was in the credit cards business since seven years. therefore. Though LIC is talking about the introduction of this facility to customers. Even the largest player in the Indian market does not still have the economies to make the card business really profitable in India. Simplicity Simple application process with minimum . but from 50. but even today the insurance premium cannot be paid by card. but its turning into reality may take time. with many loopholes remaining to be plugged. the Hong Kong & Shanghai Banking Corporation (HSBC). Speed Unique and exclusive 14-day average turnaround time. even the big brother. The increase is being attributed to new ideas such as round-the-clock functioning of card issuing banks and pulling out all stops even at a loss. it has about three lakh card holders now. Simplicity and Service as the key drivers of growth for the SBI Card. However.

Service 24 hours a day/7 days a week local call access to the SBI Card Help line across 25 cities. The DSA team comprises aggressive salesmen who visit different organizations and professionals. if you have a large bank balance. Remember. credit card companies are opting for Direct Sales Agents. ask for the add-on card fee. this is the jam! If you are the sort who forgets to pay on time. travel discounts etc. players are ready to waive joining fees and also one-year membership fees for anyone. OF at least the used to be the case. higher accident insurance cover. Remember that you will be settling the bills on the add-on card that you so touchingly gift to someone dear to you . These DSAs are paid a flat rate against the approved applications.the statement will come to you. the interest rate would be of paramount importance. or. DECIDING ON THE RIGHT CREDIT CARD How much is the joining fee and the annual fee? Generally. INTERMEDIARIES: In their attempt to increase their market share. Most credit card companies charge anywhere between 2% to 3 % per month. The balance transfer rate is lower for a certain period (say six .documentation. or likes to live it up and live off credit. and the responsibility for payment is yours (as far as the credit card company is concerned) What is the interest rate? This is actually a question that you should be asking fairly soon in the discussion. They collect filled forms and produce them to the bank for approval. or negotiate this for yourself. That's where they make their gravy. SBI Cards today offers the largest distribution and widest cash advance network for India’s middle class customers. spouse or friend. As a result of the focus on the Speed. a card with a higher annual fee enjoys more benefits like higher credit limit. look for card companies that provide the transfer balance facility. Simplicity and Service growth platform. After cards are issued they also deliver the same to the individuals. SBI Cardholders can access cash for emergency purposes from over 158 SBI branches across 68 locations in India. Grab these offers. and that's where you pay! It is always advisable to pay off the entire amount on due date. accessibility to airport lounges. while the up front one off fees are bread and butter for the credit card Company. (Read a whopping 35% to 43% per year). How much is the Add-on card fee? If you are interested in buying add-on cards for your children. With cutthroat competition between the card issuing banks.

months) and then the normal rates apply. But again this is a temporary solution to a chronic problem. 4. What is the reach? Not an important question - most outlets in India accept both the Master card and the Visa card, and most credit card companies provide Visa or Master cards. So its fairly simple, and doesn’t need much head scratching - they're all more or less the same. One thing you could do is to check out for the Automated Teller Machines nearest to your house or work place (ATMs - almost all credit card companies now provide you the facility of withdrawing cash from machines - I guess for things that cards just cant buy. These machines are called ATMs, and are helpfully scattered all over the city/country/world). Having more ATM outlets in Thailand wouldn’t be of any relevance to a person who rarely travels abroad, though it may certainly be a goal to work towards after buying the card. Please also remember that Amex credit cards are not part of the Visa/ Master chain, and have a separate chain of outlets where it’s accepted. 5.Is it a Global card? Now this could be useful to you if you are an overseas traveler. A Global card can be used for paying expenses in foreign currency just like you use a credit card to pay in rupees. Nowadays, a Global card is being issued at the same cost as for a similar domestic one. It is better to have a global card, especially if there is no premium attached. 6.How useful are branded or affinity cards? A partnership between a card issuer and the non-profit, social or lifestyle association is what results in an affinity card. This is for providing financial rewards to the group or association. E.g. Citibank Women’s card, Citibank WWF cards. Citibank WWF Visa card donates a percentage of the transaction value made through the card to the WWF fund for its environmental conservation activities. A subscription to such cards helps ease the conscience though it provides no monetary value. A partnership between a bank card issuer and a commercial partner result in a cobranded card. This entitles the cardholder to lots of freebies, prizes, discounts on cobranded products. Logic: If a customer is loyal to one brand, he will want to purchase the other. So if you were loyal to a particular brand, it would make sense going for those co-branded cards. e.g. Citibank and IOC, Bank of India and Taj group of hotels etc. 7. What’s the lost card liability? Most Card issuers mention in the brochures that lost card liability is Rs 1000. Be careful, that is actually AFTER it is reported to the Bank. The liability is actually unlimited before reporting (in cases like this, you would actually thank the credit limit because though the liability is unlimited, the ceiling should logically be your

credit limit, and the outlets accepting your stolen card should actually check that you (or the person who stole your card) haven’t exceeded your credit limit). Avoid banks that make you liable for card misuse for a single minute after reporting it. 8. Are there any freebies? Citibank gives a Pond’s gift hamper free on subscription to its Citibank Women card. Personal accident insurance for Air, Road or Otherwise is packaged along with the subscription. Also Baggage cover, Purchase Protection cover and credit shield is bundled free of cost along with the card. If you feel one these parameters are important, and then settle for the one that gives a higher cover. 9. Is immediate cash withdrawal possible? Check out if the Bank has any ATMs near your house or workplace. This surely helps in times of emergency. The cost component for a cash withdrawal could be classified as follows: Service fee (transaction fee) each time you pull out money, and Interest rate for the period for which you have used the money - until settlement date. If you are going to withdraw cash frequently, better watch out for this cost. 10. How long is the free credit period? The days of credit one gets depends on the statement date and the date of transaction. On an average, you could assume you'd get around 20 days of free credit. However, if you buy just after the statement date, you could end up getting unto 50 days of credit. Look for cards that give you the highest free credit period! 11. Is a Helpline available? A 24-hour Helpline service from the Card Company helps the cardholders during the non-banking hours. Reporting of theft, checking of available credit limit and other enquiries can be made by the cardholder round-the-clock. In the end, like everything else in life, the card you want is really up to you - what matters the most to you credit, reach, the freebees, international reach or a combination of parameters. Use our card category on the left bar to simply list out the names of the cards, or choose by bank name and see the cards they offer. Or look for cards offering the lowest interest rate. Of the lowest charges on cash withdrawal (believe me, it gets to be a serious consideration as one goes along). Go to our shortlist card section, and search for cards based on any criteria that you want. Happy hunting, and stay careful - you may like to use our section on how to use the card carefully to minimize the chance of its misuse by someone else.

Review of Literature
Future growth potential in this market is tremendous, particularly due to low payment card penetration coupled with low card spending. Shift in consumer spending patterns will also give impetus to the growth of Indian payment card market. Consumers have now been preferring the use of payment cards for these are safer to carry and provide credit facility (in case of credit cards) as well. Besides, there are many other benefits, like reward points and discounts by merchants as well as bankers, which lure customers to shop by their payment cards. This research also indicates that the future growth trend, to some extent, will be impacted by the current financial turmoil and credit squeeze. Bankers will also become a little more conscious while doing risk evaluation of credit card applicants. But the overall trend will remain positive over the forecast period. The report provides a comprehensive research and prudent analysis on the emerging payment card market in India. This extensive research will help the clients to identify the market trends and evaluate the leading-edge opportunities critical to the success of the payment card markets. This study gives an overview on the various factors driving the market, together with the forces that are blocking the growth of the industry. The research report provides forecast on § Number of credit cards issued § Credit cards payment Transaction by volume § Credit cards payment transaction by value § Number of debit cards issued § Debit cards payment Transaction by volume


Following are some of the facts that were revealed through the survey. Collection of Secondary Data: • News papers. • Press Media • Magazines • Telecommunication Research Tools: • Research design : • Sampling Unit • Sampling Size • Sampling technique : Exploratory : Area of Indore : 100 people. Collection of Primary Data: The collection of primary data done with the help of personal meet with the Managing Director and Supervisory and Official Staff after Securitization of records maintained. It's customary to distinguish data between primary and secondary.Confining our study to the geographical limits of Indore.50 Cash user Probability Sampling OBJECTIVES OF THE STUDY . we chose a sample of 100 people . using the probability sampling technique where every individual fulfilling the above criteria had an equal chance of being selected for the survey. A personal survey and surprise check are prompt to be carried out to ascertain the fact on the basis of survey of credit card at personal interest.50 cardholders and 50 non-card users. 50 non. Sources and Method of Data Collection The data on the present study will be collected by the investigator himself.

Following are the objectives of the study: • • • • To analyze credit card business in India To determine the working procedure of credit cards To learn about credit card frauds and its security issues To make the customers aware about credit card and its safety .Study is the one of the important parts of any study.

§ 1643. After receiving the statement. and the total amount owed. Each month. Electronic verification systems allow merchants to verify in a few seconds that the card is valid and the credit card customer has sufficient credit to cover the purchase. which limits cardholder liability for unauthorized use of a credit card to $50. after an account has been approved by the credit provider. Also. merchants additionally verify that the customer is in physical possession of the card and is the authorized user by asking for additional information such as the security code printed on the back of the card.C. When a purchase is made. and telephone sales). the credit card user agrees to pay the card issuer. and billing address. The cardholder indicates consent to pay by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a personal identification number (PIN).g. after which cardholders can use it to make purchases at merchants accepting that card. For card not present transactions where the card is not shown (e. any outstanding fees.. date of expiry. the credit card user is sent a statement indicating the purchases undertaken with the card. The verification is performed using a credit card payment terminal or point-of-sale (POS) system with a communications link to the merchant's acquiring bank. such as a bank or credit union.S.FINDINGS WORKING PROCEDURE OF CREDIT CARD • How credit cards work Credit cards are issued by a credit card issuer. mail order. Data from the card is obtained from a strip or chip on the card. and the Fair Credit Billing Act for details of . ecommerce. the latter system is called Chip and PIN in the United Kingdom and Ireland. the cardholder may dispute any charges that he or she thinks are incorrect (see 15 U. many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet. and is implemented as an EMV card. known as a card not present transaction (CNP). allowing the verification to happen at time of purchase.

Take the annual percentage rate (APR) and divide by 100 then multiply to the amount of the average daily balance (ADB) divided by 365 and then take this total and multiply by the total number of days the amount revolved before payment was made on the account. some financial institutions can arrange for automatic payments to be deducted from the user's bank accounts. The precise manner in which interest is charged is usually detailed in a cardholder agreement which may be summarized on the back of the monthly statement. thus avoiding such penalties altogether as long as the cardholder has sufficient funds. however. if the credit card user fails to make at least the minimum payment by the due date. Otherwise. Financial institutions refer to interest charged back to the original time of the transaction and up to the .the US regulations). The general calculation formula most financial institutions use to determine the amount of interest to be charged is APR/100 x ADB/365 x number of days revolved.000 transaction and repaid it in full within this grace period. interest would be charged on the $1. or may choose to pay a higher amount up to the entire amount owed. If. the cardholder must pay a defined minimum proportion of the bill by a due date. Interest charges Credit card issuers usually waive interest charges if the balance is paid in full each month. To help mitigate this. For example. the issuer may impose a "late fee" and/or other penalties on the user. but typically will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid. In addition. if a user had a $1. there would be no interest charged. The credit issuer charges interest on the amount owed if the balance is not paid in full (typically at a much higher rate than most other forms of debt).00 of the total amount remained unpaid. even $1.000 from the date of purchase until the payment is received.

The credit card may simply serve as a form of revolving credit. products. carrying a credit card may be a convenience to some customers as it eliminates the need to carry any cash for most purposes. Compared to debit cards and cheques. payment allocation is generally at the discretion of the issuing bank. Benefits to customers The main benefit to each customer is convenience. provided the total charges do not exceed the maximum credit line for the card. when the balance stopped revolving). Usually this compartmentalization is the result of special incentive offers from the issuing bank. and payments will therefore usually be allocated towards the lowest rate balances until paid in full before any money is paid towards higher rate balances. and points which may be redeemed for cash. if not in full. or it may become a complicated financial instrument with multiple balance segments each at a different interest rate.e. or with separate credit limits applicable to the various balance segments. or any other credit instrument or even if the issuing bank decides to raise its revenue. Thus after an amount has revolved and a payment has been made. as RRFC or residual retail finance charge. Interest rates can vary considerably from card to card. to encourage balance transfers from cards of other issuers. In the event that several interest rates apply to various balance segments. a credit card allows small short-term loans to be quickly made to a customer who need not calculate a balance remaining before every transaction. Many credit cards offer rewards and benefits packages. possibly with a single umbrella credit limit. . i. Additionally. such as offering enhanced product warranties at no cost. the user of the card will still receive interest charges on their statement after paying the next statement in full (in fact the statement may only have a charge for interest that collected up until the date the full balance was paid. and the interest rate on a particular card may jump dramatically if the card user is late with a payment on that card. free loss/damage coverage on new purchases. or airline tickets.time a payment was made.

in other cases a fixed charge is levied without change to the interest rate. Grace period A credit card's grace period is the time the customer has to pay the balance before interest is assessed on the outstanding balance. after which a higher rate is charged. most card holder agreements enable the issuer to arbitrarily raise the interest rate for any reason they see fit. As all credit cards charge fees and interest. Most simply display the acceptance marks (stylized logos. but usually range from 20 to 50 days depending on the type of credit card and the issuing bank. . Usually. some customers become so indebted to their credit card provider that they are driven to bankruptcy. finance charges will be calculated and the grace period does not apply.e. interest is applied on both the previous balance and new transactions). Finance charges incurred depend on the grace period and balance. there are some credit cards that will only apply finance charge on the previous or old balance. Further. Grace periods may vary.Detriments to customers Low introductory credit card rates are limited to a fixed term. However. if a customer is late paying the balance. This can lead to a snowball effect in which the consumer is drowned by unexpectedly high interest rates. Benefits to merchants An example of street markets accepting credit cards. shown in the upper-left corner of the sign) of all the cards they accept. In some cases universal default may apply: the high default rate is applied to a card in good standing by missing a payment on an unrelated account from the same provider. excluding new transactions. Some policies allow for reinstatement after certain conditions are met. with most credit cards there is no grace period if there is any outstanding balance from the previous billing cycle or statement (i. Some credit cards often levy a rate of 20 to 30 percent after a payment is missed. usually between 6 and 12 months.

a credit card transaction is often more secure than other forms of payment. That task is now performed by the banks which assume the credit risk. though this is strictly prohibited by credit card companies & must be reported to the consumer’s credit card issuer. banks guarantee payment on stolen cards only if an ID card is checked and the ID card number/civic registration number is written down on the receipt together with the signature. such as cheques. Extra turnover is generated by the fact that the customer can purchase goods and/or services immediately and is less inhibited by the amount of cash in his or her pocket and the immediate state of his or her bank balance. Credit cards can also aid in securing a sale. Much of merchants' marketing is based on this immediacy. which are discussed below. For each purchase. plus a fixed fee (interchange rate). In some countries. Some small merchants require credit purchases to have a minimum amount to compensate for the transaction costs. and in that case showing an ID card is not necessary. because the issuing bank commits to pay the merchant the moment the transaction is authorized. and the passport number will be written down on the receipt. regardless of whether the consumer defaults on the credit card payment (except for legitimate disputes. In these countries merchants therefore usually ask for ID. In addition. Prior to credit cards. the bank charges the merchant a commission (discount fee) for this service and there may be a certain delay before the agreed payment is received by the merchant. Some shops use the card's PIN for identification. each merchant had to evaluate each customer's credit history before extending credit. and can result in charges back to the merchant). In most cases. who are unlikely to possess a Nordic ID card or driving license.For merchants. cards are even more secure than cash. for example the Nordic countries. Non-Nordic citizens. sometimes together with other information. The commission is often a percentage of the transaction amount. a merchant may be penalized or have their ability to receive payment using that credit card restricted if there are too many cancellations or reversals of charges as a result of disputes. will instead have to show their passport. especially if the customer does not have enough cash on his or her person or checking account. . because they discourage theft by the merchant's employees and reduce the amount of cash on the premises.

for payment by credit card. Merchant: The individual or business accepting credit card payments for products or services sold to the cardholder. for each transaction. but in general is the organization that the merchant deals with. The merchant is usually charged a commission of around 1 to 3 per-cent of the value of each transaction paid for by credit card.[10] This practice is prohibited by the credit card contracts in the United States. The merchant may also pay a variable charge. the consumer. although the contracts allow the merchants to give discounts for cash payment.  Independent sales organization: Resellers (to merchants) of the services of the acquiring bank. Card-issuing bank: The financial institution or other organization that issued the credit card to the cardholder.  Acquiring bank: The financial institution accepting payment for the products or services on behalf of the merchant. American Express and Discover were previously the only card-issuing banks for their respective brands. This bank bills the consumer for repayment and bears the risk that the card is used fraudulently. Parties involved   Cardholder: The holder of the card used to make a purchase. Cards issued by banks to cardholders in a different country are known as offshore credit cards. this is no longer the case. but as of 2007.Costs to merchants Merchants are charged several fees for the privilege of accepting credit cards. called an interchange rate. use of credit cards will significantly reduce the profit margin or cause the merchant to lose money on the transaction. either a fixed amount or a percentage. In some cases merchants may charge users a "credit card supplement". Thus in some instances of very low-value transactions.  Merchant account: This could refer to the acquiring bank or the independent sales organization. Merchants must accept these transactions as part of their costs to retain the right to accept credit card transactions.  . Merchants with very low average transaction prices or very high average transaction prices are more averse to accepting credit cards.

and one company may operate multiple networks. (Such may be the case when the cardholder is not present but owes the merchant additional money. which are sent to the acquirer. American Express.Credit Card association: An association of card-issuing banks such as Visa. Batches are typically submitted once per day at the end of the business day. and major retailers. professional organizations. Transaction steps Authorization: The cardholder pays for the purchase and the merchant submits the transaction to the acquirer (acquiring bank). card-issuing banks. If a transaction is not submitted in the batch. these are either transactions falling under the merchant's floor limit or ones where the authorization was unsuccessful but the merchant still attempts to force the transaction through. Some transactions may be submitted in the batch without prior authorizations. and get paid a fee or a percentage of the balance for each card issued using their name. MasterCard. the authorization will stay valid for a period determined by the issuer. Discover. The acquirer verifies the credit card number.  The flow of information and money between these parties — always through the card associations — is known as the interchange. and it consists of a few steps. that set transaction terms for merchants. after which the held amount will be returned back to the cardholder's available credit (see authorization hold). May be operated by an independent company. universities. which the merchant stores with the transaction. An authorization will generate an approval code. Examples of typical affinity partners are sports teams. such as extending a hotel stay or car rental. charities. etc. the transaction type and the amount with the issuer (Cardissuing bank) and reserves that amount of the cardholder's credit limit for the merchant.)  .  Affinity partner: Some institutions lend their names to an issuer to attract customers that have a strong relationship with that institution.  Transaction network: The system that implements the mechanics of the electronic transactions. and acquiring banks.  Batching: Authorized transactions are stored in "batches".

Features As well as convenient. and France.Clearing and Settlement: The acquirer sends the batch transactions through the credit card association. which debits the issuers for payment and credits the acquirer. repayment arrangement. and other perks (such as rewards schemes in which points earned by purchasing goods with the card can be redeemed for further goods and services or credit card cashback)." "mid-qualified rate".  Funding: Once the acquirer has been paid. Credit cards are accepted worldwide. the acquirer pays the merchant. Essentially. the issuer pays the acquirer for the transaction. and are available with a large variety of credit limits. Some countries. who must either accept the chargeback or contest it. the United Kingdom. or "non-qualified rate" which are tiers of fees the merchant pays the acquirer for processing the transactions. accessible credit. limit the amount for which a consumer can be held liable due to fraudulent transactions as a result of a consumer's credit card being lost or stolen. they may borrow as much as their . Chargeback are typically initiated by the cardholder. which is necessary for both monitoring personal expenditures and the tracking of work-related expenses for taxation and reimbursement purposes. As they receive very low-interest loans from other firms. Costs Credit card issuers (banks) have several types of costs: • Interest expenses Banks generally borrow the money they then lend to their customers. the issuer returns the transaction to the acquirer for resolution. In the event of a chargeback.  Chargeback’s: A chargeback is an event in which money in a merchant account is held due to a dispute relating to the transaction. The merchant receives the amount totaling the funds in the batch minus either the "discount rate. such as the United States. credit cards offer consumers an easy way to track expenses. The acquirer then forwards  the chargeback to the merchant.

which may or may not includebalance . which is usually 3 to 7 years. the issuer earns 10% on the loan. an outside collection agency. • Charge offs When a consumer becomes severely delinquent on a debt (often at the point of six months without payment). for instance. to taking the many phone calls which cardholders place to their issuer. such as frequent flyer points. Rewards are generally tied to purchasing an item or service on the card. to mailing the statements. If the card issuer charges 15% on money lent to users. It will then be listed as such on the debtor's credit bureau reports (Equifax. This includes contacts from internal collections staff. and it costs 5% to borrow the money to lend. Depending on the issuer. or cash back as an incentive to use the card. while lending their capital to other borrowers at higher rates. including everything from paying the executives who run the company to printing the plastics. to protecting the customers from fraud rings. or more likely. the creditor may declare the debt to be a charge-off.) A charge-off is considered to be "written off as uncollectable. the debt is still legally valid. and the balance sits with the cardholder for a year. bad debts and even fraud are simply part of the cost of doing business. If the amount is large (generally over $1500–$2000). there is the possibility of a lawsuit or arbitration. However. • Rewards Many credit card customers receive rewards. marketing programs are also a significant portion of expenses." To banks. and the creditor can attempt to collect the full amount for the time periods permitted under state law. to running the computers that keep track of every cardholder's balance. lists "R9" in the "status" column to denote a charge-off. gift certificates. This 10% difference is the "net interest spread" and the 5% is the "interest expense".customers require. • Operating costs This is the cost of running the credit card portfolio.

even with the advent of the chip based card (EMV) in some countries was in place to prevent this fraud case. be at the expense of the merchant. Revenues . Employees that are specialized in doing fraud monitoring and investigation are often placed in Risk Management. rewards points cut dramatically into an issuer's bottom line. Networks such as Visa or MasterCard have increased their fees to allow issuers to fund their rewards system. Most banking services have their own credit card services that handle fraud cases and monitor for any possible attempt at fraud. in whose case the breakage in certain US states goes to the state's treasury. Unlike unused gift cards. Credit card fraud is a major white collar crime that has been around for many decades. redeeming awards is usually a feature that is very well hidden by the issuers. Fraud and Authorization. Credit card companies generally guarantee the merchant will be paid on legitimate transactions regardless of whether the consumer pays their credit card bill. Some issuers discourage redemption by forcing the cardholder to call customer service for rewards. On their servicing website. calculated in 2006 at 7 cents per 100 dollars worth of transactions (7 basis points). In several countries. rewards will generally cost the issuer between 0.[18] In 2004. therefore merchants usually require ID card in these countries. Depending on the type of card. or Cards and Unsecured Business. the cost of fraud was over £500 million.[19] When a card is stolen. there are still many cases reported and still around in this countries. most card issuers will refund some or all of the charges that the customer has received for things they did not buy. in some cases. These refunds will. Fraud monitoring emphasizes minimizing fraud losses while making an attempt to track down those responsible and contain the situation. unredeemed credit card points are retained by the issuer. cash advances.25% and 2.transfers. in the UK. and rewards points and related incentives must be carefully managed to ensure a profitable portfolio. or other special uses. or an unauthorized duplicate made. especially in mail order cases where the merchant cannot claim sight of the card. merchants will lose the money if no ID card was asked for. With a fractured and competitive environment. Fraud In relative numbers the values lost in bank card fraud are minor.0% of the spread.

interchange fee revenues may represent about a quarter of total revenues.Offsetting costs are the following revenues: • Interchange fee In addition to fees paid by the card holder. there are "teaser" rates in effect for initial periods of time (as low as zero percent for. debit cards. have very weak usury laws. Often. and the authorized and settled transaction amounts. The teaser rate no longer applies if the customer doesn't pay their bills on time.99%) that applies retroactively. The interchange fee that applies to a particular transaction is also affected by many other variables including: the type of merchant. six months). Other states. These fees are typically from 1 to 6 percent of each sale. say. having no ceiling on interest rates and fees. merchants must also pay interchange fees to the card-issuing bank and the card association. how the information required for the transaction was received. but also from card to card. 23. but will vary not only from merchant to merchant (large merchants can negotiate lower rates). In some cases. . For a typical credit card issuer. merchants add a surcharge to the credit cards to cover the interchange fee. when the transaction was settled. with business cards and rewards cards generally costing the merchants more to process. whereas regular rates can be as high as 40 percent. encouraging their customers to instead use cash. the specific type of card. In the U. and is replaced by a penalty interest rate (for example.S. the interest rates are set by the states. • Interest on outstanding balances Interest charges vary widely from card issuer to card issuer. with some states such as South Dakota. the merchant's total card sales volume. for example Delaware. or even cheques. the merchant's average transaction amount. whether the cards were physically present. there is no federal limit on the interest or late fees credit card issuers can charge. inviting some banks to establish their credit card operations there.

Fees charged to customers The major fees are for:   Late payments or overdue payments Charges that result in exceeding the credit limit on the card (whether done deliberately or by mistake).The variation of exchange rates applied by different credit cards can be very substantial.g. even when applied).  Exchange rate loading fees (sometimes these might not be reported on the customer's statement. A few financial institutions do not charge a fee for this.  . called overlimit fees    Returned cheque fees or payment processing fees (e. phone payment fee) Cash advances and convenience cheques (often 3% of the amount) Transactions in a foreign currency (as much as 3% of the amount). as much as 10% according to a Lonely Planet report in 2009. Membership fees (annual or monthly). sometimes a percentage of the credit limit.

the merchant or the issuer.S. Some merchants will demand to see a picture ID. The compromise can occur by many common routes and can usually be conducted without tipping off the card holder. or even to hold the card and refuse to return it to the . Self-serve payment systems (gas stations. and asking for such verification is usually a violation of the merchant's agreement with the credit card companies. For instance. millions[4] of accounts have been compromised. Stolen cards can be reported quickly by cardholders. For example. it is possible for a thief to make unauthorized purchases on a card until it is canceled. including the card account number or other information that would routinely and necessarily be available to a merchant during a legitimate transaction. to verify the identity of the purchaser. such as a driver's license. in some cases. including sophisticated software that can. However. Without other security measures. This method may deter casual theft of a card found alone. making it difficult to identify the source of the compromise. The cardholder may not discover fraudulent use until receiving a billing statement. it remains usable until the holder notifies the issuer that the card is lost. etc. or to decline the transaction. the card holder has a right to refuse to show additional verification. and some credit cards include the holder's picture on the card itself. as there is no way to verify the card holder's identity. but a compromised account can be hoarded by a thief for weeks or months before any fraudulent use. A common countermeasure is to require the user to key in some identifying information. before a transaction is authorised.) are common targets for stolen cards. The only common security measure on all cards is a signature panel. but if the card holder's wallet is stolen. driver license commonly has the holder's home address and ZIP code printed on it. such as the user's ZIP or postal code. which may be delivered infrequently. a large transaction occurring a great distance from the cardholder's home might seem suspicious. The merchant may be instructed to call the card issuer for verification. Stolen cards When a credit card is lost or stolen. a thief could potentially purchase thousands of dollars in merchandise or services before the cardholder or the card issuer realize that the card is in the wrong hands. Most issuers have free 24-hour telephone numbers to encourage prompt reporting. estimate the probability of fraud. Still. a U. but signatures are relatively easy to forge. The rapid growth of credit card use on the Internet has made database security lapses particularly costly.Credit Card Frauds The fraud begins with either the theft of the physical card or the compromise of data associated with the account. kiosks. A simple example is that of a store clerk copying sales receipts for later use. it may be trivial for the thief to deduce the information by looking at other items in the wallet. Card issuers have several countermeasures. at least until the account is ultimately used for fraud.

[edit] Card not Present The mail and the Internet are major routes for fraud against merchants who sell and ship products. [6]. because of the greater risk. whether by mail. Scam artists[who?] bet on the fact that many fraud prevention features are not used for small transactions. and indeed card issuers tend to charge a greater transaction rate for CNP. and merchant banking systems offer simple methods of verifying this information. CNP merchants must take extra precaution against fraud exposure and associated losses. While there are safeguards to this. and they pay higher rates for the privilege of accepting cards. Compromised accounts Card account information is stored in a number of formats. A common recent preventive measure for merchants is to allow shipment only to an address approved by the cardholder. and are less likely to be investigated by either the card issuer or the merchant. but they are not required to check identification and they are usually not involved in processing payments for the merchandise. Account numbers are often embossed or imprinted on the card. using a method in which the carder obtains the credit card information for a local resident and intercepts expensive computer equipment he ordered using the stolen card and shipped to the address. the largest to date being TJX. telephone ordering is the most risky. To many people's surprise. it is still more risky than presenting in person. . far more risky than the Internet It is difficult for a merchant to verify that the actual cardholder is indeed authorizing the purchase. mail order carding was rampant as early as 1992. and impacts legitimate mail-order and Internet merchants. but the most common include: • • • • Name of card holder Account number Expiration date Verification/CVV code There have been high profile examples of companies being compromised resulting in large scale identity theft. The customer must contact the issuer and prove who they are to get their card back (if it is not fraud and they are actually buying a product). Shipping companies can guarantee delivery to a location. If the card is not physically present (called CNP Card Not Present) the merchant must rely on the holder (or someone purporting to be so) presenting the information indirectly. Fields can vary. often by staking out the porch of the residence.customer. telephone or over the Internet. and a magnetic stripe on the back contains the data in machine readable format. Small transactions generally undergo less scrutiny. Before this and similar methods were introduced.

but these have not met with much success. Common scenarios for skimming are restaurants or bars where the skimmer has possession of the victim's credit card out of their immediate view. and have little incentive to pursue additional security due to laws limiting customer liability in the event of fraud.[7] The thief may also use a small keypad to unobtrusively transcribe the 3 or 4 digit Card Security Code which is not present on the magnetic strip. Instances of skimming have been reported where the perpetrator has put a device over the card slot of a ATM (automated teller machine).Merchant associations have developed some prevention measures. Application fraud Application fraud happens when a criminal uses stolen or fake documents to open an account in someone else's name. Or they may create counterfeit documents. Customers expect to be able to use their credit card without any hassles. The thief can procure a victim’s credit card number using basic methods such as photocopying receipts or more advanced methods such as using a small electronic device (skimmer) to swipe and store hundreds of victims’ credit card numbers. which reads the magnetic . Merchants can implement these prevention measures but risk losing business if the customer chooses not to use the measures. first by gathering information about the intended victim. where they ask the buyer to send a photocopy of the physical card and statement to ensure the legitimate usage of a card. Skimming Electronic-type credit card skimming Skimming is the theft of credit card information used in an otherwise legitimate transaction. and asking for mail to be redirected to a new address. It is typically an "inside job" by a dishonest employee of a legitimate merchant. Identity theft Identity theft can be divided into two broad categories: Application fraud and account takeover. Account takeover Account takeover happens when a criminal tries to take over another person's account. such as single use card numbers. Criminals may try to steal documents such as utility bills and bank statements to build up useful personal information. then contacting their card issuer masquerading as the genuine cardholder. The criminal then reports the card lost and asks for a replacement to be sent. Some merchants added a new practice to protect their consumers and their own reputation.

which can be a death blow to businesses such as restaurants where credit card transactions are the norm. These devices are often used in conjunction with a pinhole camera to read the user's PIN at the same time. The purchase is usually for a small monetary amount.00 to US$50. Please improve this article and discuss the issue on the talk page. losses and punishment The examples and perspective in this article may not represent a worldwide view of the subject. and also to avoid attracting the card issuer's attention.strip as the user unknowingly passes their card through it. If the card is processed successfully. and penalties for merchants can be severe if they are compromised.00 depending on the type of card. it is fairly easy for the card issuer to detect. Another variation would be to take false card numbers to a location that does not immediately process card numbers. and then test them to see which were valid accounts. Carding Carding is a term used for a process to verify the validity of stolen card data. The issuer collects a list of all the cardholders who have complained about fraudulent transactions. that merchant can be directly investigated. The thief presents the card information on a website that has real-time transaction processing. In the past. Market price for a phish ranges from US$1. a Web site subscription or charitable donation would be sufficient. carding is more typically used to verify credit card data obtained directly from the victims by skimming or phishing. A carder will typically sell data files of the phish to other individuals who will carry out the actual fraud. However. Merchants must ensure the physical security of their terminals. carders used computer programs called "generators" to produce a sequence of credit card numbers. as well as the more prevalent use of wireless card scanners that can process transactions right away. the thief knows that the card is still good. such as a trade show or special event.[8] Skimming is difficult for the typical cardholder to detect.[citation needed] Profits. For example. A set of credit card details that has been verified in this way is known in fraud circles as a phish. both to avoid using the card's credit limit. Sophisticated algorithms can also search for patterns of fraud. this process is no longer viable due to widespread requirement by internet credit card processing systems for additional data such as the billing address. The specific item purchased is immaterial. and the thief does not need to purchase an actual product. [citation needed] Nowadays. the 3 to 4 digit Card Security Code and/or the card's expiration date. freshness of the data and credit status of the victim. but given a large enough sample. if many of the cardholders use a particular merchant. . and then uses data mining to discover relationships among them and the merchants they use. A website known to be susceptible to carding is known as a cardable website. ranging from large fines by the issuer to complete exclusion from the system.

Credit card companies like Visa and MasterCard receive revenue from every transaction. Credit card fraud can be reported to the Federal Trade Commission (FTC) and to local and regional authorities. The Secret Service handles crimes involving the U.000 before investigating each crime. for example by being blind to sequencing.[citation needed] Most credit card criminals know this and keep purchases from any one business below $150. a clerk overseeing "card present" authorization requests must approve the customer's removal of the goods from the premise in real time.S. This requires consumers to add additional information to confirm a transaction. typically 2% to 4% depending on the payment method. and in others the cardholder. Please improve this article or discuss the issue on the talk page. This creates conflict of interest for the credit card companies.000. Besides fraud investigation costs tend to be higher than costs of write-off Detection and Punishment In the US. depending on the amount. On one hand they are obliged to fight credit card fraud. money supply. To prevent being "charged back" for fraud transactions Merchants can sign up for services offered by Visa and Mastercard called Verified by visa and MasterCard SecureCode. and where the fraud originated from Credit card companies The examples and perspective in this article or section might have an extensive bias or disproportional coverage towards one or more specific regions. . in other countries it is the card issuer. And credit card companies have to pay for preventing fraud while maintaining a good customer experience. Often enough online merchants do not take adequate measures to protect their websites from fraud attacks. But even if the cardholder does not lose money.Who pays for credit card fraud? In the US the short answer is the merchant. So they are motivated to increase total volume of transactions. consequently pursue policies to increase number of transactions. type of fraud.000. but on the other hand policies against credit fraud may impose certain restrictions that may negatively affect number of transactions and cumulative transaction volume. Local law enforcement may or may not further investigate a credit card fraud. In contrast to more automated product transactions. the inconvenience can be quite costly and tiring. they have a limit of $150. people that commit credit card crime largely go unpunished and repeatedly victimize consumers and businesses. It is the standing policy of the FTC not to investigate reports where the value of fraud does not exceed $2.

receive profit from transaction fees. and to add insult to injury the transaction fees still stand. any currency conversion commissions. but the credit card industry has opposed many of the requests. and must simply accept a proprortion of fraud as a cost of doing business. For obvious reasons. many merchants take steps to avoid chargebacks—such as not accepting suspicious transactions. Credit Card Fraud Prevention Tips 1. Be very careful to whom you give your credit card. and the three parties— the issuer. the fees for processing the payment. Try not to let your credit card out of your sight whenever possible.Credit card merchant associations. This may spawn collateral damage.[citation needed] Merchants The merchant loses the goods or services sold. Many merchants believe this pursuit of revenue reduces the incentive for credit card issuers to adopt procedures to reduce crime. Never give your credit card info out when you receive a phone call. 2. Issuers are thus motivated to pursue policies which increase the money transferred by their systems. particularly because the cost of investigating a fraud is usually higher than the cost of just writing it off. and the chargeback penalty.[citation needed] But in the US credit card issuers do not take these costs. merchants have little ability to fight fraud. and make sure you get it back as quickly as possible.[citation needed] Because all card-accepting merchants and card-carrying customers are bound by civil contract law there are few criminal laws covering the fraud. charging between 2% and 4% on each transaction. like Visa and MasterCard.[citation needed] Cash costs more to bank up. so it is worthwhile for merchants to take cards. Don't give out your account number over the phone unless you initiate the call and you know the company is reputable.[citation needed] In many cases. the payment.[citation needed] Payment transfer associations enact changes to regulations. This can results in substantial additional costs: not only has the merchant been defrauded for the amount of the transaction. the consumer. he is also obliged to pay the chargeback fee. and the merchant— are all generally bound to the conditions. they are passed on to the merchants as "chargebacks". by a self-acceptance term in the contract that it can be changed. Keep an eye on your credit card every time you use it.[citation needed] Merchants have started to request changes in state and federal laws to protect themselves and their consumers from fraud. where the merchant additionally loses legitimate sales by incorrectly blocking legitimate transactions. (For .

These are called 'phishing' scams. 15. 19. Never respond to emails that request you provide your credit card info via email -and don't ever respond to emails that ask you to go to a website to verify personal (and credit card) information. Keep a list in a secure place with all of your account numbers and expiration dates. 12. Don't write your PIN number on your credit card -. Ideally. 18. if you're told there has been a 'computer problem' and the caller needs you to verify information. destroy it immediately. 4. Only carry around credit cards that you absolutely need. but if there is a carbon that is used in a credit card transaction.or have it anywhere near your credit card (in the event that your wallet gets stolen). 11. Never write your credit card account number in a public place (such as on a postcard or so that it shows through the envelope payment window). 9. Always void and destroy incorrect receipts. it's a good idea to carry your credit cards separately from your wallet -perhaps in a zippered compartment or a small pouch. Shield your credit card number so that others around you can't copy it or capture it on a cell phone or other camera.reconcile it monthly. Keep this list updated each time you get a new credit card. Save your receipts so you can compare them with your monthly bills. Don't carry around extra credit cards that you rarely use. 17. Never sign a blank credit card receipt. Open credit card bills promptly and make sure there are no bogus charges. 6. If you find any charges that you don't have a receipt for -. 3. Sign your credit cards as soon as you receive them. Carbon paper is rarely used these days. Carefully draw a line through blank portions of the receipt where additional charges could be fraudulently these charges promptly (and in writing) to the credit card issuer. 14. 16. 7. Treat your credit card bill like your checking account -. 13. 10. Shred anything with your credit card number written on it. as well as the phone number and address of each bank that has issued you a credit card. . Never leave your credit cards or receipts lying around. 5.example.) Legitimate companies don't call you to ask for a credit card number over the phone. Never provide your credit card information on a website that is not a secure site. Shred all credit card applications you receive. 8.or that you don't recognize -.

PINs and laminated signatures. In case you inform the bank that you want to close your credit card account. On the contrary. the banks have to follow your instructions and do it the minute you inform them. 5. 2. And by chance such a card is lost and misused. expect online dispatches in future if you are not getting them already then RBI has instructed banks that customers are entitled to at least 15 days’ time to pay the credit card bill before the interest begins to be charged 4. RBI has provided some respite. RBI has asked the banks to have qualified call centre staff members who can deal with all complaints competently. 21. if any. 3.RBI in its guidelines has advised the banks that they can issue a credit card or any other product only after getting a customer’s explicit consent-meaning that it cannot be processed on an implied understanding. including the lodging of an FIR. There are very few customers who have not had to spend hours stuck to a phone to correct a billing fault. Never lend a credit card to anyone else. banks will have to honor your request immediately. you can ask for the explanation regarding this from your bank – whether it’s due to your poor payment and default history or some other reason. You can also choose the chards with options of photos. More significantly.20. In case you find that you are paying a higher rate of interest than your neighbor. should follow within a reasonable period of time. If you have been one such discontented card-holder. as advised by RBI to reduce the risk of stealing or misuse of cards. . it shall be the bank’s sole responsibility and not yours. if you’ve lost your card and want to block it. if a bank rejects your application for a credit card. it has to provide to you in writing the reason for doing so. Important RBI guidelines on credit cards for the help of customers : 1. notify your credit card issuers in advance of your change of address. as banks have been advised to publicize through their Website and other means the interest rates charged for various categories of customers. If you move. and the formalities. and also to automatically forward the unresolved complaints from a call centre to higher authorities. If you have always worried about the constant delays in receiving bills or statements.

The companies have tried to address this issue through promotional campaigns:  Placing of take away firms of credit card at more than a thousand merchant establishments.  Mailing of forms along with contests to professionals and middle management executives etc. As a result credit card companies had to educate the consumers and spread awareness of the uses of its products.  Appointing of DSAs  Using business magazines and newspapers for advertisement. Traditionally Indians like to pay in cash or at the most avail the services of a bank.  Tapping the get member route .ANALYSIS It was found that for the frequent travelers acceptability was the most important criteria and was given the highest weightage Following attributes have been analyzed as per the consumer survey conducted The attributes are as follows:  ACCEPTIBILITY  CREDIT LIMIT  CREDIT PERIOD  MEDICAL AND HOSPITAL SERVICES  OTHERS PROMOTION STRATEGIES The changing trends in the payment systems are global and even in India revolve around the change in customer needs and the evolution of financial markets.

 Introduction of photo cards. Reducing their minimum eligibility criteria and changing income documentation structure.  Tying up with durable consumer goods manufacturer ( e.g. .  Providing ATM facility to their card holders  Travel assistance via tele-banking. Onida. 0Philips ) to sell their products.

While some of them are offering attractive interest rates. With a plethora of choices on offer it is not easy to come to a decision on any particular card.COMPARISON OF CREDIT CARDS Card Issuers Citibank NA Citibank NA Citibank NA Citibank NA Citibank NA Citibank NA Citibank NA ICICI ICICI ICICI Brand Gold/Preferred Gold/Preferred Indian Oil Silver/Classic Silver/Classic Women WWF Solid Gold Sterling Silver True Blue Card Type Master Visa Master Master Visa Visa Visa Visa Visa Visa Visa Master Visa International Acceptance International International Domestic International International Domestic Domestic International Domestic Domestic Domestic International SBI Classic Standard Chartered Classic Standard Chartered Gold With the credit card truly becoming an international citizen. others are luring customers by their reward schemes. . issuers have begun highlighting the value-added features offered along with the basic product.

1. much discussion is going on as to how to avoid frauds. 4. particularly business to customer . etc are being introduced to avoid such things In spite of all these measures. In other countries. Encryption technologies. etc from big cities. Use of credit cards cannot be expected to boost the sales of online sales. 5. immediately the thought of credit card comes to everybody’s mind. Even before online purchases have become popular. This is because in US the payments by credit a card is quite common. a mega shop had experienced a fraud of huge magnitude and decided to suspend immediately their online business. They get the payment only after a certain period of time once the goods are sold. etc of credit cards once the card number is given online to a merchant. At least in Singapore. In other words. Both of them make the profit margin less. normally purchases are made through credit cards only.Then there is the question of sales tax laws Each State has its own rate of tax structure for each and every commodity.CONCLUSION Whenever Internet transactions are discussed. only IT payers will be eligible to buy goods online. As mentioned earlier. there is no 100% foolproof to make credit card payment a safe mode of payment.Use of credit cards is popular to only a few thousands of executives. Scenario in India In India the situation is far from satisfactory to use the credit cards as a means of making payments for online purchases for the following reasons. 2. Even in US. How to charge tax when a transaction takes place online and at what rate will pose problems of billing. in India. online shopping through credit cards resulted in great failures. Therefore in US there was no problem in making people to switch over to online purchases as this mode of payment is already in vogue. Secure socket layers.Still many leading credit card companies are yet to install their infrastructure to process the online payments. In other words if credit card is made the payment mechanism. where credit cards payment system is not as popular as US. businessmen. Similar stories are not uncommon in other countries too. still reports keep coming regarding credit card frauds here and there. the fraud element is applicable to India also.Many establishments do not like to offer credit card facility due to the service charges to be paid to cr card companies. misappropriation.That any person using credit card is liable to declare IT made many people surrendering their cards. 3. In view of all these factors.

the a/c holder can transfer the required amount to the merchant A/C online. This would require installation of transaction servers in the companies or can be integrated with their online business activity. which are given below:  Payments by electronic cash/ cheque may be made legally valid including electronic signature . payment through credit cards will not result in increasing the online shopping as generally believed. . In conclusion. They may look difficult to achieve but with proper programming techniques and the use of appropriate servers. this facility can be extended only to existing customers. banking practices prevalent in our country. On receipt of this code number.  Banks should be asked to immediately create necessary facilities for any of the a/c holders to operate the a/c through online. Activity can be made part of the ordering activity. The MERCHANT BANK CAN INTIMATE the shopper about the transaction. the goods can be dispatched by VPP and other modes of dispatch. they can be easily achieved. this is possible. which will ensure collection of payment against delivery. However. Once a purchase is made.I believe once the cyber laws are passed by GOI. shopper’s requirements. These are all some of the ideas to making the online purchases easier and smoother without affecting the payment due to the shoppers.  Each merchant/shopper can allot a secret code number to the existing clients (customers). We need to device different mechanisms taking into account Indian laws. Similarly all government establishments can device a mechanism to enable their employees make online purchases.Then what is the way out? There are other methods of payments for Indian online business. All these activities can be carried out instantly though proper programming.  Large organizations can issue authorization letters to each of their employee who wants to avail the online purchasing facility and device a mechanism through which the company itself pays the merchant his dues.

and must be done within 60 days from the date you received the statement on which the disputed charge appeared. For this to be effective. Report your credit card as lost/stolen so that no further charges can occur. report it to Micro Forecasts immediately and demand a charge reversal. deny the charge immediately with your credit card company. You will get a new card within a couple of week. This time frame is as per federal law. call Micro Forecasts again. Monitor your credit card statements. Many people have done this. There may be other options available as well. I believe you are much more likely to get your money back if the credit card company is involved. 4. Do not wait for your next statement to see if the credit appears. 3. 1. Wait several days and then check with your credit card company to see if you received the credit. 6. If the refund is not there. Most importantly. If there is an unauthorized charge. Never give your credit card to the company. it must be done in writing. 5. Report the problem to authorities as per the next section is? Very likely Somewhat likely Not sure Somewhat unlikely Very unlikely To what extent does credit card service exceed your expectations? Very great extent Great extent Some extent Little extent instead. Make payment by cheque 2. .RECOMMENDATIONS HOW TO PROTECT The following are my recommendations. including myself.

Very little extent Which of the following statements. Strongly agree Agree Neutral/Not sure Disagree Strongly disagree. according to you most representative of your credit card service provider? They are Helpful and Friendly. What are the added benefits you wish to acquire from the card? Acceptability . They are polite. cheerful and are knowledgeable operators In tune with the needs of its clients Prompt in dealing with customer complaints Unwilling to go the extra mile for its customers Poor customer phone support You are often put on hold for a long time How satisfied are you with the efficiency of call handling when placing calls to credit card service provider? Very satisfied Somewhat satisfied Neutral Somewhat dissatisfied Very dissatisfied Credit card service provider understands my service needs.

000-60.Longer credit period Higher credit limit Lesser charges Better offers Please rank the services of the following card issuers in order of your preference.000 40.000 Thank you for taking the time to complete this survey .000-25.000 Above 60.000 25.000-40. Citibank HSBC Bank of Baroda Bank Of India Standard Chartered ANZ Grindlays Times card ICICI SBI Personal details: Age: Profession Income: 15.


BIBLIOGRAPHY  Marketing management: Philip Kotler  Financial Management: Khan & jain  Business Statistics:     Apnaloan.Khanna & Jagjit Singh  Google search  Yahoo search  .

backed by much more comprehensive merchant establishment network. With more and more people willing to adopt to credit cards. but provide holders with exclusive add-ons. it is in the interest of the issuers to educate the consumers about the benefits of holding credit card. Simultaneously. The campaigns must also be convincing enough to clear the myth that credit cards increase spending. schemes like card carnival and sales executives contests and a plethora of augmented services should be introduced to induce greater number of people to adopt to plastic money. Considering the huge potential of the Indian market. Emphasis should be on offering a wider basket of services through credit cards enabling purchases for a wide variety of products along with ATM usage. promotional advertising through media. Focus should be on changing non-card related spending to card related spending. direct sales. The issuers must focus on service and pricing and must recognize the importance of the billing and payment process to retain credit card holders. direct mail. The credit cards schemes would be successful only if they meet the customer’s requirement of wider acceptability rather than fringe benefits like non-crisis credit or prestige proposition. to cater to high net worth customers and those with niche needs. banks should undertake innovative strategies to increase card spends. banks should provide more of premium plastic and CO-cards that piggyback on the existing infrastructure. The banks must also increase the number of cardholders by reducing the initial-one time subscription fee.SUGGESTIONS OF THE STUDY The banks battle today is more with cash than with other banks. . common ATM services between banks (to reduce cost of operations). Future promotions could include: Telemarketing. The banks should step up advertising that will help to build a brand image and create a higher brand recall like that of Citibank.

As a result the personal biases of individuals could affect the study. However. • . to counter this the data has been verified from a number of different sources to give it a measure of authenticity. Not all banks could reveal their confidential marketing strategies and statistical information.LIMITATIONS OF THE STUDY • • The study is confined to NCR only. Study was constrained by limited availability of data. Most of the information is subjective data collected through personal interaction with people transacting in the plastic money market.

















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