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TITLE: “CREDIT CARD ANALYSIS AND SUGGESTIONS TO ITS SAFETY”
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.
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
EXECUTIVE SUMMARY OF CREDIT CARD INDUSTRY INTRODUCTION TYPES OF CARDS SALIENT FEATURES OBJECTIVES RESEARCH METHODOLOGY INDIAN CREDIT CARD SCENARIO DECIDING ON THE RIGHT CREDIT CARD ANALYSIS COMPARISON OF CREDIT CARDS SUGGESTIONS OF THE STUDY LIMITATIONS OF THE STUDY CONCLUSION RECOMMENDATION BIBLIOGRAPHY QUESTIONNAIRE .
A Credit card is the smart solution to these problems. Diners Club adopted a promising approach by recruiting various hotels and restaurants to act as member establishments for accepting the cards. Later in 1977 all the national and international Bank America licenses were pulled together under the single name of Visa. Diners Club vetted its members for credit worthiness and guaranteed payment to participating establishment. It was followed by American Express. It is a convenient and safe alternative for cash. which in other banks. a New York businessman took his friends out to dinner. the pioneer of today’s multibillion-dollar plastic money business. after many vicissitudes is now a part of Citi Bank Empire Together With Diners Club. (Remember the SALE at your favorite ready-mades store?). The story goes that Mr. Such cardholders could use their card 1966 offered to license its successful blue. .system of availing instant credit upon confirming the identity of cardholder.It's credit to you!” A Credit Card is referred to as 'plastic money'. At the end of meal he discovered that he had forgotten his wallet at home. risky and sometimes. you run short of it. Thus was born the first ‘Travel and Entertainment Card’. Carrying a lot of cash on you can be cumbersome. In the 1980s credit card concept was launched in India through the Diners Club card. white and gold Bank America card to at any accepting merchant establishments around the globe. Not to be outdone. later renamed Master Charge and later still Master Card. The next great leap-forward came from Bank of America. a rival group of American Banks came together in 1966 under the name of Interbank. Ever since Master Card and Visa and their affiliates have carved the world credit card market. which is now a dominant force in the Travel and Entertainment cards industry. In the present time American Express leads the travel and entertainment (T&E) card industry. just when you most need it. the proprietor was kind enough to allow him a later settlement of bill. Thus was born the Diners Club Cards. Not only did these establishments pay a commission on member’s purchases but the members also paid an annual subscription fee.INTRODUCTION ORIGIN The credit card had its beginning in an embarrassing incident that took place in the early 1950’s in America. McNamara. within a couple of months both Visa and Master card entered into the Indian market. What is a Credit Card? “Credit Cards . As McNamara stepped out of the restaurant he had the brainwave for the introduction of credit cards . and by 1959 by Carte Blanche. and soon.
Besides. which it most certainly bestows on you. remember that. but more importantly. Most people associate a credit card with a prestige.to be extended credit! So. it says things about you. when you get yourself a card. it says that you have taken the onus of being responsible . because your bank does! .
which ranges depending upon the type of card one possesses. Revolving Line Of Credit . Banks usually take an initial fixed amount in the first year and then a lower amount as yearly renewal fees.Before i go any further. The cardholder can usually change the number. which can be used more than once to borrow money or buy products and services on credit. . retail stores and other businesses generally issue these. Teaser Rate . Annual fee – A bank charge for use of a credit card levied each year.As a security measure. It generally results in a higher credit limit. Credit Card – A credit card is a financial instrument. incomes and credit reports. Credit limit – The maximum amount of charges a cardholder may apply to the account.Issued to a couple based on both of their assets. Banks. why not become familiar with the various terms and jargons used by the credit card industry.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 is the below-market interest rate offered to entice customers to switch credit cards. some cards require a number to be punched into a keypad before a transaction can be completed. Most credit cards offer revolving credit. Personal Identification Number (PIN) . but makes both parties responsible for repaying the debt.Often called the introductory rate. Joint Credit .
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. Where a typical credit card's magnetic stripe can hold only a few dozen characters. Income eligibility is also higher. sometimes called chip cards. Schools. non-profit groups. VISA Card – VISA cards are financial institutions around the world distribute a product of VISA USA and along with MasterCard. Usually. In 1998. popular singers and airlines are among those featured on affinity cards. the cards can perform a number of functions or access data stored in the chip. Smart Card – Smart cards. Platinum Card – A credit card with a higher limit and additional perks than a gold card. Titanium Card – A card with an even higher limit than a platinum card.000 financial institutions in 220 countries and territories issue its products. It is used by people new to credit. it had almost 700 million cards in circulation. These cards can be . 23.2 million locations. Nearly 600 million cards carry one of the VISA brands and more than 14 million locations accept VISA cards. Affinity Cards . Standard Card – It is the most basic card (sans all frills) offered by issuers. use of the card entitles holders to special discounts or deals from the non-financial group. smart cards are now available with 16K of memory. Classic Card – Brand name for the standard card issued by VISA. Gold Card/Executive Card – A credit card that offers a higher line of credit than a standard card. or people trying to rebuild their poor credit ratings.A card offered by two organizations. When read by a special terminal. 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. whose users spent $650 billion in more than 16. contain a computer chip embedded in the plastic. pro wrestlers. one a lending institution. the other a non-financial group.TYPES OF CARDS MasterCard – MasterCard is a product of MasterCard International and along with VISA are distributed by financial institutions around the world. In addition. Cardholders borrow money against a line of credit and pay it back with interest if the balance is carried over from month to month. issuers provide extra perks or incentives to cardholders.
used as cash cards or as credit cards with a preset credit limit. . The retailer swipes the card over an electronic terminal at his outlet. in other words. Rebate Card – This is a card that allows the customer to accumulate cash. Just pay up in full when the bill arrives with the mail. no revolving credit facility either.they have no built-in security. American Express and Diners are providers. Open an account with a bank that offers a debit card. Travel Card – these works mostly as debit cards for the limited purpose of travel. so if lost or stolen. or used as ID cards with stored-in passwords. American Express. merchandise or services based on card usage. you enter the personal identification number on a PIN pad and the money is immediately debited at the bank. The cards are like cash -. contain a set amount of value. SBI-GE Capital has a cobranded card for retail loans. So. Bob card Global and Hong bank Thomas Cook International Card are among the players in this section. and payments for purchases are deducted from your bank account. similar to pre-paid phone cards. Times Bank and Citibank have a co-branded card that allows concessional rates for add-on cards or telephone banking. Charge Card – fall between a debit and credit card. Co-Branded Card – This is a marriage of convenience between two service providers who want a trade-off with the other's strengths. which can be read by a special cash card reader. Stan chart and Hindustan Lever Limited have a cobranded card to sell Aviance beauty products. Debit Card – It is the accountholder's mobile ATM. Citibank Dollar Card. Participating retailers will use the reader to debit the card in increments until the value is gone. Specific facilities are made to members through these tie-ups. Cash Card – Cash cards. they can be used by anyone. No outstanding are allowed. Citibank and a few domestic banks like Times Bank offer this. Works like the latter and you don't have to be an accountholder.
You can spend now . interest varies between 2. Cash Advance: An important feature . So. you can even use the reward points you have accumulated from using the credit card over the year to settle your annual fee. every month. This rate is charged to the cardholder on the amounts carried forward beyond the due date for the payment of balances. Better still. around 2.5% and 3% per month. . this fee is sometimes waived the first time.5% to 3% per transaction! BENEFITS: Credit: When you use a Credit card to pay for anything. and not the calendar year. It might sound low at 3%. it turns out to be as high as 43%. the rest is carried forward. every month. As a privilege. you can expect to be billed the annual fee every March until you cancel your card. pay later. which is especially beneficial to salaried people. if you got yourself a card in March. When the time comes for renewal of your card. Convenience: With a credit card on you.lets you withdraw cash from designated ATMs using your credit card. 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 start of the year. you don't need to run the risk of carrying a lot of cash. Most card issuers will tell you their monthly rate of interest. 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. Forwarding Balance (or Revolving): The most attractive feature of a credit card is that you need not pay off your dues in whole.SALIENT FEATURES Annual Fee: All credit card issuers charge an annual fee which is payable at the start of the year. Use discretion when withdrawing cash on your credit card because the charges for this facility are high. of course. You can opt to pay 5% of the total amount on or before the due date. but when you look at the interest rate over the year. But there's a price to pay for this extended credit interest! Normally. Billing cycles are structured in such a way that you definitely get at least 30 days out of these as clean credit time. you get an interest-free period of 45 days. is your membership year.
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. .
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. Remember. like an investment! . it is an extremely expensive way to borrow money! View it as a convenient and safe way to carry cash. a timely help in an emergency or taking advantage of an opportunity that you would have otherwise lost out on.
Never give your Credit Card number over the phone. don't just thrash into the bin.Do's & Dont's Do not leave your Credit Card lying around the house or on your desk at work. keep your receipts filed or in one place . should the need arise. and you really. and it is to your bank or someone you trust. And when you want to throw them away.you'll find them easily. unless you've made the call. If your card is lost or stolen. report it immediately to your bank. really need to! . shred or tear them before you do. or you suspect it is being used fraudulently. Hold on to receipts from your transactions. In fact.
people have started using cards on a more regular basis. You want customers to be happy with the products and services you provide. These respondents each hold credit cards. The level of services provided by these organizations is increasing day by day. your business will prosper. 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. 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. those in the industry say. There has been a seven-fold increase. ----. but the usage pattern of credit cards remains a point of conc0ern. with the number of cardholders touching over 38 lakh. Getting your customers to tell you what’s good about your business. With the influx of new financial institutions in the card market. customer retention is also one of the most important factors influencing a card issuer’s success. If they feel they have received good value for their money. and where you need improvement. Customer satisfaction is the key to success. which may be of different kinds. In order to ensure that the existing customers stay loyal. While issuing the cards may seem to be easy.EXECUTIVE SUMMARY OF CREDIT CARD INDUSTRY The credit card industry in India has registered an encouraging growth in recent times. Apart from attracting potential card users. This research has tried to study the satisfaction levels of a sample of 100 credit card holders. Organization has to ascertain whether its existing customers are satisfied with its current service offerings. helps you to be sure that your business measures up to their expectations. .
It is upon him to find out the facts of regulatory life. limited telecommunication infrastructure and emerging . 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 banks that issue the cards have made it abundantly clear that one has to look out for him. India has a long way to be anywhere near the matured markets. in India it is only 11 times. Seven years back. The markets like the United States and England have an average annual card spend of 1. There has been a seven-fold increase. This fortifies the view that conservative purchasing ideas are giving way to the big in-thing. At present there are over a dozen players in the credit card market in India. When one uses the card.300 and 3. Some of the key factors impacting the cards business in India are limited credit. 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. it is entirely his responsibility to make sure that exchange controls have been complied with. it is about 678 dollars (Rs 29. The leaders will surely be identified by the innovations for the card users. The credit card players will have to think about simplifying the foreign exchange transactions.500). It has seen the fresh issuance of global card increase by more than one lakh. Going by estimates.INDIAN CREDIT CARD SCENARIO The credit card industry in India has registered an encouraging growth in recent times.154). Those in the credit card business say that per capita credit card spending in India is about five hundred dollars (Rs 21. 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. the average card spending in India is even less than that in Indonesia. But the real challenge for the banks is to make the holder spend more on the card. but the usage pattern of credit cards remains a point of concern. wide geographical spread. with the number of cardholders touching over 38 lakh. the foreign banks launched a credit card blitzkrieg on the Indian customer. The whole idea behind the introduction of the credit cards was to increase the purchasing capacity of the cardholder. But it is the usability that raises doubts. With this in mind. The Standard Chartered Bank has seen its credit card base shoot up after the launch of its Global Rupee Card in March last year. According to a survey by the Credit Card & Management Consultancy (CCMC). The innovations have already begun to show their effect.600 dollars respectively. and the fact is the foreign banks are clearly the leaders. According to estimates. 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. India had a base of around five lakh credit cards. and the bank now has a base of more than half a billion. those in the industry say. The real point of worry is the spending on the credit cards.
The joint venture between India’s largest bank – State Bank of India and one of the world’s leading financial services companies – GE Capital.5 lakh credit cards across 25 cities (the largest distribution network in the payment card industry) within 16 months. Not to be left behind in this race. to grab a sizeable share of the expanding pie. a necessity. but from 50.5 lakh credit cards…25 cities…16 months.000 card holders in 1997. He also highlighted Speed. the players feel that the business has not reached an optimum level to say that they are making money. They also point out that though the cards business has been in the country for long. more than ten per cent of them are cardholders. the Hong Kong & Shanghai Banking Corporation (HSBC). Speed Unique and exclusive 14-day average turnaround time. The other players feel that the card acceptance base in India has to be widened.SBI Cards 2. despite the fact that it has more than one million credit card holders. Simplicity Simple application process with minimum . Less than two per cent of private consumption spending in India is done on cards. SBI Cards & Payments Services attributed this success to SBI’s enormous brand equity. but its turning into reality may take time. There is talk of widening the card business with new features. Though LIC is talking about the introduction of this facility to customers. 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. coupled with availability of the SBI Card in 25 cities in just 16 months. even the big brother. with many loopholes remaining to be plugged. Thereby achieving the target in the fastest period seen in India’s payment card industry. the State Bank of India in association with GE Capital entered the card business. but even today the insurance premium cannot be paid by card. Even the largest player in the Indian market does not still have the economies to make the card business really profitable in India. but the present scenario does not paint a positive picture. India’s fastest growing credit card company . While issuing the cards may seem to be easy.regulatory controls. the challenge for the banks lies in being able to manage their portfolios by keeping the delinquency levels at the lowest. it has about three lakh card holders now. therefore. the cards business is still in its initial stages. considering the fact that. Those in the industry point out that this figure is not bad. Suggestions include credit card usage at petrol pumps and railway bookings. Of the twenty million taxpayers in India. was in the credit cards business since seven years. The spurt in the card business has gathered momentum during the past couple of years. SBI Cards & Payment Services (SBI Cards) has issued 2. However. Simplicity and Service as the key drivers of growth for the SBI Card. and unparalleled retail branch network coupled with GE Capital’s payment card process and technology expertise. For instance. Huge investments in systems and infrastructure are.
Grab these offers. and that's where you pay! It is always advisable to pay off the entire amount on due date. while the up front one off fees are bread and butter for the credit card Company. players are ready to waive joining fees and also one-year membership fees for anyone. (Read a whopping 35% to 43% per year). the interest rate would be of paramount importance. Remember. They collect filled forms and produce them to the bank for approval. These DSAs are paid a flat rate against the approved applications. 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. travel discounts etc. As a result of the focus on the Speed.the statement will come to you. look for card companies that provide the transfer balance facility. Most credit card companies charge anywhere between 2% to 3 % per month. ask for the add-on card fee. accessibility to airport lounges. or. The balance transfer rate is lower for a certain period (say six .documentation. spouse or friend. credit card companies are opting for Direct Sales Agents. Service 24 hours a day/7 days a week local call access to the SBI Card Help line across 25 cities. 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. this is the jam! If you are the sort who forgets to pay on time. if you have a large bank balance. OF at least the used to be the case. Remember that you will be settling the bills on the add-on card that you so touchingly gift to someone dear to you . or likes to live it up and live off credit. With cutthroat competition between the card issuing banks. or negotiate this for yourself. INTERMEDIARIES: In their attempt to increase their market share. After cards are issued they also deliver the same to the individuals. DECIDING ON THE RIGHT CREDIT CARD How much is the joining fee and the annual fee? Generally. higher accident insurance cover. The DSA team comprises aggressive salesmen who visit different organizations and professionals. a card with a higher annual fee enjoys more benefits like higher credit limit. Simplicity and Service growth platform. How much is the Add-on card fee? If you are interested in buying add-on cards for your children. SBI Cardholders can access cash for emergency purposes from over 158 SBI branches across 68 locations in India.
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
Collection of Secondary Data: • News papers.Confining our study to the geographical limits of Indore.50 Cash holder. • Press Media • Magazines • Telecommunication Research Tools: • Research design : • Sampling Unit • Sampling Size • Sampling technique : Exploratory : Area of Indore : 100 people. 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. Following are some of the facts that were revealed through the survey.cash user Probability Sampling OBJECTIVES OF THE STUDY . It's customary to distinguish data between primary and secondary. using the probability sampling technique where every individual fulfilling the above criteria had an equal chance of being selected for the survey. 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. Sources and Method of Data Collection The data on the present study will be collected by the investigator himself. 50 non. we chose a sample of 100 people .50 cardholders and 50 non-card users.
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.
such as a bank or credit union. and is implemented as an EMV card. the latter system is called Chip and PIN in the United Kingdom and Ireland. and telephone sales). the credit card user agrees to pay the card issuer. Data from the card is obtained from a strip or chip on the card. which limits cardholder liability for unauthorized use of a credit card to $50. allowing the verification to happen at time of purchase. 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. For card not present transactions where the card is not shown (e. the cardholder may dispute any charges that he or she thinks are incorrect (see 15 U. 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). ecommerce. and the total amount owed. mail order. and the Fair Credit Billing Act for details of . after an account has been approved by the credit provider. Each month. any outstanding fees. date of expiry. and billing address. many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet. § 1643.. after which cardholders can use it to make purchases at merchants accepting that card.FINDINGS WORKING PROCEDURE OF CREDIT CARD • How credit cards work Credit cards are issued by a credit card issuer. known as a card not present transaction (CNP). 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.g.C. the credit card user is sent a statement indicating the purchases undertaken with the card. After receiving the statement. Also. When a purchase is made. 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.S.
Interest charges Credit card issuers usually waive interest charges if the balance is paid in full each month. the cardholder must pay a defined minimum proportion of the bill by a due date. the issuer may impose a "late fee" and/or other penalties on the user. 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. thus avoiding such penalties altogether as long as the cardholder has sufficient funds. In addition.000 from the date of purchase until the payment is received.the US regulations). 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. if the credit card user fails to make at least the minimum payment by the due date.000 transaction and repaid it in full within this grace period. there would be no interest charged. however. but typically will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid. For example. if a user had a $1. If. Financial institutions refer to interest charged back to the original time of the transaction and up to the . To help mitigate this. 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. even $1.00 of the total amount remained unpaid. interest would be charged on the $1. or may choose to pay a higher amount up to the entire amount owed. 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). Otherwise. some financial institutions can arrange for automatic payments to be deducted from the user's bank accounts.
and the interest rate on a particular card may jump dramatically if the card user is late with a payment on that card. products. Compared to debit cards and cheques.e. free loss/damage coverage on new purchases. i. Many credit cards offer rewards and benefits packages. Usually this compartmentalization is the result of special incentive offers from the issuing bank. Interest rates can vary considerably from card to card. or with separate credit limits applicable to the various balance segments. when the balance stopped revolving). carrying a credit card may be a convenience to some customers as it eliminates the need to carry any cash for most purposes. such as offering enhanced product warranties at no cost. . if not in full. Benefits to customers The main benefit to each customer is convenience. or any other credit instrument or even if the issuing bank decides to raise its revenue. and points which may be redeemed for cash. payment allocation is generally at the discretion of the issuing bank.time a payment was made. 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. or it may become a complicated financial instrument with multiple balance segments each at a different interest rate. The credit card may simply serve as a form of revolving credit. as RRFC or residual retail finance charge. In the event that several interest rates apply to various balance segments. Thus after an amount has revolved and a payment has been made. 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. possibly with a single umbrella credit limit. 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. to encourage balance transfers from cards of other issuers. Additionally. provided the total charges do not exceed the maximum credit line for the card. or airline tickets.
there are some credit cards that will only apply finance charge on the previous or old balance. 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. 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.e. but usually range from 20 to 50 days depending on the type of credit card and the issuing bank. This can lead to a snowball effect in which the consumer is drowned by unexpectedly high interest rates. Finance charges incurred depend on the grace period and balance. most card holder agreements enable the issuer to arbitrarily raise the interest rate for any reason they see fit. Usually. Grace periods may vary. excluding new transactions. in other cases a fixed charge is levied without change to the interest rate. . As all credit cards charge fees and interest. Benefits to merchants An example of street markets accepting credit cards. However. finance charges will be calculated and the grace period does not apply. usually between 6 and 12 months. after which a higher rate is charged. shown in the upper-left corner of the sign) of all the cards they accept. 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. interest is applied on both the previous balance and new transactions). some customers become so indebted to their credit card provider that they are driven to bankruptcy.Detriments to customers Low introductory credit card rates are limited to a fixed term. Further. if a customer is late paying the balance. Some policies allow for reinstatement after certain conditions are met. Most simply display the acceptance marks (stylized logos.
Prior to credit cards. plus a fixed fee (interchange rate). and the passport number will be written down on the receipt. though this is strictly prohibited by credit card companies & must be reported to the consumer’s credit card issuer. Non-Nordic citizens. That task is now performed by the banks which assume the credit risk. a credit card transaction is often more secure than other forms of payment. In some countries. especially if the customer does not have enough cash on his or her person or checking account. In addition.For merchants. For each purchase. In these countries merchants therefore usually ask for ID. sometimes together with other information. because they discourage theft by the merchant's employees and reduce the amount of cash on the premises. for example the Nordic countries. cards are even more secure than cash. and can result in charges back to the merchant). 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. . because the issuing bank commits to pay the merchant the moment the transaction is authorized. Some shops use the card's PIN for identification. Much of merchants' marketing is based on this immediacy. 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 small merchants require credit purchases to have a minimum amount to compensate for the transaction costs. which are discussed below. 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. will instead have to show their passport. and in that case showing an ID card is not necessary. Credit cards can also aid in securing a sale. In most cases. The commission is often a percentage of the transaction amount. regardless of whether the consumer defaults on the credit card payment (except for legitimate disputes. who are unlikely to possess a Nordic ID card or driving license. 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. such as cheques. each merchant had to evaluate each customer's credit history before extending credit.
Independent sales organization: Resellers (to merchants) of the services of the acquiring bank. either a fixed amount or a percentage. Merchants with very low average transaction prices or very high average transaction prices are more averse to accepting credit cards. Parties involved Cardholder: The holder of the card used to make a purchase. Merchants must accept these transactions as part of their costs to retain the right to accept credit card transactions. 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.Costs to merchants Merchants are charged several fees for the privilege of accepting credit cards. but in general is the organization that the merchant deals with. Acquiring bank: The financial institution accepting payment for the products or services on behalf of the merchant. use of credit cards will significantly reduce the profit margin or cause the merchant to lose money on the transaction. American Express and Discover were previously the only card-issuing banks for their respective brands. although the contracts allow the merchants to give discounts for cash payment. Cards issued by banks to cardholders in a different country are known as offshore credit cards. Card-issuing bank: The financial institution or other organization that issued the credit card to the cardholder. for payment by credit card. Thus in some instances of very low-value transactions. This practice is prohibited by the credit card contracts in the United States. for each transaction. This bank bills the consumer for repayment and bears the risk that the card is used fraudulently. this is no longer the case. Merchant: The individual or business accepting credit card payments for products or services sold to the cardholder. Merchant account: This could refer to the acquiring bank or the independent sales organization. but as of 2007. called an interchange rate. The merchant may also pay a variable charge. In some cases merchants may charge users a "credit card supplement". . the consumer.
after which the held amount will be returned back to the cardholder's available credit (see authorization hold).) . and get paid a fee or a percentage of the balance for each card issued using their name. and one company may operate multiple networks. Transaction network: The system that implements the mechanics of the electronic transactions. card-issuing banks. Batches are typically submitted once per day at the end of the business day. Some transactions may be submitted in the batch without prior authorizations. charities. which are sent to the acquirer. and it consists of a few steps. that set transaction terms for merchants. and major retailers. etc. May be operated by an independent company. Transaction steps Authorization: The cardholder pays for the purchase and the merchant submits the transaction to the acquirer (acquiring bank).Credit Card association: An association of card-issuing banks such as Visa. such as extending a hotel stay or car rental. (Such may be the case when the cardholder is not present but owes the merchant additional money. 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. American Express. Affinity partner: Some institutions lend their names to an issuer to attract customers that have a strong relationship with that institution. and acquiring banks. MasterCard. the transaction type and the amount with the issuer (Cardissuing bank) and reserves that amount of the cardholder's credit limit for the merchant. The acquirer verifies the credit card number. universities. Discover. Examples of typical affinity partners are sports teams. the authorization will stay valid for a period determined by the issuer. Batching: Authorized transactions are stored in "batches". If a transaction is not submitted in the batch. An authorization will generate an approval code. which the merchant stores with the transaction. professional organizations. The flow of information and money between these parties — always through the card associations — is known as the interchange.
In the event of a chargeback. and are available with a large variety of credit limits. Funding: Once the acquirer has been paid. Credit cards are accepted worldwide. credit cards offer consumers an easy way to track expenses. accessible credit. such as the United States.Clearing and Settlement: The acquirer sends the batch transactions through the credit card association. who must either accept the chargeback or contest it. repayment arrangement. the United Kingdom. Some countries. or "non-qualified rate" which are tiers of fees the merchant pays the acquirer for processing the transactions. which is necessary for both monitoring personal expenditures and the tracking of work-related expenses for taxation and reimbursement purposes. and France. Chargeback’s: A chargeback is an event in which money in a merchant account is held due to a dispute relating to the transaction. Costs Credit card issuers (banks) have several types of costs: • Interest expenses Banks generally borrow the money they then lend to their customers. the acquirer pays the merchant. The merchant receives the amount totaling the funds in the batch minus either the "discount rate. Features As well as convenient. Essentially. the issuer pays the acquirer for the transaction. Chargeback are typically initiated by the cardholder. 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. the issuer returns the transaction to the acquirer for resolution. they may borrow as much as their . which debits the issuers for payment and credits the acquirer. The acquirer then forwards the chargeback to the merchant." "mid-qualified rate". As they receive very low-interest loans from other firms. 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).
to running the computers that keep track of every cardholder's balance. gift certificates. marketing programs are also a significant portion of expenses. the debt is still legally valid. Depending on the issuer. lists "R9" in the "status" column to denote a charge-off. and the balance sits with the cardholder for a year. or more likely. the creditor may declare the debt to be a charge-off. or cash back as an incentive to use the card. including everything from paying the executives who run the company to printing the plastics. and it costs 5% to borrow the money to lend. • Rewards Many credit card customers receive rewards.) A charge-off is considered to be "written off as uncollectable." To banks. to taking the many phone calls which cardholders place to their issuer. It will then be listed as such on the debtor's credit bureau reports (Equifax. to mailing the statements. • Operating costs This is the cost of running the credit card portfolio. and the creditor can attempt to collect the full amount for the time periods permitted under state law. bad debts and even fraud are simply part of the cost of doing business. Rewards are generally tied to purchasing an item or service on the card. such as frequent flyer points. for instance. the issuer earns 10% on the loan. However. an outside collection agency. If the card issuer charges 15% on money lent to users. This 10% difference is the "net interest spread" and the 5% is the "interest expense". This includes contacts from internal collections staff. which may or may not includebalance .customers require. while lending their capital to other borrowers at higher rates. to protecting the customers from fraud rings. there is the possibility of a lawsuit or arbitration. which is usually 3 to 7 years. • Charge offs When a consumer becomes severely delinquent on a debt (often at the point of six months without payment). If the amount is large (generally over $1500–$2000).
in whose case the breakage in certain US states goes to the state's treasury. therefore merchants usually require ID card in these countries. the cost of fraud was over £500 million. With a fractured and competitive environment.transfers.0% of the spread. merchants will lose the money if no ID card was asked for. Unlike unused gift cards. or other special uses. Fraud In relative numbers the values lost in bank card fraud are minor. When a card is stolen. in some cases. be at the expense of the merchant. Credit card companies generally guarantee the merchant will be paid on legitimate transactions regardless of whether the consumer pays their credit card bill. In several countries. unredeemed credit card points are retained by the issuer. rewards points cut dramatically into an issuer's bottom line. there are still many cases reported and still around in this countries. Depending on the type of card. redeeming awards is usually a feature that is very well hidden by the issuers. or Cards and Unsecured Business. most card issuers will refund some or all of the charges that the customer has received for things they did not buy. These refunds will. cash advances. Networks such as Visa or MasterCard have increased their fees to allow issuers to fund their rewards system. Some issuers discourage redemption by forcing the cardholder to call customer service for rewards.25% and 2. Fraud and Authorization. or an unauthorized duplicate made. On their servicing website. Most banking services have their own credit card services that handle fraud cases and monitor for any possible attempt at fraud. in the UK. Revenues . In 2004. Fraud monitoring emphasizes minimizing fraud losses while making an attempt to track down those responsible and contain the situation. Employees that are specialized in doing fraud monitoring and investigation are often placed in Risk Management. and rewards points and related incentives must be carefully managed to ensure a profitable portfolio. Credit card fraud is a major white collar crime that has been around for many decades. rewards will generally cost the issuer between 0. even with the advent of the chip based card (EMV) in some countries was in place to prevent this fraud case. calculated in 2006 at 7 cents per 100 dollars worth of transactions (7 basis points). especially in mail order cases where the merchant cannot claim sight of the card.
S. encouraging their customers to instead use cash. there is no federal limit on the interest or late fees credit card issuers can charge. interchange fee revenues may represent about a quarter of total revenues. inviting some banks to establish their credit card operations there. For a typical credit card issuer. In the U. when the transaction was settled. and is replaced by a penalty interest rate (for example. the merchant's total card sales volume. or even cheques. with business cards and rewards cards generally costing the merchants more to process. These fees are typically from 1 to 6 percent of each sale. with some states such as South Dakota. the specific type of card. but will vary not only from merchant to merchant (large merchants can negotiate lower rates). debit cards. 23. there are "teaser" rates in effect for initial periods of time (as low as zero percent for. and the authorized and settled transaction amounts. • Interest on outstanding balances Interest charges vary widely from card issuer to card issuer. six months). Other states. have very weak usury laws. having no ceiling on interest rates and fees. In some cases. but also from card to card. the merchant's average transaction amount. . Often. the interest rates are set by the states. The teaser rate no longer applies if the customer doesn't pay their bills on time. merchants must also pay interchange fees to the card-issuing bank and the card association.99%) that applies retroactively. merchants add a surcharge to the credit cards to cover the interchange fee. whether the cards were physically present. say.Offsetting costs are the following revenues: • Interchange fee In addition to fees paid by the card holder. The interchange fee that applies to a particular transaction is also affected by many other variables including: the type of merchant. how the information required for the transaction was received. for example Delaware. whereas regular rates can be as high as 40 percent.
Membership fees (annual or monthly). even when applied). Exchange rate loading fees (sometimes these might not be reported on the customer's statement.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). 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). called overlimit fees Returned cheque fees or payment processing fees (e. sometimes a percentage of the credit limit.The variation of exchange rates applied by different credit cards can be very substantial.g. A few financial institutions do not charge a fee for this. . as much as 10% according to a Lonely Planet report in 2009.
However. to verify the identity of the purchaser. but if the card holder's wallet is stolen. The merchant may be instructed to call the card issuer for verification. For example. including the card account number or other information that would routinely and necessarily be available to a merchant during a legitimate transaction. kiosks. such as a driver's license. the merchant or the issuer. but a compromised account can be hoarded by a thief for weeks or months before any fraudulent use. or to decline the transaction. such as the user's ZIP or postal code. Still. making it difficult to identify the source of the compromise.) are common targets for stolen cards. a large transaction occurring a great distance from the cardholder's home might seem suspicious. including sophisticated software that can.S. The only common security measure on all cards is a signature panel. Some merchants will demand to see a picture ID. Without other security measures. the card holder has a right to refuse to show additional verification. The compromise can occur by many common routes and can usually be conducted without tipping off the card holder. For instance. as there is no way to verify the card holder's identity. Card issuers have several countermeasures. The cardholder may not discover fraudulent use until receiving a billing statement. before a transaction is authorised. etc. or even to hold the card and refuse to return it to the . Stolen cards When a credit card is lost or stolen. estimate the probability of fraud. and asking for such verification is usually a violation of the merchant's agreement with the credit card companies. which may be delivered infrequently. A common countermeasure is to require the user to key in some identifying information. millions of accounts have been compromised. 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. driver license commonly has the holder's home address and ZIP code printed on it. and some credit cards include the holder's picture on the card itself.Credit Card Frauds The fraud begins with either the theft of the physical card or the compromise of data associated with the account. a U. A simple example is that of a store clerk copying sales receipts for later use. it remains usable until the holder notifies the issuer that the card is lost. The rapid growth of credit card use on the Internet has made database security lapses particularly costly. but signatures are relatively easy to forge. it is possible for a thief to make unauthorized purchases on a card until it is canceled. at least until the account is ultimately used for fraud. in some cases. Self-serve payment systems (gas stations. Stolen cards can be reported quickly by cardholders. This method may deter casual theft of a card found alone. Most issuers have free 24-hour telephone numbers to encourage prompt reporting. it may be trivial for the thief to deduce the information by looking at other items in the wallet.
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. 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. . Fields can vary. A common recent preventive measure for merchants is to allow shipment only to an address approved by the cardholder. While there are safeguards to this. and are less likely to be investigated by either the card issuer or the merchant. mail order carding was rampant as early as 1992. and merchant banking systems offer simple methods of verifying this information. 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). because of the greater risk. Account numbers are often embossed or imprinted on the card. Small transactions generally undergo less scrutiny.  Card not Present The mail and the Internet are major routes for fraud against merchants who sell and ship products. far more risky than the Internet It is difficult for a merchant to verify that the actual cardholder is indeed authorizing the purchase. To many people's surprise. telephone ordering is the most risky. and a magnetic stripe on the back contains the data in machine readable format. whether by mail. Before this and similar methods were introduced. Scam artists[who?] bet on the fact that many fraud prevention features are not used for small transactions. CNP merchants must take extra precaution against fraud exposure and associated losses. telephone or over the Internet. . but they are not required to check identification and they are usually not involved in processing payments for the merchandise. it is still more risky than presenting in person. and they pay higher rates for the privilege of accepting cards. the largest to date being TJX. and indeed card issuers tend to charge a greater transaction rate for CNP. often by staking out the porch of the residence. Compromised accounts Card account information is stored in a number of formats. 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.customer. Shipping companies can guarantee delivery to a location.
Criminals may try to steal documents such as utility bills and bank statements to build up useful personal information. The criminal then reports the card lost and asks for a replacement to be sent. Skimming Electronic-type credit card skimming Skimming is the theft of credit card information used in an otherwise legitimate transaction. 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). where they ask the buyer to send a photocopy of the physical card and statement to ensure the legitimate usage of a card.Merchant associations have developed some prevention measures. but these have not met with much success. 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. Account takeover Account takeover happens when a criminal tries to take over another person's account. and have little incentive to pursue additional security due to laws limiting customer liability in the event of fraud. It is typically an "inside job" by a dishonest employee of a legitimate merchant. Some merchants added a new practice to protect their consumers and their own reputation. first by gathering information about the intended victim. such as single use card numbers. 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. Identity theft Identity theft can be divided into two broad categories: Application fraud and account takeover. Customers expect to be able to use their credit card without any hassles. 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 asking for mail to be redirected to a new address. then contacting their card issuer masquerading as the genuine cardholder. which reads the magnetic . Merchants can implement these prevention measures but risk losing business if the customer chooses not to use the measures.
and penalties for merchants can be severe if they are compromised. and also to avoid attracting the card issuer's attention. A set of credit card details that has been verified in this way is known in fraud circles as a phish. such as a trade show or special event. losses and punishment The examples and perspective in this article may not represent a worldwide view of the subject. the thief knows that the card is still good. but given a large enough sample. The specific item purchased is immaterial. A website known to be susceptible to carding is known as a cardable website. In the past.  Nowadays. For example. However. it is fairly easy for the card issuer to detect. the 3 to 4 digit Card Security Code and/or the card's expiration date. that merchant can be directly investigated. These devices are often used in conjunction with a pinhole camera to read the user's PIN at the same time. both to avoid using the card's credit limit. Carding Carding is a term used for a process to verify the validity of stolen card data. A carder will typically sell data files of the phish to other individuals who will carry out the actual fraud. Skimming is difficult for the typical cardholder to detect. Sophisticated algorithms can also search for patterns of fraud. carders used computer programs called "generators" to produce a sequence of credit card numbers.00 to US$50. Please improve this article and discuss the issue on the talk page. and the thief does not need to purchase an actual product.strip as the user unknowingly passes their card through it. Market price for a phish ranges from US$1.00 depending on the type of card. The issuer collects a list of all the cardholders who have complained about fraudulent transactions. which can be a death blow to businesses such as restaurants where credit card transactions are the norm. Another variation would be to take false card numbers to a location that does not immediately process card numbers. as well as the more prevalent use of wireless card scanners that can process transactions right away. and then uses data mining to discover relationships among them and the merchants they use. carding is more typically used to verify credit card data obtained directly from the victims by skimming or phishing. . a Web site subscription or charitable donation would be sufficient. Merchants must ensure the physical security of their terminals. The purchase is usually for a small monetary amount. if many of the cardholders use a particular merchant. this process is no longer viable due to widespread requirement by internet credit card processing systems for additional data such as the billing address. ranging from large fines by the issuer to complete exclusion from the system. The thief presents the card information on a website that has real-time transaction processing. Profits. and then test them to see which were valid accounts. If the card is processed successfully. freshness of the data and credit status of the victim.
typically 2% to 4% depending on the payment method. type of fraud.Who pays for credit card fraud? In the US the short answer is the merchant. .S. money supply. It is the standing policy of the FTC not to investigate reports where the value of fraud does not exceed $2. Most credit card criminals know this and keep purchases from any one business below $150. 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. On one hand they are obliged to fight credit card fraud. they have a limit of $150.000 before investigating each crime. The Secret Service handles crimes involving the U. In contrast to more automated product transactions. This requires consumers to add additional information to confirm a transaction. the inconvenience can be quite costly and tiring. Credit card companies like Visa and MasterCard receive revenue from every transaction. for example by being blind to sequencing. a clerk overseeing "card present" authorization requests must approve the customer's removal of the goods from the premise in real time. Please improve this article or discuss the issue on the talk page. But even if the cardholder does not lose money. Credit card fraud can be reported to the Federal Trade Commission (FTC) and to local and regional authorities. 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. consequently pursue policies to increase number of transactions. people that commit credit card crime largely go unpunished and repeatedly victimize consumers and businesses. So they are motivated to increase total volume of transactions. Besides fraud investigation costs tend to be higher than costs of write-off Detection and Punishment In the US. in other countries it is the card issuer. Local law enforcement may or may not further investigate a credit card fraud. and in others the cardholder. 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.000. This creates conflict of interest for the credit card companies. depending on the amount. but on the other hand policies against credit fraud may impose certain restrictions that may negatively affect number of transactions and cumulative transaction volume.000.
and the merchant— are all generally bound to the conditions. the fees for processing the payment. Issuers are thus motivated to pursue policies which increase the money transferred by their systems. he is also obliged to pay the chargeback fee. Merchants have started to request changes in state and federal laws to protect themselves and their consumers from fraud. Because all card-accepting merchants and card-carrying customers are bound by civil contract law there are few criminal laws covering the fraud. (For . merchants have little ability to fight fraud. Payment transfer associations enact changes to regulations. 2. and must simply accept a proprortion of fraud as a cost of doing business. Never give your credit card info out when you receive a phone call. For obvious reasons. where the merchant additionally loses legitimate sales by incorrectly blocking legitimate transactions. and the three parties— the issuer. but the credit card industry has opposed many of the requests. like Visa and MasterCard. Be very careful to whom you give your credit card. and make sure you get it back as quickly as possible. and the chargeback penalty. the consumer. But in the US credit card issuers do not take these costs. receive profit from transaction fees. This can results in substantial additional costs: not only has the merchant been defrauded for the amount of the transaction. Merchants The merchant loses the goods or services sold. many merchants take steps to avoid chargebacks—such as not accepting suspicious transactions. Many merchants believe this pursuit of revenue reduces the incentive for credit card issuers to adopt procedures to reduce crime. and to add insult to injury the transaction fees still stand. the payment. This may spawn collateral damage. they are passed on to the merchants as "chargebacks". In many cases. particularly because the cost of investigating a fraud is usually higher than the cost of just writing it off.Credit card merchant associations. charging between 2% and 4% on each transaction. Try not to let your credit card out of your sight whenever possible. Cash costs more to bank up. Credit Card Fraud Prevention Tips 1. any currency conversion commissions. by a self-acceptance term in the contract that it can be changed. so it is worthwhile for merchants to take cards. Keep an eye on your credit card every time you use it. Don't give out your account number over the phone unless you initiate the call and you know the company is reputable.
8. . if you're told there has been a 'computer problem' and the caller needs you to verify information. 6. but if there is a carbon that is used in a credit card transaction. 11. 9. 12. destroy it immediately. 10. 7. Shield your credit card number so that others around you can't copy it or capture it on a cell phone or other camera. 5. Keep this list updated each time you get a new credit card. Keep a list in a secure place with all of your account numbers and expiration dates. 13.reconcile it monthly. Carefully draw a line through blank portions of the receipt where additional charges could be fraudulently added. These are called 'phishing' scams. as well as the phone number and address of each bank that has issued you a credit card. 15. Always void and destroy incorrect receipts. Don't carry around extra credit cards that you rarely use. 19. Open credit card bills promptly and make sure there are no bogus charges. Only carry around credit cards that you absolutely need.or that you don't recognize -.example.) Legitimate companies don't call you to ask for a credit card number over the phone. 4. 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). Shred all credit card applications you receive. Shred anything with your credit card number written on it. 14. If you find any charges that you don't have a receipt for -. Never sign a blank credit card receipt. it's a good idea to carry your credit cards separately from your wallet -perhaps in a zippered compartment or a small pouch. Ideally. Never leave your credit cards or receipts lying around. Save your receipts so you can compare them with your monthly bills. 18. Don't write your PIN number on your credit card -.report these charges promptly (and in writing) to the credit card issuer. 17. Never provide your credit card information on a website that is not a secure site. 3. 16.or have it anywhere near your credit card (in the event that your wallet gets stolen). Treat your credit card bill like your checking account -. 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. Carbon paper is rarely used these days. Sign your credit cards as soon as you receive them.
it has to provide to you in writing the reason for doing so. There are very few customers who have not had to spend hours stuck to a phone to correct a billing fault. More significantly. as banks have been advised to publicize through their Website and other means the interest rates charged for various categories of customers. 21. In case you find that you are paying a higher rate of interest than your neighbor. 2. . and the formalities. if any. and also to automatically forward the unresolved complaints from a call centre to higher authorities. it shall be the bank’s sole responsibility and not yours. Important RBI guidelines on credit cards for the help of customers : 1. if a bank rejects your application for a credit card. Never lend a credit card to anyone else.20. the banks have to follow your instructions and do it the minute you inform them. 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. 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. On the contrary. If you have been one such discontented card-holder.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. You can also choose the chards with options of photos. In case you inform the bank that you want to close your credit card account. notify your credit card issuers in advance of your change of address. banks will have to honor your request immediately. 5. PINs and laminated signatures. RBI has asked the banks to have qualified call centre staff members who can deal with all complaints competently. including the lodging of an FIR. If you have always worried about the constant delays in receiving bills or statements. RBI has provided some respite. as advised by RBI to reduce the risk of stealing or misuse of cards. And by chance such a card is lost and misused. If you move. 3. should follow within a reasonable period of time. if you’ve lost your card and want to block it.
As a result credit card companies had to educate the consumers and spread awareness of the uses of its products.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. Mailing of forms along with contests to professionals and middle management executives etc. Traditionally Indians like to pay in cash or at the most avail the services of a bank. Appointing of DSAs Using business magazines and newspapers for advertisement. 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. Tapping the get member route .
Reducing their minimum eligibility criteria and changing income documentation structure. Providing ATM facility to their card holders Travel assistance via tele-banking. 0Philips ) to sell their products.g. Introduction of photo cards. Tying up with durable consumer goods manufacturer ( e. . Onida.
issuers have begun highlighting the value-added features offered along with the basic product. While some of them are offering attractive interest rates.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. With a plethora of choices on offer it is not easy to come to a decision on any particular card. others are luring customers by their reward schemes. .
immediately the thought of credit card comes to everybody’s mind. In view of all these factors. Secure socket layers. How to charge tax when a transaction takes place online and at what rate will pose problems of billing. 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. In other words if credit card is made the payment mechanism. 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. As mentioned earlier.CONCLUSION Whenever Internet transactions are discussed. online shopping through credit cards resulted in great failures. a mega shop had experienced a fraud of huge magnitude and decided to suspend immediately their online business. Use of credit cards cannot be expected to boost the sales of online sales. 3. Both of them make the profit margin less. where credit cards payment system is not as popular as US. etc of credit cards once the card number is given online to a merchant. At least in Singapore. in India. misappropriation. 1. the fraud element is applicable to India also. Even before online purchases have become popular.Use of credit cards is popular to only a few thousands of executives.Still many leading credit card companies are yet to install their infrastructure to process the online payments. This is because in US the payments by credit a card is quite common.Then there is the question of sales tax laws Each State has its own rate of tax structure for each and every commodity.Many establishments do not like to offer credit card facility due to the service charges to be paid to cr card companies. etc from big cities. Even in US. only IT payers will be eligible to buy goods online. They get the payment only after a certain period of time once the goods are sold. Encryption technologies. much discussion is going on as to how to avoid frauds. businessmen. In other words. Similar stories are not uncommon in other countries too.That any person using credit card is liable to declare IT made many people surrendering their cards. etc are being introduced to avoid such things In spite of all these measures. there is no 100% foolproof to make credit card payment a safe mode of payment. In other countries. particularly business to customer . 2. normally purchases are made through credit cards only. still reports keep coming regarding credit card frauds here and there. 5. 4.
the goods can be dispatched by VPP and other modes of dispatch. Once a purchase is made. On receipt of this code number. payment through credit cards will not result in increasing the online shopping as generally believed.I believe once the cyber laws are passed by GOI. Similarly all government establishments can device a mechanism to enable their employees make online purchases. They may look difficult to achieve but with proper programming techniques and the use of appropriate servers. In conclusion. All these activities can be carried out instantly though proper programming.Then what is the way out? There are other methods of payments for Indian online business. the a/c holder can transfer the required amount to the merchant A/C online. they can be easily achieved. However. banking practices prevalent in our country. Each merchant/shopper can allot a secret code number to the existing clients (customers). Banks should be asked to immediately create necessary facilities for any of the a/c holders to operate the a/c through online. which are given below: Payments by electronic cash/ cheque may be made legally valid including electronic signature . These are all some of the ideas to making the online purchases easier and smoother without affecting the payment due to the shoppers. shopper’s requirements. which will ensure collection of payment against delivery. this facility can be extended only to existing customers. This would require installation of transaction servers in the companies or can be integrated with their online business activity. this is possible. 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. . Activity can be made part of the ordering activity. We need to device different mechanisms taking into account Indian laws. The MERCHANT BANK CAN INTIMATE the shopper about the transaction.
. If there is an unauthorized charge. 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. 4. For this to be effective. 6. Do not wait for your next statement to see if the credit appears. Report your credit card as lost/stolen so that no further charges can occur. and must be done within 60 days from the date you received the statement on which the disputed charge appeared. This time frame is as per federal law. You will get a new card within a couple of week. Never give your credit card to the company. Wait several days and then check with your credit card company to see if you received the credit. Make payment by cheque 2. Monitor your credit card statements. call Micro Forecasts again. report it to Micro Forecasts immediately and demand a charge reversal. 5. it must be done in writing. I believe you are much more likely to get your money back if the credit card company is involved. There may be other options available as well. Many people have done this. Most importantly.RECOMMENDATIONS HOW TO PROTECT The following are my recommendations. 3. including myself. deny the charge immediately with your credit card company. 1. If the refund is not there.
according to you most representative of your credit card service provider? They are Helpful and Friendly. 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. Strongly agree Agree Neutral/Not sure Disagree Strongly disagree. They are polite. What are the added benefits you wish to acquire from the card? Acceptability .Very little extent Which of the following statements.
000 Thank you for taking the time to complete this survey . Citibank HSBC Bank of Baroda Bank Of India Standard Chartered ANZ Grindlays Times card ICICI SBI Personal details: Age: Profession Income: 15.000 Above 60.000-25.000-40.000 40.000-60.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 25.
com .BIBLIOGRAPHY Marketing management: Philip Kotler Financial Management: Khan & jain Business Statistics: K.com Mouthshut.K.com Sbicards.com Rbi.org Apnaloan.Khanna & Jagjit Singh Google search Yahoo search Citibank.
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. . Focus should be on changing non-card related spending to card related spending. it is in the interest of the issuers to educate the consumers about the benefits of holding credit card. The campaigns must also be convincing enough to clear the myth that credit cards increase spending. Considering the huge potential of the Indian market. Simultaneously. banks should undertake innovative strategies to increase card spends. 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. Future promotions could include: Telemarketing. backed by much more comprehensive merchant establishment network.SUGGESTIONS OF THE STUDY The banks battle today is more with cash than with other banks. to cater to high net worth customers and those with niche needs. direct mail. The banks should step up advertising that will help to build a brand image and create a higher brand recall like that of Citibank. The issuers must focus on service and pricing and must recognize the importance of the billing and payment process to retain credit card holders. common ATM services between banks (to reduce cost of operations). With more and more people willing to adopt to credit cards. banks should provide more of premium plastic and CO-cards that piggyback on the existing infrastructure. direct sales. promotional advertising through media. 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. but provide holders with exclusive add-ons. The banks must also increase the number of cardholders by reducing the initial-one time subscription fee.
Not all banks could reveal their confidential marketing strategies and statistical information. However. Most of the information is subjective data collected through personal interaction with people transacting in the plastic money market.LIMITATIONS OF THE STUDY • • The study is confined to NCR only. Study was constrained by limited availability of data. • . to counter this the data has been verified from a number of different sources to give it a measure of authenticity. As a result the personal biases of individuals could affect the study.
TYPES OF CARDS .
SALIENT FEATURES .
OBJECTIVES & SCOPE OF THE STUDY .
RESEARCH METHODOLOGY .
EXECUTIVE SUMMARY OF CREDIT CARD INDUSTRY .
INDIAN CREDIT CARD SCENARIO .
DECIDING ON THE RIGHT CREDIT CARD .
COMPARISON OF CREDIT CARDS .
LIMITATIONS OF THE STUDY .
SUGGESTIONS OF THE STUDY .
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