A Study on the Usage of Credit Cards and its Impact

on the Indian Economy

A Project Submitted to

University of Mumbai for

partial completion of the degree

of

Bachelor in Commerce (Accounting & Finance )

Under the Faculty

of Commerce

By

Shruti Bhausaheb
Sathe
Roll No. 20.

Under the Guidance

of Dr. Ravi Ahuja

Laxman Devram Sonawane College,

Kalyan NOVEMBER 2022-2023

Laxman Devram Sonawane College, Kalyan

Pg 1
 Laxman Devram Sonawane College, Kalyan

Department of Management Studies

CERTIFICATE

This is to certify that Ms Shruti Bhausaheb Sathe of Bachelor in Commerce

(Accounting and

Finance) Semester V (2022-2023) has successfully completed the project on Topic “A Study

on the Usage of Credit Cards and its Impact on the Indian Economy” under the guidance

of Dr. Ravi Ahuja.

PROJECT SUPERVISOR:

HEAD, DEPARTMENT OF MANAGEMENT STUDIES:

INTERNAL EXAMINER:

EXTERNAL EXAMINER:

PRINCIPAL

Date of submission:

Pg 2
 Declaration by Student

I, the undersigned Miss. Shruti Bhausaheb Sathe hereby, declare that the work

embodied in this project work titled “A Study on the Usage of Credit Cards and

its Impact on the Indian Economy”, forms my own contribution to the research

work carried out under the guidance of Dr.Ravi Ahuja is a result of my own

research work and has not been previously submitted to any other University for any

other Degree to this or any other University. Wherever reference has been made to

previous works of others, it has been clearly indicated as such and included in the

bibliography. I, here by further declare that all information of this document has been

obtained and presented in accordance with academic rules and ethical conduct.

Miss. Shruti Bhausaheb Sathe

Certified by

Dr. Ravi Ahuja

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 Acknowledgment

To list who all have helped me is difficult because they are so numerous and the depth is so
enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions in
the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this
project.

I would like to thank our Director (Education) and Principal Annie Joseph for
providing the necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator, for his moral support and guidance.

I would also like to express my sincere gratitude towards my project guide

Dr. Ravi Ahuja whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books and
magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in
the completion of the project especially my Parents and Peers who supported me
throughout my project.

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 Index-I

Chapter Content
No

1 Introduction 7

▪ Topic

▪ Statement of problem and Need of the study

▪ Rational of study

2 Research Methodology 30

▪ Objective

▪ Hypothesis

▪ Scope of the study

▪ Limitations

▪ R.M (Research Design data source , Research Approach , sampling Technique

,Research instrument, sampling process, sample size,

calculator, population set, sample frame, sample size, sampling technique,

Research Instrument, Statistical technique. )

3 Review Of Literature 37

4 Data Analysis, Interpretation and Presentation 42

5 Conclusion and Suggestions 54

❖ References 57

❖ Appendices

▪ Questions

▪ Abbreviations

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 Index-III
(List of Charts and Graphs)
Chapt Name of Charts and Graphs page no.
er No
4 DATA ANALYSIS AND INTERPRETATION 42

FIG 4.1 44

FIG 4.2 45

FIG 4.3 47

FIG 4.4 49

FIG 4.5 50

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 Chapter 1: Introduction
1.1. Introduction:

A credit card is a thin rectangular piece of plastic or metal issued by a bank or

financial services company, that allows cardholders to borrow funds with which to
pay for goods and services with merchants that accept cards for payment. Credit cards
impose the condition that cardholders pay back the borrowed money, plus any
applicable interest. as well as any additional agreed-upon charges, either in full by the
billing date or over time. An example of a credit card is the Chase Sapphire Reserve.

In addition to the standard credit line, the credit card issuer may also grant a separate
cash line of credit (LOC) to cardholders, enabling them to borrow money in the form
of cash advances that can be accessed through bank tellers, ATMs or credit card
convenience checks. Such cash advances typically have different terms, such as no
grace period and higher interest rates, compared to those transactions that access the
main credit line. Issuers customarily pre-set borrowing limits, based on an individual's
credit rating. A vast majority of businesses let the customer make purchases with
credit cards, which remain one of today's most popular payment methodologies for
buying consumer goods and services.

Credit cards typically charge a higher annual percentage rate (APR) versus other
forms of consumer loans. Interest charges on any unpaid balances charged to the card
are typically imposed approximately one month after a purchase is made (except in
cases where there is a 0% APR introductory offer in place for an initial period of time
after account opening), unless previous unpaid balances had been carried forward
from a previous month-in which case there is no grace period granted for new
charges.

By law, credit card issuers must offer a grace period of at least 21 days before interest
on purchases can begin to accrue.1 That's why paying off balances before the grace
period expires is a good practice when possible. It is also important to understand
whether your issuer accrues interest daily or monthly, as the former translates into
higher interest charges for as long as the balance is not paid.

This is especially important to know if you're looking to transfer your credit card

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balance to a card with a lower interest rate. Mistakenly switching from a monthly
accrual card to a daily one may potentially nullify the savings from a lower rate.

CONCEPT OF CREDIT CARDS:

A credit card is a financial instrument issued by banks with a pre-set credit limit,
helping you make cashless transactions. Once you get the credit card bill, you can
repay the amount you have spent within a certain repayment period without any
interest. After this grace period, interest is applied on your balance.

ORIGIN OF CREDIT CARDS:

People have engaged in credit-like transactions for thousands of years. For example,
merchants would give farmers seeds so long as repayment would come following the
harvest.
One of the earliest written examples of a credit system can be found in the Code
of Hammurabi, a set of laws named after the ruler of Babylon from 1792 to
1750 B.C.1 This early credit system established rules for loaning and paying back
money, and how interest could be charged, too. Jump forward to the late 1800s when
consumers and merchants exchanged goods using the idea of credit, exchanging what
were called credit coins and papers as temporary currency.2 This started among small
merchants, but the idea of credit payments quickly spread to other industries. Around
1885, loyal customers of hotels and department stores received what can be
considered early paper store credit cards. The credit lines were typically only for one
location, but sometimes were accepted by competing merchants, too.
In 1914, Western Union gave metal plates to select customers that allowed them to
defer payment until a later date.3 Oil companies followed suit in the next decade by
creating similar courtesy cards that could finance gas and repair services at their
stations.
Next came the Charga-Plate, a metal card developed as early as 1928 that fit in
wallets, was personalized with embossed cardholder's information, almost like a
military dog tag, and had paper on the back for the cardholder's signature. The
embossed card helped sales clerks quickly make imprints of the details for processing.
These cards were issued during the 1930s through the 1950s primarily by larger
merchants for use in their store networks.

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TECHNICAL SPECIFICATIONS:
Certain credit card issuers must submit credit card agreements and data to the
Bureau of Consumer Financial Protection (Bureau) under the Truth in Lending Act
(TILA) and the Credit Card Accountability Responsibility and Disclosure
Act of 2009 (CARD Act). The Bureau is issuing new technical specifications for
complying with those submission requirements. Credit card issuers will make the
required submissions under TILA and the CARD Act through the Bureau's "Collect"
website. These technical specifications include registration information and the URL
for the website at which issuers (or their designees) can submit the required
information. The size of most credit cards is 85.60 by 53.98 mill meters (3+38 in x
2+18 in) and rounded corners with a radius of 2.88-3.48 milli meters (9/80-11/80 in)
conforming to the ISO/IEC 7810 ID-1 standard, the same sizes ATM cards and other
payment cards, such as debit cards.
Credit cards have a printed or embossed hank card number complying with the
ISO/IEC 7812 numbering standard. The card number's prefix, called the Bank
Identification Number (known in the industry as a BINI. is the sequence of digits at
the beginning of the number that determine the bank to which a credit card number
belong This is the first six digits for MasterCard and Visa cards. The next nine digits
are the individual account number, and the final digit is a validity check digit.
Both of these standards are maintained and further developed by ISO/IEC JTC 1/SC
17/WG 1. Credit cards have a magnetic stripe conforming to the ISO/IEC 7813. Most
modern credit cards use smart card technology: they have a computer chip embedded
in them as a security feature. In addition, complex smart cards, including peripherals
such as a keypad, a display or a fingerprint sensor are increasingly used for credit
cards.

1.2. CREDIT CARDS FRAUD:

Credit card fraud is an inclusive term for fraud committed using a payment card, such
as a credit card or debit card.[1] The purpose may be to obtain goods or services or to
make payment to another account, which is controlled by a criminal. The Payment
Card Industry Data Security Standard (PCI DSS) is the data security standard created
to help financial institutions process card payments securely and reduce card fraud.[2]

Credit card fraud can be authorized, where the genuine customer themselves
processes payment to another account which is controlled by a criminal, or
unauthorized, where

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the account holder does not provide authorization for the payment to proceed and the
transaction is carried out by a third party. In 2018, unauthorized financial fraud losses
across payment cards and remote banking totaled £844.8 million in the United
Kingdom. Whereas banks and card companies prevented £1.66 billion in unauthorized
fraud in 2018. That is the equivalent to £2 in every £3 of attempted fraud being
stopped.[3]
Credit cards are more secure than ever, with regulators, card providers and banks
taking considerable time and effort to collaborate with investigators worldwide to
ensure fraudsters aren't successful. Cardholders' money is usually protected from
scammers with regulations that make the card provider and bank accountable. The
technology and security measures behind credit cards are becoming increasingly
sophisticated making it harder for fraudsters to steal money.

TYPES OF CREDIT CARDS FRAUD:

Credit cards are a powerful payment instrument as they allow you to easily avail an
instant line of short-term credit while making transactions. This helps increase your
purchasing power, while also offering benefits like ease of use, reward points and
cashback. Regular, on-time payments can also improve your credit score which leads
to easier long- term loan approvals. However, alongside all these merits, credit cards
also run the risk of being targeted for fraud. While there are several types of credit
card frauds, there are safeguards you can put in place to protect your money. Let us
see how.

• POS Fraud
In this type of fraud, small skimming devices are attached to normal Point-of-Sale
(POS) devices to hack your data. These devices scan and store the card information
while the customer completes a swipe transaction. Usually, this involves a merchant
or store employee who shares these details with malicious actors. Similar attachments
may also be fastened on to ATM card slots to clone card information, while a camera
is secretly placed over the keypad to capture your PIN.

• Phishing and Vishing

These involve impersonating official communication from the bank which in
turns acts as a bait for you to click on false links. This will usually take you to
websites that look authentic Once you enter your card details on these fake

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 links, fraudsters can access the details and use them for their benefit. Another
version is when fraudsters impersonate bank officials on phone calls, asking
you to share an OTP to verify your card' or 'avail the reward points' or 'extend
the validity of your reward points.

• Keystroke logging
Today, since most financial transactions are online, hackers have started relying on
keystroke logging through malicious software to grab credit card details. This usually
begins after you have clicked on a suspicious link and unknowingly installed malware
on your system. The software records every key pressed on the system, eventually
stealing card details, PIN and more.

• Application fraud
This is a type of identity theft where fraudulent actors impersonate a genuine
customer by using their stolen or counterfeited documents to obtain a credit card.
While this might be detected after thorough background checks, if carried out, this
will allow criminals to use a valid credit card with a false paper trail. A similar type of
fraud involves taking over a valid credit card account by posing as the customer using
a similar fake paper trail.

• Theft or loss of card

If your physical credit card gets stolen or misplaced, there are chances it could be
misused. There are precautions you can take in advance as well as safeguards you can
put in place even after it is stolen.

• Account takeover
An account takeover refers to the act by which fraudsters will attempt to
assume control of a customer's account (i.e. credit cards, email, banks, SIM
card and more). Control at the account level offers high returns for fraudsters.
According to Forrester, risk-based authentication (RBA) plays a key role in
risk mitigation.[9]

A fraudster uses parts of the victim's identity such as an email address to gain access
to financial accounts. This individual then intercepts communication about the
account to

Pg 11
keep the victim blind to any threats. Victims are often the first to detect account
takeover when they discover charges on monthly statements they did not authorize or
multiple questionable withdrawals.[10] There has been an increase in the number of
account takeovers since the adoption of EMV technology. which makes it more
difficult for fraudsters to clone physical credit cards.[11]

• Social engineering fraud

Social engineering fraud can occur when a criminal poses as someone else which
results in a voluntary transfer of money or information to the fraudster. Fraudsters are
turning to more sophisticated methods of scamming people and businesses out of
money. A common tactic is sending spoof emails impersonating a senior member of
staff and trying to deceive employees into transferring money to a fraudulent bank
account.[14] Fraudsters may use a variety of techniques in order to solicit personal
information by pretending to be a bank or payment processor. Telephone phishing is
the most common social engineering technique to gain the trust of the victim.

Businesses can protect themselves with a dual authorization process for the transfer of
funds that requires authorization from at least two persons, and a callback procedure
to a previously established contact number, rather than any contact information
included with the payment request. Your bank must refund you for any unauthorised
payment, however, they can refuse a refund on the basis: it can prove you authorised
the transaction, or it can prove you are at fault because you acted deliberately, or
failed to protect your details that allowed the transaction.

• Unexpected repeat billing

Online bill paying or internet purchases utilizing a bank account are a source for
repeat billing known as "recurring bank charges". These are standing orders or
banker's orders from a customer to honor and pay a certain amount every month to the
payee. With E- commerce, especially in the United States, a vendor or payee can
receive payment by direct debit through the ACH Network. While many payments or
purchases are valid, and the customer has intentions to pay the bill monthly, some are
known as Rogue Automatic Payments.

Another type of credit card fraud targets utility customers. Customers receive

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unsolicited in-person, telephone, or electronic communication from individuals
claiming to be representatives of utility companies. The scammers alert customers that
their utilities will be disconnected unless an immediate payment is made, usually
involving the use of a reloadable debit card to receive payment. Sometimes the
scammers use authentic- looking phone numbers and graphics to deceive victims.

1.3 INTERNET CRIMEN COMPLAINT:-

The mission of the Internet Crime Complaint Center, also known as IC3, is to provide
the public with a reliable and convenient reporting mechanism to submit information
to the Federal Bureau of Investigation (FBI) concerning suspected Internet-facilitated
criminal activity and to develop alliances with law enforcement and industry partners.
Information is analyzed and disseminated for investigative and intelligence purposes
to law enforcement and for public awareness.

Since 2000, the IC3 has received complaints crossing the spectrum of cyber crime
matters, to include online fraud in its many forms including intellectual property
rights (IPR) matters, computer intrusions (hacking). economic espionage (theft of
trade secrets), online extortion, international money laundering, identity theft, and a
growing list of Internet facilitated crimes. It has become increasingly evident that,
regardless of the label placed on a cyber crime matter, the potential for it to overlap
with another referred matter is substantial. Therefore, the IC3, formerly known as the
Internet Fraud Complaint Center (IFCC). was renamed in October 2003 to better
reflect the broad character of such matters having an Internet, or cyber, nexus referred
to the IC3, and to minimize the need for one to distinguish "Internet Fraud" from
other potentially overlapping cyber crimes.

1.4. PREVENTION OF CARD FRAUD

With the increasing dependency on plastic money, credit card frauds can prove to be
extremely damaging. Yet, one tends to neglect basic steps to avoid credit card frauds.
It is imperative that every individual take necessary steps to avoid the perils of credit
card fraud.

Modern-age frauds can range from theft of cards, account takeover, counterfeiting, to
email/telephone order (MO/TO frauds) and more. The banking sector has taken

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multiple steps towards prevention of credit card frauds. However, consumer education
is a key strategy when it comes to avoiding fraud. Here are some simple ways a
consumer can self-educate and help avoid credit card fraud.

• Keeping the Credit Card Safe

The primary step for credit card fraud prevention is to keep the credit cards in a place
which is not easily accessible for others. First, make sure that a new credit card
kit/envelope is not tampered with, and sign on the back of the card as soon as you
receive it. Always keep the credit card secured in a small wallet which will make it
difficult for snatchers or pickpockets. After every purchase, one must never forget to
put the card away as soon as possible because thieves can store a digital imprint of the
credit card through snapshots using cell phone cameras. It is also recommended to
confirm the possession of the credit card in your wallet from time to time, even if you
have not used it in a while.

• Monitor Credit card transactions online

Standard Chartered allows you to monitor your credit card transactions via SMS and
email alerts and also via Online Banking or SC Mobile. You can get real time alerts
that enables tracking of credit card spends.

• Avoid Paper Trails of your Credit Card Number

This is another simple step for avoiding credit card fraud. Credit card billing
statements usually have the full credit card number printed on them. As a credit card
user, one must always remember to shred the statement before dumping it into the bin.
Expired and cancelled credit cards should also be shredded.

• Signing of Blank Receipts

The amount on the credit card receipt should be thoroughly verified before signing
the bill. In case of a credit card receipt with blank spaces, it is advisable to fill the
blank spaces with zero/s (0) or scratch through before putting the signature.

• Never Make Credit Card Information Public

Always be aware of scammers and potential threats of phishing. Credit card number
and other sensitive information related to the credit card should never be provided
over

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the phone or through text messages. Credit card scammers usually pose as new
service issuers or providers of lucrative business offers while tricking the
unsuspecting user into leaking sensitive information about the credit card. Ensure that
you memories your PIN and change it frequently to avoid misuse. You can change the
PIN for your Standard Chartered credit cards online, by following simple steps.

• Double-Check Your Online Transactions

Credit card providers be aware of the phishing threats posed through email links that
mimic bank logos, credit card provider or businesses that require personal
information. A general rule of thumb is to verify the legitimacy of the online website
that you are making the purchase from. This can be done by checking if another
website of the same or similar name exists. Always make sure that the website is
secure by checking for the 'https://' in the address bar of the site. Exercising caution
goes a long way to avoid credit card fraud.

• Immediate Reporting of Lost or Stolen Card

It is advisable to report a lost or stolen card to the service provider as soon as possible.
As a customer, you must remember, the sooner the intimation of a lost card, the
quicker the credit card fraud prevention. Always keep the credit card company's
customer service number in your phonebook to avoid delays in informing the service
provider in case of credit card loss or theft. Only with prompt reporting can one avoid
credit card fraud in such cases.
Another necessary step for credit card fraud prevention is consistent review of the
billing statement for each month. Unauthorized charges are a sure sign of credit card
fraud. Under such circumstances, the extent of the fraud is immaterial, as even a small
unauthorized charge should be reported immediately to the credit card service
provider. Usually, in this case, the service provider will instruct you to close the
account and apply for a new account number. At Standard Chartered, the user gets an
SMS and email notification each time the credit card is used. In case of unauthorized
transactions, it is recommended that you report it immediately and block the card.
Click here to know how to do this yourself via Online banking or SC Mobile.

• Making Strong Passwords

In this digital age, credit card numbers are usually stored online for the ease of access
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and one-click purchases. A basic rule for making a strong password at some of the
most secure websites is to use a combination of both upper and lower case characters
and numbers. It is also advisable to memories the password and avoid jotting it down
on a piece of paper for future reference.

• Using RFID-Blocking Wallets

Contactless credit cards usually come with RFID chip embedded in them which
allows for a smoother operation where the users do not need to swipe the card. Credit
card fraudsters can scan the RFID data of a card while standing next to a person.
Investing in an RFID-blocking wallet can be pivotal to credit card fraud prevention.

Credit card fraud protection starts with the customer. Being aware is essential for
every credit owner. Quick intimation protocols are usually provided by the card
service providers, and it is essential to use them to inform the service providers, in
case you notice something out of the ordinary as soon as possible. To know more
about Standard Chartered credit cards,

1.5. RBI MEASURE FOR FRAUD PREVENTION

A special study on credit card business of certain banks covering aspects relating to
the systems and controls on issue of credit cards and recovery of dues thereunder, was
undertaken by us. The study report was circulated to banks for their comments and
suggestions. Based on the response received from banks, it has been decided that
banks should adopt the following additional safeguards to ensure that their credit card
operations are run on sound, prudent and profitable lines.

The Central Bank has finally woken up and has recommended measures to prevent
Credit Card Frauds or at least minimize the same. RBI has recommended the
following measured to be taken by every credit card issuer.
1) Mandatory SMS facility for Online Transactions over Rs 5,000 [However,
some banks like ICICI are sending the SMS for every online Transaction and it is a
good move] with effect from September. 2009.

2) Separate Password Protection for all online transaction. CVV is not enough:
the hacker will need a password as well.

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3) Secured Transaction Mechanism for customers doing business on IVR-
Interactive Voice Response Systems.

4) RBI measure in internet security.

All these measured have to be fully implemented by each and every

credit card company operational In Indian under the guidelines for RBI.

LOSS REDUCTION STEPS TAKEN BY THE BANKS:

1) Chargeback insurance:
Chargeback insurance is an insurance product that protects a merchant who accepts
credit cards. The insurance protects the merchant against fraud in a transaction where
the use of the credit card was unauthorized, and covers claims arising out of the
merchant's liability to the service bank.

2) Credit Card Security:

Credit card fraud is an inclusive term for fraud committed using a payment card, such
as a credit card or debit card.[1] The purpose may be to obtain goods or services or to
make payment to another account, which is controlled by a criminal. The Payment
Card Industry Data Security Standard (PCI DSS) is the data security standard created
to help financial institutions process card payments securely and reduce card fraud.

1.6. CERDIT CARD ELIGIBILITY:

A Credit Card is a handy tool for all your spending needs. It is the most convenient
way to go cashless, at the same time not getting the amount deducted from your bank
account. Everyone has different needs and ways in which they spend money. To cater
to these versatile needs, a variety of Credit Cards are available in the market. We
explore the range of Credit Cards, along with the accompanying rewards and Credit
Card offers.
while there is a whole range of Credit Cards to explore basis your needs. there are
some conditions when it comes to who is eligible for a Credit Card. You can check
your

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Credit Card eligibility online through a Credit Card eligibility checker. We have listed
down few points that can assist you with checking your eligibility for a Credit Card.
Age-You will need to be minimum 18 years of age to apply for a Credit Card. Even if
you are an add-on Credit Card holder, the age limit needs to be met. Anyone meeting
these criteria becomes eligible for a Credit Card eligibility criterion. You will need to
have a regular income and provide proof of the same. Income requirement varies
depending on the Credit
Card being applied for. You can either be a salaried employee, or self-employed and
managing your own business. Credit history-A good credit history is proof that you
can manage your credit well. This helps in getting you a Credit Card easily.

Nationality-While applying for a Credit Card in India, you need to be an Indian

resident or a Non-resident Indian (NRI)You may or may not be an account holder in
the bank where you are applying for a Credit Card.

1.7. PARTIES INVOLED:

● Consumer
● Consumer's Bank
● Credit Card Process
● business transactions
● Merchant's Bank
● Financial Network
● Merchant
● payment Transactions
● Acquirer Payment Gateway

There are in general six parties involved in a traditional credit card processing cycle:
customer, card issuing bank, merchant, merchant's bank, acquirer, and a credit card
processor.

In e-commerce credit card transactions for the purchase of goods or services from the
merchant by the cardholders are processed through a variety of platforms such as
from

Pg 18
laptops, tablets, or smart mobiles in card-not-present (CNP) transaction process. The
entire cycle from the time cardholder enters the data in payment page and passes the
transaction from the payment page will gets approval/decline takes place within two
to three seconds. The entire transaction process and the key players involved in the
online transaction process will be discussed in this article.

Cardholder:
Cardholder is a consumer, who owns the card, being used to make purchase. The
name of the cardholder on the card shown is Richard Branson, it is a MasterCard and
Virgin Money is the card issuer.

Merchant:
The merchant is primarily the business owner can be an offline or online, sells goods
or services to cardholder and accepting payments from credit/debit cards
(Visa/MasterCard). Example: Online cosmetics merchant-Yvesrocher
(www.yvesrocher.de)

An Acquirer:
An Acquirer is a financial institution that offer credit card and debit card processing
services to merchant. Example: Wire Card (www.wirecard.com), First Data
(www.firstdata.com) Payment processor:
A payment processor in an entity involves in the contract with an acquirer to provide
payment services to the merchant. The payment processor utilized to handle the
processing and batching of credit card transactions. Example: Skrill, Klama.

ISO:
Independent Sales Organization is an individual or organization that is not in
association with card association (Visa/MasterCard) member. ISO is not a bank, but it
has bank card relationships with an associate member bank (Issuer / Acquirer).
Example: CCNetPay's (www.ccnetpay.com).

Payment Gateway:
The payment gateway is an important element in card-not-present payment processing
system. A payment gateway is a front-end technology on an ecommerce application
or

Pg 19
website that reads payment cards and sends cardholder details to the acquirer for
processing.

Card Associations:
The most popular card associations are Visa and MasterCard, Card association is a
network of card issuer and acquirer that process payment cards of the specific brand.
Card associations govern the issuing of cards like Visa and MasterCard, card
associations license their names to card issuers that want to launch cards like Amazon
Visa Card, Virgin Money MasterCard Card issuers get the license from card
associations to use Visa or MasterCard logo on the credit card.

Credit Card Transaction Process

Transaction Process:

Cardholder enters the credit card details on the merchant checkout page for purchase
of goods or services from the merchant in the card-not-present transaction. Then,
from the merchant checkout page, the authorization request goes to the acquirer with
the transaction amount used in the transaction. Acquirer electronically sends the
authorization request to card network to determine the card association of the
transaction to which it should be routed. If the card association is Visa or MasterCard,
it passes the relevant request to the card association. Card association then passes the
request to the card issuer. Card issuer provides an online response charged amount
and the so-called merchant name technically called "merchant descriptor or billing
descriptor" is a way of merchant name appears on the credit card statement on the
cardholder when purchased goods or services from the relevant merchant domain.

1.8 CREDIT CARD SYSTEM:

A payment processor (also known as a credit card processor) allows businesses to
accept credit, debit and other forms of electronic payments. Payment processors
connect businesses, consumers, banks and card networks in order to conduct
transactions that fuel the global economy.

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Selecting the right credit card acceptance system starts with a payment processor. A
payment processor (also known as a credit card processor) allows businesses to accept
credit, debit and other forms of electronic payments. Payment processors connect
businesses, consumers, banks and card networks in order to conduct transactions that
fuel the global economy.
Imagine having to create the infrastructure to connect your business to the bank
of every customer who ever makes a purchase. Thankfully payment processors
make all those connections for you. Payment processors make payments easy for
customers and businesses alike.

How do businesses accept credit cards in-store?

Payments have come a long way from the days of manual credit card imprinters and
carbon copies. Accepting credit cards today is easier than ever.

Accepting credit and debit cards in-store are called "card-present" transactions,
because the cardholder is in possession of the card and uses it to make a payment
in-person. "Cardpresent" (CP) and "card-not-present" (CNP) are the terms used to
classify payments at the highest level. Payment classifications are important because
they impact the cost of payment acceptance.
Let's look at four major methods for accepting card payments in-store credit card
terminals, integrated POS systems, self-service checkout and mobile payment
acceptance. Credit card terminals
Credit card terminals are perhaps the most familiar credit card system as they've been
the workhorse of electronic payments for decades. These durable and effective
devices connect to payment networks to perform essential credit and debit cards
transaction processing. Credit card terminals endure because of their low cost, easy
maintenance, durability and ease of use.

Though simple in appearance, newer credit card terminals are smarter than ever. Even
today's basic terminals are equipped with sophisticated EMV chip card security. Many
"simple" credit card terminals use NFC technology to accept smartphones payments
with popular digital wallets.

Pg 21
point of sale (POS) systems
An integrated point of sale (POS) system combines the functionality of a robust
terminal with other essential systems for businesses, like accounting and inventory.
"Integrated" in this context simply means the payment software is built directly into
the point of sale system.
Iprocessors, like World pay. POS systems are highly customizable, and can evolve
as the business grows and changes. Integrates systems are often optimized for use
in particular industries where they play a larger in business operations:
Restaurant POS systems are available for every type of food and beverage service
to help manage menus, kitchen and bar orders, delivery schedules, inventory, sales
and more
In addition to accepting payments, retail POS systems can check inventory in real-
time across multiple locations, scan items, manage pricing updates and add custom
inventory Hotel POS systems offer built-in folio management software to handle
reservations and thirdparty bookings, room service charges, and cancellation fees
Service providers benefit from integrated POS software that helps manage client
scheduling (even for multiple providers or vendors), product add-ons, co-pays, billing,
and subscriptions.

1.9. PAYMENT OPTION FOR CREDIT CARDS:

1. Online Bill Payment Services

Also called electronic bill payment, these companies' help you pay off your credit
card bills on time. All you need to do is to select your bill payment service provider,
enter your credit card details, your contact details such as your mobile number and /
or your email address, the payment amount, and the bank and bank account from
where you want to make the payment. These firms process the payments usually
within a business day or two of you making the payment.

One of the key features of these payment service companies is that they send you
reminders when the payment amount is due, making it quite easy to keep track of
when you have to make the payments. Moreover, you can schedule payments well in
advance by getting the bill payment firm to automatically make the payments at least
1-2 days

Pg 22
before the due date..

2. NEFT Payments
The National Electronic Funds Transfer System (NEFT) allows you to make
payments from your bank account to your credit card within the same day. You can
make payments from any bank account you have. If you have activated your online
banking services, you can make the payments by clicking on the 'Funds Transfer'
option and choosing NEFT payments in the transfer option. The other option provided
is RTGS but more on that in the next section..

3. RTGS Payments
Like NEFT payments, Real Time Gross Settlement (RTGS) allows you to make funds
transfers to your credit card on the same day, provided the payments are initiated
before the cut-off time. The benefit of RTGS payments is that they are meant for large
payments. If you have to make a very large credit card bill payment, then this mode is
the best to ensure your card bill is repaid on the same day.
The process of making an RTGS payment is similar to NEFT payments. You need to
add your credit card to the list of payees by putting in your card and bank details.
Check bank branch IFSC as mentioned for NEFT-call up the customer care and ask.
You can also visit your credit card company's website if they provide such
customer-centric information on their site.

4. ECS Payments
Electronic Clearance System (ECS) payments are ideal if you use your credit card for
specific bills on a regular basis. In such a scenario, you know the amount of the bill
you will have in advance and you can set up an ECS mandate wherein you can ask the
credit card company to present an ECS payment request to your bank. The bank will
then honor your ECS mandate and make the payment from your bank account to the
credit card company.

5. Mobile App Payments

Banks and credit card companies have come up with apps that allow you to make
payments to pay off your credit card bill. All you need to do is to enter the card details
and the mobile app will transfer the funds from your account to the credit card. You

Pg 23
will have to put in the transaction and OTP in most cases to prevent any fraud.
You should note here that you cannot use your standard semi-closed mobile wallet
from e-wallet firms such as Pay TM, MobiKwik or Freecharge, among others to make
credit card payments. These firms may start doing so in the future if they are
allowed to make payments from your bank account directly to the credit card. If this
is allowed, you are likely to see this payment option emerging in UPI-based apps
such as BHIM first and perhaps later in the semiclosed mobile wallets.

6. Visa or MasterCard Money Transfer Send

Both Visa and MasterCard offer payment options on their sites to pay their respective
brand of cards. All you need to do is enter your card details, put in the amount you
have to pay, and enter your bank account details to make the payment. If you need to
check bank branch IFSC codes, you can do so online or simply call up the customer
service of your card issuing bank. Payments made through Visa or MasterCard are
usually processed in a day or two.

7. Bank Accounts
This is one of the most convenient ways to pay off your credit card bills. All you need
to do is login to your account, enter the card details such as issuing bank name, IFSC
code (if necessary), etc. and make the payment. Like with NEFT and RTGS, the bank
may take anything from half an hour to 24 hours to add the card as a payee. Once this
is done, you can transfer funds to the card using your bank account.
You can also add the credit card to the list of billers whom you need to pay if your
bank allows you to do so. In such cases, it will work like a bill payment service and
you will get updates on due dates and due amounts well in time for you to make the
payments. You can also set-up automatic payments (usually called Auto Pay) wherein
the card bill is paid on the date you specify.

Most banks allow you to issue standing instructions under which the bank pays the
minimum or the total amount due on your card. You will have to check with the bank
how you can set it up but minimum documentation and verification should work in
most cases.

8. Cheque Payments

Pg 24
This is one of the easiest ways to make your credit card payment. All you need to do
is to put in your card number in the payee name and enter the other details such as
date, amount (in numerical and letters) before signing it. Remember to make the
cheque account payee before you put it in the drop box. Paying credit card bills by
cheque usually take 2-3 business days to be processed and if you are using a third
party drop box vendor to drop your cheque, it makes sense to put it in at least 5-6 days
before the due date so you do not miss any payments.

9. Cash Payments
The quickest way to make a credit card payment is by cash over the counter. The
funds are transferred within the same business day to your credit card. This is the best
option to use if you need to make a payment and want it to be credited on the same
day.

There are a number of ways you can pay off your credit card bill. Check these options
with your bank before you apply online for credit card so that you are not left in the
lurch when you look for ways to make your credit card payment.

1.10. CREDIT CARD OPERATION CYCLE:

A credit card transaction goes through many stages before it hits your merchant bank
account. The life cycle of a transaction is complex, so we would like to shed some
light on what happens once your customer taps or inserts their card into the terminal,
and explain how authorizations become funds in your bank account. It is fascinating
how much is going on behind the scenes within those split seconds while a transaction
is being processed.

Authorization Stage

Your customer (cardholder) asks for a purchase from your business by presenting
their credit card to you. Once they insert the card into the terminal and enter their PIN
number, your POS terminal sends an authorization request to the acquirer.
Let's pause here for a second to understand what the acquirer is.
An acquirer is a financial institution or merchant bank that processes credit or debit
card payments on behalf of a merchant. The merchant bank is contacted to authorize a

Pg 25
credit card purchase amount that will be either approved or declined at this point.
Once the acquirer receives an authorization request, they submit the request to the
issuer (the bank that issued the card) to authorize the transaction.
The card issuer issues an authorization code if the funds on the credit card are
available and sends the code back to the acquirer who sends it to the merchant.
If the funds are available, the merchant sees an "Approved" message on the screen
and the customer walks away with a purchase.

Batching and Clearing Stage

As your day goes by and clients pay with their credit cards at your store, your
terminal stores approved authorization codes. At the end of the day, you close the
batch, in other words - cash out. Here's what happens after you print the settlement
report.
Your POS terminal sends all stored authorized sales in a batch to the acquirer.

Next, the acquirer submits a request to get payment from the multiple card issuers
(banks that issued your clients' cards) for each authorization in a batch.
The card issuers deduct the interchange fees and send the remaining amount to the
acquirer.

Funding Stage:
This final stage of the cycle is the shortest and the simplest. Once the acquirer
receives a payment from the issuer via a card network (Visa, MasterCard), they
(usually) pay the full amount to the merchant and the deposit is done. We say usually,
because in the majority of cases the acquirer bills the merchant for the transactions on
a monthly basis. Merchants that prefer daily billing would receive the full sale
amount, less the fees charged by the acquirer.

1.11 FEATURE OF CERDIT CARD:

I. Alternative to cash
Credit card is a better alternative to cash. It removes the worry of carrying various
currency denominations to pay at the trade counters. It is quite easy and way fast to
use a credit card rather than waiting for completion of cash transactions.

Pg 26
As an alternative, credit card helps a cardholder to travel anywhere in the world
without a need to carry an ample amount of cash. It also reduces the possible
risk of money theft and gives its user a complete peace of mind.

2. Credit limit
The credit cardholder enjoys the facility of a credit limit set on his card. This limit of
credit is determined by the credit card issuing entity (bank or NBFC) only after
analyzing the credit worthiness of the cardholder.

The credit limit is of two types, viz.,

Normal credit limit is usual credit given by the bank or NBFC at the time of issuing a
credit card.
Revolving credit limit varies with the financial exposure of the credit cardholder.
Aids payment in domestic and foreign currency Credit card aids its cardholder to
make payments in any currency of choice. In other words, it gives its holder a unique
facility to make payments either in domestic (native) currency or if necessary, also in
foreign (non-native) currency. that too as and when required.
Credit card reduces the cumbersome process of currency conversion. That is, it
removes the financial complexities often encountered in converting a domestic
currency into a foreign currency. It is because of this feature, a credit cardholder can
possibly make payments to merchants present in any corner of the world.

4. Record keeping of all transactions

Credit card issuing entities like banks or NBFCs keeps a complete record of all
transactions made by their credit cardholders. Such a record helps these entities to
raise appropriate billing amounts payable by their cardholders, either on a monthly or
some periodic basis.

5. Regular charges
Regular charges are basic routine charges charged by the credit card issuing entity on
the usage of credit card by its cardholder. These charges are nominal in nature.

The regular charges are primarily classified into two types, viz.,

Pg 27
 ● Annual charges, and

● Additional charges.

Annual charges are collected on per annum or yearly basis.

Additional charges are collected for other supplementary services provided by the
credit card issuing entity. Such services include, add-on-card (an additional credit
card), issue of a new credit card, etc.

6. Grace period
The grace period is referred to those minimum numbers of additional days within
which a credit cardholder has to pay his credit card bill without any incurring interest
or financial charges.

7. Higher fees on cash withdrawals

Credit-card issuer makes charges on cash withdrawals made through credit card at the
ATM outlets and other desks. Generally, cash withdrawal fees are quite higher than
fees charged by the bank or NBFC for the other regular credit transactions. On cash
withdrawn done through a credit card, interest is charged from the same day. That is,
interest is charged since the day on which cash is withdrawn. Usually, no grace period
is provided for cash transactions.

8. Additional charges for delay in payment

The credit card payment is supposed to be made within a due date as mentioned on
the bill of a credit card. If payment is not paid on time, then a credit-card issuer
charges some additional costs, which are resulted due to delay in payment. These
charges are charged to compensate (recover) the interest cost, administration cost and
any other related costs bared by the credit card issuing entity.

9. Service tax
Service tax is included in the total amount charged to the credit cardholder. This
mandatory service tax imposed by the government also increases the final end cost
bared by a credit cardholder. Many credit card providers (issuing entities) have
policies

Pg 28
 of reversing the service tax charged on the purchase of gas, fuel and other similar
goods.

10. Bonus points

The competition among the credit card providers is unbending (adamant). Offering
various incentives is usually a trendy (fashionable) way to improve the sale of the
products in the ordinary course of business. Following this trend, credit card providers
also give bonus points on the financial value of the transactions compiled by their
customers.

11. Gifts and other offers

At a later stage (ie, after crossing pre-determined number of bonus points)
accumulated bonus points are redeemed either by converting them into gifts, cash
back offers, or any other similar compelling offers. To collect many bonus points, the
credit cardholder has to carry out a considerable number of transactions through his
credit card.

Pg 29
 CHAPTER 2: RESEARCH AND METHODOLOGY.

⮚ OBJECTIVES:

● To study the benefits of credit cards offered by the financial

institues/organisations to the consumers.
● To study the process behind the credit card operations in the back end.
● To study the different payments methods can be provided for the credit card
transactions.
● To study the disadvantages or shortcomings of the credit cards.

⮚ HYPOTHESIS:

● H1: The cause-and-effect relationship between credit cards and spending has
yet to be adequately explored.
● H2: Credit card holders are doing Extra expenses due to facility of credit received
through
● credit cards.
● H3: Credit card holders are increasing their monthly liabilities through credit cards.
● H4: Income of Commercial Banks from issuing credit cards is increasing day
by day.

⮚ SCOPE OF THE STUDY:

This research point to observe the process followed to carried out credit card transactions
and to identify what are the benefits and shortcomings of the credit cards. Also how we can
simplified the use of credit cards for the consumers.

⮚ LIMITATIONS:

A credit card has become an indispensable part of our lives, with its ease of use and
convenient pay-back options. The discounts, offers, and deals that a credit card offers are
unmatched by any other financial products and spell a bonanza for the wise user. However,
credit cards can become debt traps if not used correctly. or if you spend more than you can
repay when the bill comes around

If you're new to the world of credit, here's a list of the advantages and the disadvantages
associated with your little plastic card. Pg 30
o Advantages of Credit Cards:

1. Easy access to credit:

The biggest advantage of a credit card is its easy access to credit. Credit cards function on
a deferred payment basis, which means you get to use your card now and pay for your
purchases later. The money used does not go out of your account, thus not denting your
bank balance every time you swipe.

2. Building a line of credit

Credit cards offer you the chance to build up a line of credit. This is very important as it
allows banks to view an active credit history, based on your card repayments and card
usage. Banks and financial institutions often look to credit card usage as a way to gauge a
potential loan applicant's creditworthiness, making your credit card important for a future
loans or rental applications.

3. EMI facility

If you plan on making a large purchase and don't want to sink your savings into it, you can
choose to put it on your credit card as a way to defer payment. In addition to this, you can
also choose to pay off your purchase in equated monthly installments, ensuring you aren't
paying a lump sum for it and denting your bank balance. Paying through EMI is cheaper
than taking out a personal loan to pay for a purchase, such as a television or an expensive
refrigerator.

4. Incentives and offers

Most credit cards come packed with offers and incentives to use your card. These range
from cash back to rewards point accumulation each time you swipe card, which can later be
redeemed as air miles or used towards paying your outstanding card dues. Lenders also
offer discounts on purchases made through a credit card, such as on flight tickets, holidays
or large purchases, helping you save

Pg 31
5. Flexible credit

Credit cards come with an interest-free period, which is a period of time during which your
outstanding credit is not charged interest. Ranging between 45-60 days, you can avail free,
short-term credit if you pay off the entire balance due by your credit card bill payment date.
Thus, you can benefit from a credit advance without having to pay the charges associated
with having an outstanding balance on your credit card. Record of expenses

A credit card records each purchase made through the card, with a detailed list sent with
your monthly credit card statement. This can be used to determine and track your spending
and purchases, which could be useful when chalking out a budget or for tax purposes.
Lenders also provide instant alerts each time you swipe your card, detailing the amount of
credit still available as well as the current outstanding on your card.

7. Purchase protection

Credit cards offer additional protection in the form of insurance for card purchases that
might be lost. damaged or stolen. The credit card statement can be used to vouch for the
veracity of a claim, if you wish to file one.

Pg 32
o Disadvantages of Credit Cards:
1. Minimum due trap
The biggest con of a credit card is the minimum due amount that is displayed at the top of a
bill statement. A number of credit card holders are deceived into thinking the minimum
amount is the total due they are obliged to pay, when in fact it is the least amount that the
company expects you to pay to continue receiving credit facilities.
This results in customers assuming their bill is low and spending even more, accruing
interest on their outstanding, which could build up to a large and unmanageable sum over
time.

2. Hidden costs

Credit cards appear to be simple and straightforward at the outset, but have a number of
hidden charges that could rack up the expenses overall. Credit cards have a number of taxes
and fees, such as late payment fees, joining fees, renewal fees and processing fees. Missing
a card payment could result in a penalty and repeated late payments could even result in the
reduction of your credit limit, which would have a negative impact on your credit score and
future credit prospects

3. Ease of overuse

With revolving credit, since your bank balance stays the same, it might be tempting to put
all your purchases on your card, making you unaware of how much you owe. This could
lead to you overspending and owing more than you can pay back. beginning the cycle of
debt and high interest rates on your future payments.

4. High interest rate

If you do not clear your dues by your billing due date, the amount is carried forward and
interest is charged on it. This interest is accrued over a period of time on purchases that are
made after the interest-free period. Credit card interest rates are quite high, with the average
rate being 3% per month, which would amount to 36% per annum.

Pg 33
5. Credit card fraud

Though not very common, there are chances you might be victim of credit card fraud. With
advances in technology, it is possible to clone a card and gain access to confidential
information through which another individual or entity can make purchases on your card.
Check your statements carefully for purchases that look suspicious and inform the bank
immediately if you suspect card fraud. Banks usually waive off charges if the fraud is
proven, so you will not have to pay for purchases charged by the thief.

⮚ RESEARCH AND METHODOLOGY:

We score each attribute on a scale of 0 to 5. We then weight these scores to determine the
star ratings you see on our review pages. The following elements are generally ordered
from highest to lowest in how heavily they factor into our overall evaluation of credit cards.

o The Cost of a Credit Card

With credit card debt reaching an all-time high of $1.09 trillion in 2019, we believe you
should know the cost of using cards and carrying a balance. 1 Because of that we heavily
weight a card's annual percentage rates (APRS) and fees in determining its overall score.

o Fees

Every credit card has fees, but the big one most people want to avoid is the annual fee. The
higher a card's annual fee, the lower we score it, because a card with no annual fee is the
easiest to manage. When scoring a card's annual fee, we look at the three-year average cost,
to account for cards that waive the annual fee the first year your account is open.

We also knock cards for having a high number of overall fees, which could include any of
the following:

o Fees type

When It's Charged Foreign Transaction You make a transaction in another country Balance
Transfer You transfer a debt from one credit card to another You withdraw cash from your
credit line

Pg 34
o Cash Advance

Late Payment You do not pay your credit card bill by the due date Authorized User or You
request additional consumer or business employee cards, which tie
Employee Card to your account Returned Payment Your credit card payment doesn't go
through Paper Statement You request a paper version of your credit card account statement.

Over limit Your credit card balance exceeds your account limit Credit Limit Increase Each
time you request a higher credit limit Account Maintenance Your credit card issuer requires
this to cover costs of servicing your accounts, typically on a monthly basis for the more
common fees (e.g. foreign transaction and balance transfer fees), we score cards according
to how high the fee is. Lower fees receive better scores.

o Interest

Most people don't open a credit card with the intention of going into debt, but a massive
amount of people end up in that situation, given that credit card interest also
compounds-you owe interest on interest-when you don't pay your whole bill, the cost of
credit card debt can really add up.

That's why we give a credit card's regular purchase APRS significant bearing on the card's
overall score. We also look at other common APRS, including penalty APR, introductory
purchase APR, balance transfer APR (intro and ongoing), and cash advance APR. The high
end of a card's APR range determines its score in this category, given that only people with
the best credit scores qualify for the lowest rates. The higher the APR, the lower the score.
The credit card system, in its simplest form is a method of obtaining credit on hire
purchase, whereby the cardholder can make purchases on credit up to an amount agreed by
him with the credit card company by presenting the card in lieu of cash. Hence credit cards
are termed as convenient money and plastic money. For the credit cardholder, credit cards
are an innovative way to pay for the purchases. They can go for instant purchases without
checking their liquidity. Really sense of feeling assured is there. With credit cards in pocket,
emergencies are not felt so by cardholders. They exude a of confidence. Perhaps taking the
use of the above feeling Can card tells, "You won't need anything else. To ensure that one
feels assured, the sense Express Card tells, "Don't leave home without it. The best way to
pay is the slogan is that credit card services, no doubt credit card are a new American
means of consumer finance. The American Express Bank therefore projects that its "credit
card is not plastic, its prestige".
Pg 35
The job of card issuer is to serve as a conduct between the client card holder being made to
receive by, as the case may be the card issuer. Credit cards are fundamentally different from
the other payment methods in that they involve extending credit rather than drawing on an
existing store of funds. Banks in conjunction with credit card associations such as Visa and
Master card, issue general-purpose credit cards. Department stores also issues credit card to
be used for purchases at that particular store Like Electronic Fund Transfer, payment by
credit card is not anonymous. Since paying with a credit card does not involve a store of
funds, deposit insurance and reserve requirements are not directly relevant. The bank that
issues the card is liable and thus merchants are paid if the cardholders default. If the issuing
bank fails, the credit card association guarantees payment to merchants with Outstanding
transactions and then has a creditor's claim on failed banks. In this chapter, the Data
Collected during the research was analysed and reported. This Study was executed to
achieve the stated objections. The Sample

Research Type:
research design is a clear plan about the research. The type of the study is Exploratory.
Method of Data Collection: e ask of data collection begins after a research problem has
been defined and research on chalked out. The data collected are primary and secondary
data.

Sampling Methods:
me sampling design of the research study consists of the following categories namely
ployed persons, professionals and others. The respondents of the sample size are 100.

Sample Design:
Under Non probability technique convenience sampling is being used. When the population
elements are selected for inclusion in the sample based on the ease of access, it is called
Convenience sampling. This method is also known as accidental sampling because the
respondents whom the researcher meets accidentally are included in the sample

Statistical Tools Adopted:

The following statistical tools were employed for data analysis and interpretation of the
survey data

Pg 36
 CHAPTER 3: REVIEW OF LITERATURE

Examining consumers' behaviours in choosing and using credits cards, this report was
commissioned to present an empirical review of the credit card market, with he intention of
providing insight for policy implementers in consumer protection within the UK market.
We review the literature on credit card consumption from the perspectives of economics,
finance, marketing and psychology, and discuss
(1) how consumers source for and switch between credit card contracts, along with the
stakes they commonly make;
(2) the determinants of borrowing behaviour using credit cards;
(3) how consumers repay credit card debts and the impact of minimum repayment
requirement presentation;
(4) borrowing costs including interests and fees that consumers pay on credit cards;
(5) the extent to which behavioural biases drive consumers' behaviours. Although
majority of the literature focuses on the U.S. market, we believe that these findings are
highly applicable to he UK owing to the similarities between both countries' credit card
markets.

o Searching and Switching

The increasing volume of direct solicitations combined with disclosure requirements during
recent years, have reduced the costs of searching for credit cards greatly. The literature has
demonstrated that consumers, especially those carrying high balances, remain particularly
sensitive to interest-rates and are actively searching for lower credit card rates; consumers
are effectively obtaining benefits from their searches ending up with lower interest rates.
Studies show that few consumers fake action to switch bank services despite reporting
dissatisfaction with their current banks. This suggests that faced with switching costs,
consumers choose to remain with their current bank services. The literature further suggests
that switching costs are most severe among consumers with high balances where it is kely
for them to end up with lower levels of credit. This phenomenon persists even Today,
though banks utilize automated pre- screening systems to improve their Ability to judge the
creditworthiness of consumers

Pg 37
and lower evaluation costs. Lower costs of searching by consumers are believed to intensify
competition and lower margins in the industry. This also holds in the credit card market as
searching behaviours evidently impact on the pricings listed by banks.
One study shows that
the issuers' interest rate is an increasing function of the customers' switching cost. which
suggests that some banks may exploit these consumers with high switching costs and
discriminate against them by setting higher prices.

o Borrowing behaviour
Knowing the characteristics of credit card users is the first step for banks to set out
advertisement strategies or for policy makers to implement consumer protection plans.
Empirical results are roughly consistent with general conjecture that credit card users are
more likely to be married, wealthier, better educated and own houses. Growing competition
in the credit card industry has influenced many issuers actively involved in soliciting
potential consumers in extending more and more competitively motivated services to a
customer, they create a stronger relationship with the consumers and benefit by gaining
more information from them. Additionally, according to the literature, consumers who have
stronger relationships with their banks also have increased likelihoods of getting credit in
the future and the borrowing, on average, come with lower rates.

o Repayment
Repayment decision is an important topic since it directly impacts consumers' debt level
and borrowing costs. What characterizes consumers with high balances in their credit
cards? One descriptive study suggests a positive correlation of high balances with their
education, income and real assets; however, the findings of this study remain limited by its
small sample size and measurement error. Repayment behaviours also differ among birth
cohorts, where youngsters payoff rate is estimated to be 24% lower than their parents and
77% lower than their grandparents. Further, repayment patterns for most consumers are
also, interestingly, either paid in full or paid near the minimum amount each month, with
very few intermediate payments. The minimum repayment requirement is usually made
known in most credit card contracts. However, the literature shows that the availability of
such information does not contribute to higher

Pg 38
probabilities of repayment and some consumers choose to still repay the minimum amount.
Such behaviour is known as an anchoring bias within psychology where the consumers'
repayment patterns are psychologically tethered by the postulated levels of minimum
payment. A number of studies monitored the consumers' repayment patterns after removing
the minimum repayment information and saw a dramatic increase of repayment value by
70%. It is apparent then, that imposing warnings about cost of minimum payment alone
does not assist with encouraging consumers in their credit card repayments. Two possible
approaches were suggested to mitigate the negative effects wrought by presenting minimum
payment information. The first is to increase the minimum repayment requirement, which
takes advantage of the anchoring effect since borrowers may allocate their payment at the
newlychanged or newly salient levels. One estimate shows that a 1% increase in minimum
repayment requirement might lead to an increase in the average payoff rate by 1.9%. The
other choice experimentally proven to be effective in increasing repayment is to present the
costs of both minimum payment and alternative choice (ie what will happen if repaying a
higher level of the balance) and make the comparison salient to consumers. The 2009 US
CARD Act requires such disclosure of comparing the cost of minimum payment with the
case when the card holder repays the current balance within 36 months. Estimates show that
the disclosure significantly increases repayment levels and thus reduces interest payment. In
aggregate, the annualized reduction in interest payments is approximately 71 million US
dollars. This potentially suggests that there is room for alternative

o Borrowing cost
One empirical estimate over the span of 2008 to 2010 in the US market shows that banks
are earning significant profits in their credit card portfolios, 1.6% of which come from
interest payments and fees paid by the consumers. In particular, consumers with poor credit
quality pay 43.9% per dollar borrowed and generate a net profit of 7.9%. If we only focus
on fees and charges on credit cards, more than 40% of all accounts incur such cost and the
average amount is estimated to be $14 18 per account per month. The amount paid for
credit card fee is also huge in terms of aggregation. During the economic downturn in 2008,
British credit card suppliers collected 213 million pounds in penalty charges and the amount
collected in the US is estimated to be 20.5 billion dollars. Studies report a positive
correlation between penalty fees and consumer default risk. This suggests that penalty fees
may serve to compensate banks for taking risks. However, the literature does not exclude
the possibility that banks are excessively charging its consumers.

Pg 39
Besides interest rates, fees and charges are also taken into consideration when consumers
choose among a variety of credit card contracts. In most cases, they are facing a trade-off
between the two depending on their estimation of future consumption. If one expects to
borrow a large amount, then one should choose the contract with a lower interest rate, thus
minimizing the total borrowing cost. The literature also shows that in reality, consumers do
rationally choose the right credit contract for themselves, even when initial mistakes were
made consumers were likely to switch to more optimal contracts after. Consumers also
learn to avoid fees. Studies show that paying a fee last month reduces the fee payment in
current month by 40%, although this learning effect is depreciating when the strain of
paying fees becomes distant To avoid excessive credit card fees, policy makers can
implement regulations that aim to reduce or limit fee charges. The effectiveness of such
policies is undetermined since it may steer banks to hike other rates and impose other
conditions which might negatively impact consumer welfare. Researchers are offering
support to such regulatory policies by evaluating the 2009 US CARD Act, which limits the
ability of banks to charge certain types of credit card fees. Empirical estimates show that
the overall fees cost reduction is an annualized 2.8% of borrowing volume, which translates
into annual cost savings of 20.8 billion per year. Such protection schemes are most
beneficial to consumers with poor credit qualities (low FICO score).

The interest rate charges for credit card debts are usually as high as 15%, usually higher
than the returns that most liquid assets, such as cash and checks, can deliver. So it is optimal
for consumers to pay off credit card debts as long as they are not highly constrained
credit-wise. However, studies show that this is not true in reality, offering evidence that
households tend to hold significant credit card debts and sizable liquid assets
simultaneously. Surprisingly, the size of liquid assets held is not small. For a third of all
households, the liquid assets respectively held amount to more than one month's income.
This phenomenon is prevalent for households with all levels of income and education.
Compared to a traditional payment mechanism like cash and check, paying by credit card
decreases the vividness with which individuals can feel the outflow of money. Therefore,
there is a frequently heard conjecture that credit card use causes people to spend more and
save less. A number of studies confirmed this notion in experimental settings. Credit card
payment can enhance not only the magnitude but also the decision time involved in
spending.

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One solution to the overspending problem might be inferred from one study which shows
that participants do not spend more when using credit cards (as opposed to cash) when they
are instructed to consider the cost of each item they purchase individually and add them
together. Consumers are shown to suffer from present bias by emphasizing too much on
current consumption instead of the future consumption and ignoring long-term plans. This
bias affects their choice of credit card contracts, rendering them to prefer contracts with
lower introductory interest rate over certain

time durations. Those with present bias were also found to more likely accumulate credit
card debts. Consumers may also feel overly optimistic about their future card usage and
paying schemes, choosing the sub-optimal contracts with high interest rate and low fees but
end up with large outstanding balances.

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CHAPTER4: DATA ANALYSIS AND INTERPRETATION

The credit card system, in its simplest form is a method of obtaining credit on hire
purchase, whereby the cardholder can make purchases on credit up to an amount agreed by
him with the credit card company by presenting the card in lieu of cash. Hence credit cards
are termed as convenient money and plastic money. For the credit cardholder, credit cards
are an innovative way to pay for the purchases. They can go for instant purchases without
checking their liquidity. Really sense of feeling assured is there. With credit cards in pocket,
emergencies are not felt so by cardholders. They exude a of confidence. Perhaps taking the
use of the above feeling Can card tells, "You won't need anything else. To ensure that one
feels assured, the sense Express Card tells, "Don't leave home without it. The best way to
pay is the slogan is that credit card services, no doubt credit card are a new American
means of consumer finance. The American Express Bank therefore projects that its "credit
card is not plastic, its prestige".
The job of card issuer is to serve as a conduct between the client card holder being made to
receive by, as the case may be the card issuer. Credit cards are fundamentally different from
the other payment methods in that they involve extending credit rather than drawing on an
existing store of funds. Banks in conjunction with credit card associations such as Visa and
Master card, issue general-purpose credit cards. Department stores also issues credit card to
be used for purchases at that particular store. Like Electronic Fund Transfer, payment by
credit card is not anonymous. Since paying with a credit card does not involve a store of
funds, deposit insurance and reserve requirements are not directly relevant. The bank that
issues the card is liable and thus merchants are paid if the cardholders default. If the issuing
bank fails, the credit card association guarantees payment to merchants with Outstanding
transactions and then has a creditor's claim on failed banks.
In this chapter, the Data Collected during the research was reported. This Study was
executed to achieve the stated objections. The Sample

Research Type
as design is a clear plan about the research. The type of the study is Exploratory.

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Method of Data Collection: e ask of data collection begins after a research problem has
been defined and research in chalked out. The data collected are primary and secondary
data.

Sampling Methods:
me sampling design of the research study consists of the following categories namely
employed persons, professionals and others. The respondents of the sample size are 100.

Sample Design:
Under Non probability technique convenience sampling is being used. When the population
elements are selected for inclusion in the sample based on the ease of access, it is called
Convenience sampling. This method is also known as accidental sampling because the
respondents whom the researcher meets accidentally are included in the sample.

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⮚ QUESTIONNAIRE & DATA ANALYSIS & INTERPRETATION

1. What is your age?

AGE LIMIT NO. OF

RESPONDENTS
20-30 20

30-40 56

40-50 9

50-60 15

Fig.4.1
Interpretation:
Diagram shows that out of 100 respondents people there are 56 people whose age is in
between 30-40 years are using credit cards.

People in the age group are risk takers and want credit card for enjoyment/ shopping.

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2. Rate your Income Per Annum ?

Income (per annum in No. of Respondents

lakhs)
Upto 2 lakhs 5

Upto 3 lakhs 13

Upto 4 lakhs 30

4 lakh and above 52

Fig4.2
Interpretation :
Graph shows that out of 100 respondents 52% people are having their income more than 4 lacs and
above. Which shows that credit card has utilization for the employees who has higher income.

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3. What Are The Reasons For Using Credit Card Faciltity?

NAME OF THE NO OF
BANKS RESPONDENTS

Need 26

Enjoyment 34

Status 25

Peer Influence 15

total 100

Interpretation:
Table shows that out of 100 respondents. There are only 20% respondents who use for
need.34% respondents use it for enjoyment, 25 % respondents use it for status and 15%
respondents use it due to peer influence.

4. Give Your Preference of Credit Card?

Name of Banks No of Respondents

HDFC 32

ICICI 34

CITI Bank 14

SBI 10

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 Fig4.3
Interpretation:
graph shows that out of 100 respondents, 34% respondents and giving preference to ICICI
credit card, 2 respondents are giving preference to HDFC means credit cards of KK and
There are only 10% respondents who use 100% credit limit.

5. How Many Credit Cards Be You Have?

No of Credit Cards No of Respondents

Single Credit Cards 53
Double Credit Cards 23
Triple Credit Cards 24
Total 100

Interpretation:
Table shows that out of 100 respondents, 53% respondents prefer to have single credit card,
23% respondents have 2 credit cards, 24% respondents have 3 credit cards, which shows.

Pg 47
6. How Often Do You Use The Credit Card?

Credit Limit No of Respondents

Once In Week 54
Twice In Week 15
Thrice In Week 15
Occasionally 16

Interpretation:
Table shows that out of 100 respondents,54% respondents use it once in a month, 18%
respondents use it twice in a month, 15% use it thrice in a month and 21 % use it
occasionally.

7. How Did You Attract To Use Credit Cards ?

Credit Limit No of Respondents

By Bank 45
Friends 25
Media 16
Other 14

Interpretation:
Table shows that out of 100 respondents 45% respondents are attracted to use credit cards
rough banks, 25% respondents are attracted to use credit cards through friends 16%
respondents are attracted to use credit cards through media & 14% through others.

8. How Much Credit Limit Do You Use?

Credit Limit No of Respondents

< 30% 14
30-50% 24
50-70% 52
70 & above 10

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 Fig 4.4

Interpretation:
Graph shows that out of 100 respondents, 52% respondents who use 50- 70% credit limit
out of sanctioned credit limit, 24% respondents use 30- 50% of credit limit and 14% use
less than 30% credit limit, There are only 10% respondents who use 100% credit limit.

9. Are You Satisfied With The Credit Card Facilities Of Your Bank?
Satisfaction Level No of Respondents
Satisfied 52
Partly Satisfied 32
Partly dis-Satisfied 12
Dis-satisfied 4

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 Fig4.5
Interpretation:
Table shows that out of 100 respondents, 52% respondents are satisfied with the
facilities,32% are in Partly satisfaction & 12% are in Partly dissatisfaction due to customer
support facilities.

10. Are You Aware About Defaulter Charges of Bank?

Awareness of Defaulter charges No of Respondents

Yes 77
No 18

Interpretation:
program shows that out of 100 respondents, 77% respondents are aware about Defaulter
13% are unaware.

11. Do You Have Any Good Or Bad Experience About Credit Card With
Your Bank?

Experience No of Respondents
Good 62
Bad 38

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Interpretation:
Table shows that out of 100 respondents, 62% respondents have good experience and 38%
responds have bad experience regarding to banks.

12. Good /Bad Experience

a) Nature of Good Experience

Frequent reminder for payment, Kind cooperation from Staff b)Nature of Bad
Experience
Arrogant behavior during recovery & unsatisfied answers about queries.

Interpretation:
Credit card holder have good as well as Bad Experience about banks

13. When Do You Pay Credit Card Bills

Payment through reminder No of Respondents

Self-reminder 78
Bank reminder 22

Interpretation
Table shows that out of 100 respondents, 78% respondents pay Credit card bills try keeping
and 22% respondents depends upon banks reminder.

14. If You Are Defaulter in Credit Card Payment In Last Year Please
Specify?

Defaulter in last year No of Respondents

Not Defaulter 52

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 One time Defaulter 23
Two time Defaulter 15
Three time Defaulter 10

Interpretation:
graph shows that out of 100 respondents, 52% respondents are not defaulter in last year
responds are one times defaulter, 15% are two time defaulters and 10% are three times
defaulter

15. If You Are Defaulter Please Specify the Reason

Reason of Defaulter in Last Year No of Respondents
Salary 11
Other Prioritites 31
Improper Fund Managment 19
Ignorance of reminder 16

Interpretation:
Table shows that out of 77 Defaulters, 11 respondents are defaulter due to irregularities in
salaries, 31 are defaulter due to other priorities, 19 due to fund management and 16 due to
ignorance of reminder.

16. As A Protective Measure for Defaulter Which Option You May

Choose?
Protective Measures No of Respondents
Switching credit card 42
Discontinue the facility for few days 36
Facility for few days 12
Completely Stop its use 10

Interpretation:
Table shows that out of 100 respondents 42% respondents will go for Full settlement, 36%
Choose the option of switching credit card, 12% will go to discontinue the facility & 10%
respondents will stop Its use.

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17. What Are Your Expectations From You Bank

Respondents are expected the following areas

a. Clear terms and conditions
b. Timely reminders
c. Good customer relation
d. Customization of credit limit
e. Help desk support

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CHAPTER 5: CONCLUSION & SUGGESTIONS

Credit card which is my product has a negative impact on people because on the way they
used their credit card. consumers think that using their credit cards for online shopping or
other necessary things they might need to buy is a good thing. but they are actually wrong
because is bad thing. They might not know if someone is taking their money and then
might have to pay the overdraw of the credit card they have. Some other negative impacts
are that consumers may continuously roll over the balance for several months. Also, when
consumers default on credit card payments, you are charged with late fees and interest
increasing your debt load.

The Environmental Effects of my product is that credit is made out of plastic. Plastic was or
made of polyvinyl chloride acetate, with the first viable and cheap. This affects the
environment because when people change credit cards, they have to recycle but credit card
is plastic and it would take time to recycle and there a new credit card that it's made out of
metal. Human cost and the Environmental cost are related because for human cost
Online-exclusive $100 cash rewards bonus after you spend at least $500 on purchases in the
first 90 days of account opening and this is also for the environmental cost. Another
example is 1% cash back on every purchase, 2% at grocery stores and 3% on gas for the
first $1,500 in combined grocery store and gas purchases each quarter so this is how they
are both related

My product is credit card and my role as a consumer is how credit card works and for the
consumer too. This is how it works when you make a payment, your card issuer generally
must credit your account the day they receive it, but there are exceptions, for you consumer
and for me too is that your issuer can specify reasonable requirements for payment. For
example, your issuer can set a reasonable cut-off hour for your payment to be received for
crediting on that day. but generally, it can't be before 5 p.m. on the due date at the location
the issuer specifies, your issuer doesn't have to credit your account the day your payment is
received if a delay won't result in a charge to you. It's important to pay your bill on time. If
you don't, count on paying late fees and additional finance charges. How i feel about it is
that I'm not really sure if should feel good or bad about how credit card works and for the
consumer but at least know how

Pg 54
it works that how i feel about.

What people will have to do in order to have their credit card should be safer so that there is
no impact and environmental effects to make the situation better.

The banks will have to allow people to link all of their accounts so people will have fewer
cards, which will also be safer. This production should be completed in one or two years so
the credit cards of the consumer are safer. This action should be taken because when people
used the credit card to buy the necessary things or that they like or including online
shopping they take the money of the consumer but not only online shopping also malls, and
stores. This action will improve the situation better because this way people have their
credit card improve and better. Also, it will prevent from people or stores taking the
consumer money of their bank account by using their credit card.

Suggestions:

1. Pay off your balance every month.

Avoid paying interest on your credit card purchases by paying the full balance each billing
cycle 1 Resist the temptation to spend more than you can pay for any given month, and
you'll enjoy the benefits of using a credit card without interest charges.

2. Use the card for needs, not wants.

A credit card should be used carefully. Frivolous purchases can lead to debt. Credit cards
can be used in emergency situations, such as a mobile phone bill that's due before your next
payday. Use the credit card as a temporary loan to yourself, and then pay back the amount
as soon as you can to decrease or avoid interest charges altogether.

3. Never skip a payment.

Pay your bill every month, even if the minimum payment is all you can afford Missing a
payment could result in a late fee, penalty interest rates and a negative impact to your credit
score.

4. Use the credit card as a budgeting tool

Pg 55
If you're confident you can use a credit card responsibly and pay off the balance every
month, try using it as a budgeting tool. By making all of your purchases with your credit
card, you can see exactly how much you've spent at the end of the month. Of course, you
should only do this if you know you can pay off the balance each month. To make sure your
credit card spending doesn't get out of hand, never charge more to your card than you have
in your bank account

5. Use a rewards card.

If you're using a credit card for most or all of your purchases, it makes sense to use a card
that offers rewards. Not only can you avoid paying interest, but you'll also earn rewards
such as cash, airline miles or retail points.

6. Stay under 30% of your total credit limit.

One way to keep your credit score healthy is to keep your credit utilization ratio under 30%.
This credit utilization ratio is the percentage of total available credit that you're using. For
example, if your limit is $1,000 you should keep your balance under $300. But the ratio
applies to the sum of all your cards - so if one credit card has a $3,000 limit with a $3,000
balance and a second card has a limit of $7,000 with no balance, you're right at the 30%
mark ($3,000 of an available $10,000) which is where you want to be.

Pg 56
● References :

1. CreditCards.com (27 January 2010). "Credit card penalty rates can top 30 percent;
how to avoid them". Creditcards.com. Retrieved 26 March 2013.
2. ^ Prater, Connie (7 April 2010). "Issuer of 79.9% interest rate credit card defends its
product". FoxBusiness.com. Retrieved 28 July 2011.
3. The Travel Card that gave "CREDIT" to the public". Flying. Vol. 52, no. 6. June
1953. p. 11. Retrieved 11 November 2018.
4. History Of The Credit Card". www.creditcardprocessingspace.com. Retrieved 14
February 2013.
5. O’Sullvilian, Arthur, Steven M. Sheffrin (2003). Economics: Principles in action
(Textbook). Upper Saddle River, New Jersey: Pearson Prentice Hall. p. 261. ISBN
0-13-063085-3.
6. Business Credit Card Myths That Can Cost Your Business | AllBusiness.com".
AllBusiness.com. 21 December 2016. Retrieved 10 April 2017
7. ISO/IEC 7810:2003, clause 5, Dimensions of card
8. SO/IEC 7810:2003 Identification cards — Physical characteristics
9. For Merchants - MasterCard Unembossed". MasterCard.
10. Bank Identification Number (BIN)".

Pg 57
● BIBLIOGRAPHY

1. Prater, Connie (7 April 2010). "Issuer of 79.9% interest rate credit card defends its product".
FoxBusiness.com. Retrieved 28 July 2011.
2. The Travel Card that gave "CREDIT" to the public". Flying. Vol. 52, no. 6. June 1953.
p. 11. Retrieved 11 November 2018.
3. History Of The Credit Card". www.creditcardprocessingspace.com. Retrieved 14 February 2013.
4. O’Sullvilian, Arthur, Steven M. Sheffrin (2003). Economics: Principles in action (Textbook).
Upper Saddle River, New Jersey: Pearson Prentice Hall.p. 261. ISBN 0-13-063085-3.
5. Business Credit Card Myths That Can Cost Your Business | AllBusiness.com".
AllBusiness.com. 21 December 2016. Retrieved 10 April 2017
6. ISO/IEC 7810:2003, clause 5, Dimensions of card
7. SO/IEC 7810:2003 Identification cards — Physical characteristics
8. For Merchants - MasterCard Unembossed". MasterCard.
9. Bank Identification Number (BIN)".

Pg 58