FINANCIAL MARKETS AND SERVICES

Dr. Nisha Mary Thomas

nishathomas@isme.in

BBA, Semester 5
January 2022
WHAT IS DEBIT CARD? WHAT ARE ITS LIMITATIONS
AND ADVANTAGES?

Meaning:
A debit card is a payment card that deducts money directly from a consumer’s
checking account when it is used. Also called “check cards” or "bank cards," they
can be used to buy goods or services; or to get cash from an automated teller
machine or a merchant who'll let you add an extra amount onto a purchase.

Advantages:
• Avoid fees and service charges— Unlike credit cards, which often come with
annual fees, late payment charges, substantial foreign transaction fees, debit
cards typically have few or no fees attached.
• Debit card can be easily obtained— When you open a savings or current
account, most banks issue a free debit card.
• Very convenient to use— One of the advantages of a debit card is that it can be
swiped for transactions as well as withdrawal of cash from ATMs.
• Protection— Debit cards come with a default PIN (Personalised Identification
Number), which can be changed. SMS notifications are received whenever a
transaction is made via your debit card. online payments can be made by
entering a One-Time Password (OTP) sent to the mobile number linked to your
bank account.
• No more debts— When you have a credit card, you are more likely to make
impulsive purchases. But a debit card keeps you in check as it is linked to your
bank account. You are only able to spend the amount that is in your account.
• Easily accepted— Debit cards are accepted widely all over India and at
international destinations.
• Faster payments means better budgeting— Just as debit cards hold you
accountable to spend responsibly, they also make it easier to stick to a budget
and resist overspending.
• Debit cards are linked to interest-earning accounts— Many banks offer multiple
kinds of checking and savings accounts, including interest-earning options.
There’s usually a minimum daily balance required, but in return you get both
the benefit of earning interest and of using a debit card for cash withdrawal and
purchases.
Disadvantages:
• No grace period— Unlike a credit card, a debit card uses funds directly from
your checking account. A credit card allows you to borrow funds on credit,
leaving disposable cash in your account.
• Withdrawal Fees— Banks charge consumers with processing fee on every
transaction. These charges may seem negligible, but the deducted amount can
be surprising when considered as a whole. If you use your ATM cum-debit card
at an ATM not affiliated with your bank, it will cost you more. Adding the annual
maintenance fee and charges for SMS alerts/online banking would be more
troubling.
• Withdrawal Limit— A debit card owner is not as privileged as a credit card
owner. In most cases, the issuing banks limit the maximum withdrawal amount,
and that’s applicable for both cash and online transfer. This issue, at times, can
be one of the leading disadvantages of a debit card, if you’re away from your
bank and the value of the amount required is considerably high.
• Check book balancing— Balancing your account may be difficult unless you
record every debit card transaction.
• They don’t build your credit score— Since debit cards are directly linked to your
checking account, they don’t affect your credit score.
• Terminal Dependent— Only merchants having an electronic terminal can
perform transactions through debit cards. Moreover, a customer can access
account only from the place where the issuing bank’s outlet terminal exists.
• Unprotected against Frauds— Card fraud is everywhere and surprisingly, no one
can stop it even after putting the top-level security methods in place. The
personal Identification Number (PIN) cannot give protection against identity
theft. Anyone carrying the card can access the account if they know your Debit
card PIN.
• Raising a complaint is a lengthy process— Where it’s for cybercriminals to
misuse your debit card online, even in case you notice it happening, it’s a
lengthy process to get the lost money. You’ll have to report the incident to the
bank. You are obligated to go through the inquiry process and explain the
circumstances under which it happened. The process may take even days to
resolve; the only way to retrieve the money is when the bank believes it’s a
genuine fraud case.
WHAT IS CREDIT CARD?
• Credit Card is a financial instrument issued by
banks with a pre set credit limit, helping the users
to make cashless transactions. The card issuer
determines the credit limit based on credit score,
credit history, and income.
• It is a thin rectangular piece of plastic which
contains information like card number, card holder
name, expiration date, chip, magnetic strip, CVC
code and hologram.
• It allows cardholder to borrow funds to pay for
Goods and Services with merchants.
WHAT ARE ITS LIMITATIONS AND ADVANTAGES?
Advantages
A credit card is safer than carrying cash.
A credit card can build your credit rating.
You can get interest-free day.
Earn rewards points when you spend. You can
request a chargeback if you’re unhappy with
a product or service.
Credit cards work in any currency.
Credit cards give you an emergency line of
credit. Credit cards often have complimentary
extras.
You can consolidate debts and save money on
existing balances.
Disadvantages
High rate of interest 22% APR, more than
initially charged interest if failed to pay
installments.
Credit Profile damage due to missed
repayments and ongoing debts.
Annual fees is way more high than a debit
card.
Overspending is more as the user is easily
carried away with their credit card, creating
a debt that is beyond their means to pay
off.
Credit card fraud are more. As fraudster
targets the credit card holders.
Other fees can be added up quickly
WHAT IS ATM?
The limitations of ATM are as
follows
Advantages ATM machines
WHAT IS INTERNET BANKING/ e-BANKING? WHAT ARE
ITS LIMITATIONS AND ADVANTAGES?

1. Electronic banking has many names like e - banking, virtual

banking, online banking, or Internet banking.

2. It is simply the use of electronic and telecommunications

network for delivering various banking products and services.

3. Through e-banking, a customer can access his account and

conduct various transactions using his electronic gadgets such
as computer or mobile phone.
 Pros & Cons of E- Banking
Pros Cons

• Check balances of accounts and • Technology issues

view records of transactions easily . • Security issues
• Pay bills automatically each month • Inefficient at complex transactions.
with easy to set up auto payment . • No relationship with personal banker
• Transfer funds among accounts • Inconvenient to make deposits.
easily and fast .
• Download or print statement for tax
or personal records .
• Access to the account 24x7
WHO ARE FINANCIAL ADVISORS AND WHAT IS THEIR
ROLE?

Financial Advisor is a finance professional who provides consulting and advice

about an individual’s or entity’s finances. Financial advisors can help
individuals and companies reach their financial goals sooner by providing
their clients with strategies and ways to create more wealth, reduce costs, or
eliminate debts

Role Of Financial Advisor are :

• Assessing the financial goals of clients
• Assessing the investment horizon and risk profile
• Assessing fund requirement
• Building plan to fulfil the goals
• Continuous monitoring and reviewing the plan
What is an Investment Portfolio?

An investment portfolio is a set of financial assets owned

by an investor that may include bonds, stocks, currencies,
cash and cash equivalents, and commodities. Further, it
refers to a group of investments that an investor uses in
order to earn a profit while making sure that capital or
assets are preserved.
 Components of a Portfolio
The assets that are included in a portfolio are called asset classes. The investor or financial advisor needs to make sure that
there is a good mix of assets in order that balance is maintained, which helps foster capital growth with limited or controll ed
risk. A portfolio may contain the following:
1. Stocks
Stocks are the most common component of an investment portfolio. They refer to a portion or share of a company. It means
that the owner of the stocks is a part owner of the company. The size of the ownership stake depends on the number of shares
he owns. Stocks are a source of income because as a company makes profits, it shares a portion of the profits through
dividends to its stockholders. Also, as shares are bought, they can also be sold at a higher price, depending on the performa nce
of the company.
2. Bonds
When an investor buys bonds, he is loaning money to the bond issuer, such as the government, a company, or an agency. A
bond comes with a maturity date, which means the date the principal amount used to buy the bond is to be returned with
interest. Compared to stocks, bonds don’t pose as much risk, but offer lower potential rewards.

3. Alternative Investments
Alternative investments can also be included in an investment portfolio. They may be assets whose value can grow and
multiply, such as gold, oil, and real estate. Alternative investments are commonly less widely traded than traditional
investments such as stocks and bonds.
 Different factor to be taken into account while creating portfolio

• Diversification - It is one of the basic blocks of a good portfolio. It reduces risk by allocating investments. It aims to maximize
returns by investing in different areas.
• Risk and return analysis - Investors should analysis their risk ability and design portfolio accordingly. Return depends upon the risk
ability.
• Proper research - research is the backbone of every investing. Research assists the decision-making process with as much relevant
information.
• Hold some portion in cash - A well-balanced portfolio should have some space for cash to maintain liquidity in portfolio.