C r e d i t Cards

What are Credit

Cards?
Pre-approved credit which can be used for the
purchase of items now and payment of them later.
 Credit c ards
• It is a plastic card having a magnetic strip,
issued by a bank or business authorizing the
holder to buy goods or services on credit.
Also called charge cards
• The concept of using a card for was first
described in 1887 by Edward Bellamy in
his utopian novel Looking Backward.
• The size of most credit cards is 85.60 ×
53.98 mm
 Eligibility For Getting The
Card
• Person should have a savings current
account in the bank.
• His assets and liabilities on a particular
date are reported to bank.
• A statement of annual or monthly income.
• He is considered credit worthy up to
certain limit depending upon his income,
assets and expenditure.
 Particulars Displayed On Credit
• Cards
Name of the customer
• 16-digit card number
• Validity date
• The VISA hologram and the VISA
logo
• Name of the issuing bank
• Signature period
• Magnetic strip
• PIN
What does 16 digit
means
 CLASSIFICATION
OF CREDIT
CARDS

Based on Based on Based on Based on Based

mode of status of geographic franchise on
credit credit al validity / Tie-up issuer
recovery card Categor
y

Individ Corpor
Charg Revolving Domesti Internation
- ual - ate
e credit c card - al Card
Cards Cards
Card card

Domesti
Proprie- Maste VIS
c Tie-up
tary r A
Standar Busines Card
Gold card Card Car
d s d
Card
Card Card
 Based on mode of credit recovery
• Charge Card-A card that charges no interest but
requires the user to pay his/her balance in full upon
receipt of the statement, usually on a monthly basis.
While it is similar to a credit card, the major benefit
offered by a charge card is that it has much higher,
often unlimited, spending limits.
• Revolving credit card-A line of credit where
the customer pays a commitment fee and is then
allowed to use the funds when they are needed. It is
usually used for operating purposes, fluctuating each
month depending on the customer's current cash flow
needs
 Based on status of credit
card
• Standard Card- it is a generally issued credit
card
• Business Card- (Executive cards ) it is issued
to small partnership firms , solicitors,
tax- consultants ,for use by executives on
their business trips.
• Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to
high unsecured overdrafts, some insurance
cover, etc
 Based on geographical
validity
• Domestic card- Cards that are
valid only in India and Nepal are
called domestic cards.
• International Card- credit Cards
that are valid internationally are
called international cards.
 Based on franchise/ Tie-
up
• Proprietary card- A bank issues such cards
under its own brands. Eg. SBI card Cancard of canara
bank
• Master Card- this card is issued under the umbrella
of “MasterCard International”
• VISA Card – it is issued by any bank having tie up
with “VISA international”
• Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands
such as CanCard and IndCard.
 Based on issuer
Category
• Individual Cards- Non-corporate
cards that are issued to
individuals
• Corporate Cards- Issued to
corporate and business firms.
 Credit card
cycle
• A card holder makes purchase , and present
it to the merchant instead of cash .
• The retailer will check the number on the
card
, and he will tally signature of voucher
and credit card .
• Vouchers are send to banks, which in
turn reimburses it for the customer’s
purchase.
 Credit card
cycle
• Purchase of goods
and
service on card
• marchant delivers goods after taking an authenticated credit
Card
Credit
purchas
e
and
cardnoting the number and taking signature on certain
paymen
t forms.
Card
processi
• Marchant raises the bill for the purchase and sends it
ng
to the credit card issuing bank for payment
Bill to
card
holder • Issuing bank pays amount to the
merchant establishment
Bill
raising

paym
ent
• Issuing bank raises bill on the credit cardholder
and sends it for payment

• Credit card holder makes the payment

to the issuing bank
 Advantage
To Cardholderss:
• Simple, convenient and can be substituted for cash
• Convenient method of payment
• He need not approach a bank for taking credit
• Credit cards issued by leading banks are acceptable in
many countries
• Holders can withdraw cash from any branch of major banks
worldwide.
• Issuer of card provides 24 hrs customer helpline
available across the world in case of any emergency.
To Merchants/ Shopkeepers :
• Guaranteed payment
• Lessens the security risk of holding
the cash
• Overseas visitors may purchase
more, providing new market for
retailer
To credit card companies/ Banks :
• Source of revenue
- Joining fee
- card renew fee
- services charges from
retailers
- Interest charged to customer
 Disadvantage
To cardholders : s
•Loss or stealing of card
To Merchants/ Shopkeepers :
•Retailers are required to pay a certain fee and service
charges at an agreed percentage of their credit
card
sales. :
To credit card companies
•Risk of bad debt
•Risk of fraud
 Safety Tips
 Sign card with signature
 Do not leave cards lying around
 Close unused accounts in writing and by phone, then cut up
the card
 Do not give out account number unless making purchases
 Keep a list of all cards, account numbers, and phone
numbers separate from cards
 Report lost or stolen cards promptly