CREDIT CARDS

Amit Adeshara
260128
 WHAT IS CREDIT CARD…?
 Any card that may be used repeatedly to borrow money or buy products and services
on credit .
 Normally we know Credit cards as Plastic money...!

 A credit card is a way of payment by using the plastic cards which are
issued to customers for their payment. Credit cards are different than the debit cards.
It is because using the facility of credit finance it does not remove or decrease the
balance of the amount of account holder from his account.
 Credit Cards gives you a smart way to shop, and offer you flexibility and
convenience in managing your finances.
 Credit cards provide a host of exciting offers and benefits such as low interest rates,
rewards programs, and a high credit and cash limit.
SERVICE PROVIDERS IN INDIA
Major Credit Card Providers in India
 ABN Amro
 HDFC
 American Express

 ICICI Bank
 Axis Bank

 SBI
 Bank of Baroda

 Canara Bank
 Citibank
 Visa

 HSBC
 MasterCard
 Deutsche Bank
 Amex
 Barclays Bank
 Diners Club
 Standard Chartered

 Kotak Mahindra
TYPES OF CREDIT CARDS
Major India Credit Card Types
Following are various types of credit cards available in India:

 Premium Credit Cards

 Cash Back Credit Cards
 Gold Credit Cards
 Airline Credit Cards
 Silver Credit Cards
 Business Credit Cards
 Balance Transfer Credit Cards
 Co-branded Credit Cards
 Low Interest Credit Cards
 Lifetime Free Credit Cards
 Rewards

There are 33 various premium credit cards available in India.

 WHAT CREDIT CARD NUMBERS MEAN

The first digit in your credit-card number signifies the system

The structure of the card number varies by system. For example,
American Express card numbers start with 37.

Out of the 16 numbers on a typical credit card, the set of first 6 digits is
known as the issuer identifier number (read this for details), and the last
digit is known as the “check digit” which is generated in such a way as to
satisfy a certain condition
INTEREST RATE & GRACE
PERIOD
 Interest Rate : The interest rates are very
high on a credit card purchase - in India its
between 1.9% to 2.5% monthly.
 Grace Period :- Also called the interest free
period, during which the balances on credit
card do not attract finance charges provided
the credit card holder repays the entire
outstanding amount in full with the monthly
credit card bill.
-The grace period varies with every credit
card and usually is between 20 to 60 days
EXAMPLE OF BILLING CYCLE
 The HDFC Bank Platinum Plus Card has an
interest-free Credit Period of 55 days.
 A credit card holder whose billing date falls
on 4th of the month can spend on his credit
card from 5th April to 4th May, his bill will
be generated on 4th May and his Payment
Due Date will be 29th May.
 A purchase made on 14th April will have a
credit period of 46 days, while a purchase
made on 2nd May will have a credit period of
23 days.
 HOW INTEREST ON CREDIT
CARDS IS CALCULATED?
 If a credit card holder doesn't pay his bill completely
before the due date, his entire outstanding balance
will attract interest rate and all new spends on the
credit card will also attract interest rate until the
balances are repaid in full.

 Taking cash advances from the credit card also takes

away any grace period.
CONTD….
INTEREST RATE CALCULATION
Date Transaction Amount

10 November Purchased Jewellery 15000

15 November Purchased Apparel 5000

18 November* Statement Date:  

Payment Into Credit

15 December 2000
card Account

16 December Purchase of Groceries 1000

Payment Into Credit

17 December 15000
card Account
CONTD….
INTEREST RATE CALCULATION
The charges are calculated from the statement date.
 Interest on Rs 15000 @ 2.65%pm from 18 November to 15 December (i.e.
for 28 days) (15000 x 2.65 x 12 x 28)/365)/100 = Rs. 365.91
 Interest on Rs 13000 @ 2.65%pm from 15 December to 17 December (i.e.
for 3 days) (13000 x 2.65 x 12 x 3)/365)/100= Rs. 33.97
 Interest on Rs 5000 @ 2.65%pm from 18 November to 17 December (i.e.
for 30 days) (5000 x 2.65 x 12 x 30)/365)/100 = Rs 130.68
 Interest on Rs 3000 @ 2.65%pm from 17 December to 18 December (i.e.
for 2 days) (3000 x 2.65 x 12 x 2)/365)/100 = Rs 5.22
 Interest on Rs 1000 (fresh spends @ 2.65%pm from 16 December to 18
December (i.e. for 3 days)(1000 x 2.65 x 12 x 3)/365)/100 = Rs 2.61
 a) Thus total interest = (365.91+ 33.97+130.68+5.22+2.61) =Rs.
538.39
 b) Late payment charges = Rs. 350
 c) Total principal amount outstanding = Rs. 4000 (Rs.1000 fresh spend +
balance Rs. 3000 outstanding from last month’s billing period)
 Hence Total Amount Due = (a) + (b) + (c) = Rs. 4888.39 + Service tax
as applicable on interest and other charges.
 ADVANTAGES OF CREDIT CARDS
 They allow you to make purchases on credit without carrying
around a lot of cash. This allows you a lot of flexibility.
 They allow accurate record-keeping by consolidating
purchases into a single statement.
 They allow convenient remote purchasing -
ordering/shopping online or by phone. They allow you to pay
for large purchases in small, monthly installments.
 Under certain circumstances, they allow you to withhold
payment for merchandise which proves defective.
 Many cards offer additional benefits such as additional
insurance cover on purchases, cash back, air miles and
discounts on holidays.
 DISADVANTAGES
 You may become an impulsive buyer and tend to overspend because
of the ease of using credit cards. Cards can encourage the purchasing
of goods and services you cannot really afford.
 Credit cards are a relatively expensive way of obtaining credit if you
don't use them carefully, especially because of the high interest rates
and other costs.
 Lost or stolen cards may result in some unwanted expense and
inconvenience.
 The use of a large number of credit cards can get you even further
into debt.
 Using a credit card, especially remotely, introduces an element of
risk as the card details may fall into the wrong hands resulting in
fraudulent purchases on the card. Fraudulent or unauthorized charges
may take months to dispute, investigate, and resolve.
 PROS & CONS TO MERCHNTS
PROS
 Credit card transaction is often more secure than
other forms of payment, such as checks
 In most cases, cards are even more secure than
cash, because they discourage theft by the
merchant's employees and reduce the amount of
cash on the premises
 Credit cards can also aid in securing a sale,
especially if the customer does not have enough
cash on his or her person or checking account.
CONTD…..
 The merchant may be charged a discount rate
of 1%-3%+ of each transaction obtained through
a credit card.
 The merchant will also pay a flat per-item
charge, called an interchange rate, for each
transaction
 Merchants with very low average transaction
prices or very high average transaction prices
are more averse to accepting credit cards