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SSCMR 2009-2011
PLASTIC MONEY
TABLE OF CONTENT
CHAPTER NO.
TOPIC
PAGE NO.
1.
OBJECTIVE OF STUDY
2.
3.
INTRODUCTION
6-8
PAYMENT OPTIONS
CONCEPT OF CREDIT CARDS
DEFINITION OF CREDIT CARDS
4
5.
8-10
6.
DIFFERENT TYPES
7.
CARDS
PROCESS OF CREDIT CARDS
14
8.
15
9.
16-17
10.
11.
OF CREDIT CARDS
NEED OF CREDIT CARDS
22-24
12.
25
13.
26
14.
27
15.
ADVANTAGES
DISADVANTAGES
OF
CREDIT 11-13
AND 29-31
OF
DEBIT
16.
CARDS
DEBIT CARDS V/S CREDIT CARDS
32-33
17.
34
18.
RESEARCH
34-39
& 40
20.
RECOMMENDATION
CONCLUSION
41
21.
BIBILOGRAPHY
42
OBJECTIVES OF STUDY
Primary objectives
Secondary objectives
To know the importance of plastic money in the daily life of consumers W.R.T credit and
debit cards.
To find out the market leader among the various banks/companies issuing credit and debit
cards
cards, either at the ATMs or at the counters. The debit card can be used to withdraw cash
from ATMs of other banks depending on whether the debit card-maker has a Visa or a
Maestro tie-up. Visa and MasterCard both confirmed yesterday that they had been notified of
the breach and had in turn notified several banks and credit card companies of the potential
data compromise. They declined to say how many companies have been notified. Credit cards
As well as convenient, accessible credit; credit cards offer consumers an easy way to track
expenses, which is necessary for both monitoring personal expenditures and the tracking of
work-related expenses for taxation and reimbursement purposes.
INTRODUCTION
Plastic money or polymer money, made out of plastic, is a new and easier way of paying for
goods and services. Plastic money was introduced in the 1950s and is now an essential form
of ready money which reduces the risk of handling a huge amount of cash. It includes debit
cards, ATMs, smart cards, etc. Credit cards, variants of plastic money, are used as substitutes
for currency Credit cards in India are gaining ground. A number of banks in India are
encouraging people to use credit card. The concept of credit card was used in 1950 with the
launch of charge cards in USA by Diners Club and American Express. Credit card however
became more popular with use of magnetic strip in 1970.
Credit card in India became popular with the introduction of foreign banks in the country.
Credit cards are financial instruments, which can be used more than once to borrow money or
buy products and services on credit. Basically banks, retail stores and other businesses issue
these. It was introduced around and has now become an essential form of ready money. One
of the main reasons for introducing plastic money, especially credit cards is to reduce the risk
of handling a huge amount of cash by individuals/merchants. The growth and popularity of
plastic money in India has been phenomenal in the last few years.
In the present day world, no one wants to be bothered by the presence of huge cash in his or
her wallet and the Indians are no exceptions. The unprecedented growth in the number
6
of credit card users has stimulated the Indian economy by a significant extent. The arrival of
malls, multiplexes, online shopping stores and shopping complexes have contributed to the
growth of the use of plastic cards.
The Best credit cards in India are usually meant for specific user group such as women,
students and small business owners. These cards are offered to the prospective customers
with appealing deals.
Over the years, Indians have been averse to credit cards. This is primarily because they
believed that spending through credit is a sure shot way of getting into the debt trap. Of
course, movies highlighting the sad state of a borrower did not exactly help matters. And
even the local kirana shops have the famous lines Aaj Nagad, Kal Udhari (cash today, credit
tomorrow).But the situation is not actually that scary. And it is all about right timing. Credit
cards can be a useful tool at the hands of savvy consumers who can effectively use the
benefits offered by cards.It is important to know that credit card is a financial tool that needs
to be used responsibly. While it ensures cash flow, it is not advisable for customers to borrow
for a longer period of time. Use it effectively and take good advantage of the time line and
clear your debts, without any additional costs.
Major Banks issuing Credit Card in India
Global player in Credit card market are Master Card, VISA Card, American Express, Diners
Club International.
7
The first 6 digits of credit cards number are known as the issuer identification number
(IIN),previously known as bank identification number (BIN).These identify the institution
that issued the to the card holder
The IIN ranges used by the major card schemes are
VISA: Card number start with a 4.
Master Card: Card start with No.51 and 55
Diners Club: Card number beginning 36 or 38
Amex Ex: Card number beginning 34 or37
PAYMENT OPTIONS
payment system. Development in banking while also giving inputs to the further development
of cash brought about a second phase in payment namely paper instructions such as cheques
and credit transfers. The requirement for greater flexibility and convenience has led to
electronic payments, and this is where plastic cards have proved their worth. It allows the
card issuers to limit the sum of money the card-holders wish to spend. The spending of cardholders who have defaulted on payments or who are over their credit limit can be restricted
until the balances are cleared.
That on the production of it (whether or not some other action is also required), he
will supply, cash, goods and services (or any of them) on credit, or
That were, on the production of it to third party (whether or not any other action is
also required), the third party supplies cash, goods and services (whether or not
deducting any discount or commission), in return for payment to him by the
individual.
In very simple words credit card can be termed as an unsecured personal loan offered to
customers by the banks where the card-holder could purchase goods and services from
authorized merchant or merchant establishments (MEs) of the bank up to a fixed limit on
credit. Such credit is normally made available for a period of 30 to 45 days.
A credit card can also be used to secure airline tickets and car rentals. Having a credit card
can make purchases and reservations easier; however, a credit card should be used
responsibly
so
that
the
consumer
does
not
over
extend
his
finances.
Credit cards are usually issued by banks or other financial institutions. Some credit cards may
be available online.
9
10
local merchants for small purchases. After the sale was completed, the merchant deposited
the scrip in a bank account, and the bank billed the customer for the total scrip issued.
Parties involved:
Cardholder: The owner of the card used to make a purchase; the consumer.
Card-issuing bank: The financial institution or other organization that issued the credit card to
the cardholder. This bank bills the consumer for repayment and bears the risk that the card is
used fraudulently. American Express and Discover were previously the only card-issuing
banks for their respective brands, but as of 2007, this is no longer the case.
11
Merchant: The individual or business accepting credit card payments for products or services
sold to the cardholder
Acquiring bank: The financial institution accepting payment for the products or
services on behalf of the merchant.
Merchant account: This could refer to the acquiring bank or the independent sales
organization, but in general is the organization that the merchant deals with.
Transaction network: The system that implements the mechanics of the electronic
transactions. May be operated by an independent company, and one company may operate
multiple networks. Transaction processing networks include: Cardnet, Nabanco, Omaha,
Paymentech, NDC Atlanta, Nova, Vital, Concord EFSnet, and VisaNet.
Charge card
A charge card carries all the features of credit cards. However, after using a charge card you
will have to pay off the entire amount billed, by the due date. If you fail to do so, you are
likely to be considered a defaulter and will usually have to pay up a steep late payment
charge.
At the time of using the card he is not declared not as a defaulter even if misses due date. A
2.95 per cent late payment fees (this differs from one bank to another) is levied in the next
billing statement.
12
Amex card
Amex stands for American Express and is one of the well-known charge cards. This card has
its own merchant establishment tie-ups and does not depend on the network of MasterCard or
Visa.
Smart card
A smart card contains an electronic chip which is used to store cash. This is most useful when
you have to pay for small purchases, for example bus fares and coffee. No identification,
signature or payment authorisation is required for using this card.
The exact amount of purchase is deducted from the smart card during payment and is
collected by smart card reading machines. No change is given. Currently this product is
available only in very developed countries like the United States and is being used only
sporadically in India.
Photo card
In this photograph is imprinted on a card, and then you have what is known as a photo card.
Doing this helps identify the user of the credit card and is therefore considered safer. Besides,
in many cases, your photo card can function as your identity card as well.
13
Global card
Global cards allow you the flexibility and convenience of using a credit card rather than cash
or travellers checks while travelling abroad for either business or personal reasons.
Co-branded card
Co-branded cards are credit cards issued by card companies that have tied up with a popular
brand for the purpose of offering certain exclusive benefits to the consumer. .
Affinity card
The card issuer ties up with popular organizations/ institutions which are often non-profit
organizations (Citi-WWF card or the stanch art-Cricket cards) to offer an affinity card. When
the card is used, a certain percentage is contributed to the organization /institution by the card
issue
Visa card: Visa, Inc., commonly called VISA, is an economic joint venture of 21,000
financial institutions that issue and market Visa products including credit and debit cards. The
company was originally named Visa International Service Association. The name change
occurred in the fall of 2007 as a part of Visas restructuring and IPO plan. The company is
based in San Francisco, California, USA.
summarized
Charge
The holder can repay the whole amount at the end of the month, without charge provided no
cash advance has been taken.
Cash
On presentation at the appropriate banks, subject to check, cash can be obtained. In most
cases can also be used in ATMs to obtain cash.
Cheque guarantee
A cheque drawn on a bank may be guaranteed up to a published limit provided it is
accompanied by a Cheque Guarantee Card (or in some cases a Visa or MasterCard card)
issued by the bank on which it is drawn.
Cheque encashment
Cheque guaranteed as above may be used to obtain cash from branches of most banks,
although a charge may be levied in certain circumstances.
International
If the card is a member of Visa International or MasterCard International, you can use your
card at many countries where there are a lot banks who are members of them.
Perhaps the most significant fact to emerge from the summary of card functions is that
strictly speaking, they are not debit cards. Although they can be used to obtain cash via ATM,
the debit will be made from the credit card account and not from the holder's bank account.
The credit cards discussed above are bank cards. Different bank cards have different card
functions. The functions of bank cards really depend on the individual bank itself. Some bank
card may have all of the above functions and some may not.
There other credit cards that are issued by retail stores such as Petrol Card, Quasi Card and
Private Label Card which may have some of the above functions mentioned above.
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Miscellaneous Fees
Things like late-payment fees, over-the-credit-limit fees, set-up fees, and return-item fees are
all quite common these days and can represent a serious amount of money out of your pocket
if you get whacked for any of these fees.
Incentives
Since there are so many credit card companies, competition is stiff. Adding incentives to their
offers is one of the more popular ways to tip the scales in their favor. Incentives like rebates
on purchases, frequent flyer miles on certain airlines, and extended warranties on purchases
are just a few of the bonuses that card companies will now offer.
For those of you who collect and use your frequent flyer miles, they also have added
incentives like travel insurance and car rental insurance for your convenience. Of course, they
are hoping that with all this traveling, you are using their card to foot at least some of the
bill.
Rewards
Many card companies are looking to keep your business and are therefore making it worth
your while to use their card. Just simply by using their card you can accumulate points that
will in turn earn you rewards. What kind of reward depends solely on the amount of points
you accumulate. Since you can't accumulate these points without charging things on your
card, this is a classic case of 'you have to spend money to save money.'
Bottom line is this: Know what you need and what you don't. No sense in paying for any
features that you won't use.
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APR
The annual percentage rate (APR) is the interest rate applied a balance carried beyond the
grace period. Credit cards can have different APRs for different types of balances, e.g.
balance transfers or purchases. Balance transfers and cash advances usually have higher
APRs than for purchases.
Your APR may increase when you're late on your payment to a particular creditor, and other
creditors if your card agreement includes a universal default clause.
APRs can be fixed or variable. A fixed APR can change, but the creditor must inform you in
writing before changing the rate. A variable APR changes from time to time.
Grace Period
The grace period is the amount of time you have to pay your balance in full before a finance
charge is applied to your purchase. If you carried a balance from the previous month, you
may not have a grace period for your new purchases. In addition, balance transfers and cash
advances typically do not have a grace period. When balances don't have an applicable grace
period, interest is applied right away.
To find out the length of the grace period refer to the credit card application or your credit
card agreement. Your monthly statements should also include the number of days in the grace
period.
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Credit cards can make it easier to buy things. If you don't like to carry large amounts of
cash with you or if a company doesn't accept cash purchases (for example most airlines,
hotels, and car rental agencies), putting purchases on a credit card can make buying things
easier.
Protection of Purchases
Credit cards may also offer you additional protection if something you have bought is
lost, damaged, or stolen. Both your credit card statement (and the credit card company)
can vouch for the fact that you have made a purchase if the original receipt is lost or
stolen. In addition, some credit card companies offer insurance on large purchases.
Having a good credit history is often important, not only when applying for credit cards,
but also when applying for things such as loans, rental applications, or even some jobs.
Having a credit card and using it wisely (making payments on time and in full each
month) will help you build a good credit history.
Emergencies
Credit cards can also be useful in times of emergency. While you should avoid spending
outside your budget (or money you don't have!), sometimes emergencies (such as your
car breaking down or flood or fire) may lead to a large purchase (like the need for a rental
car or a motel room for several nights.)
In addition to the benefits listed above, some credit cards offer additional benefits, such as
discounts from particular stores or companies, bonuses such as free airline miles or travel
20
discounts, and special insurances (like travel or life insurance.) While most of these
benefits are meant to encourage you to charge more money on your credit card
(remember, credit card companies start making their money when you can't afford to pay
off your charges!) the benefits are real and can be helpful as long as you remember your
spending limits.
If you lose your card or wallet, report it to your credit card company immediately.
Don't loan your credit card to anyone and only give out your credit card information
to trusted companies or Web sites.
Check your statement closely at the end of each month to make sure all charges are
yours.
You can find out more about protecting your personal information by visiting
our Personal Safety course.
Credit cards can make life easier and be a great tool, but if they aren't used wisely they can
become a huge financial burden. If you do decide to use credit cards, remember these simple
rules:
Pay off your balance on all of your credit cards at the end of each month.
Don't loan your credit or give out your credit card information to anyone but reliable
companies
22
saved up. This much money should be able to handle any emergency that comes your way. If
you are stranded on the road and need to be towed you can use your debit card to pay for the
tow, and your emergency fund to cover those expenses.
4. Credit Card to Save Money on Purchases
Many stores will offer discounts for having a store credit card. Stores do not offer cards to
give you discounts; they offer cards because they realize that while most people intend to pay
the card off every month, few actually do. They make more back on interest than they the
discount they offer to you.
5. Credit Card to Earn Rewards
This is a dangerous game to play. If you are responsible and pay off your balance in full each
month, you may consider having a rewards credit card. You should make sure that you have a
credit card with no annual fee. Additionally it is important to remember that the credit card
offers its rewards, because the company realizes that most people are not going to pay off
their credit cards in full each month. This means that they make more money off the
customers, then rewards they give out.
Fraud Question
What kinds of credit card frauds are more prevalent?
Counterfeit and CNP (card not present) continue to be the two main types. Physical
theft of cards is not such an issue. Since online transactions typically don't require the
card to be presented, the information sitting on the card and other customer
authentication details are sometimes compromised and used for transactions. This is
becoming a big problem. However, India has been pro-active in this regard and has
introduced the two-factor identification system, wherein a customer transacting online
must also have a T-Pin for transactions where the card is not present.
24
They should first opt for customer alerts each time there is a transaction. Second
would be dynamic authentication by using chip cards.
Also, they should be careful of hidden cameras in ATMs and should watch for fake
ATM fronts, where your card can be skimmed
26
Debit cards may also allow for instant withdrawal of cash, acting as the ATM card for
withdrawing cash and as a check guarantee card. Merchants may also offer cash
back facilities to customers, where a customer can withdraw cash along with their purchase.
Debit cards can also allow for instant withdrawal of cash, acting as the ATM card for
withdrawing cash and as a cheque guarantee card. Merchants can also offer "cash back"/"cash
out" facilities to customers, where a customer can withdraw cash along with their purchase.
Debit card
27
There are currently three ways that debit card transactions are processed: online
debit (also known as PIN debit), offline debit (also known as signature debit) and
the Electronic Purse Card System. It should be noted that one physical card can
include the functions of an online debit card, an offline debit card and an electronic
purse card. Although many debit cards are of the Visa or MasterCard brand, there are
many other types of debit card, each accepted only within a particular country or
region.
29
Smart-card-based electronic purse systems in which value is stored on the card chip,
not in an externally recorded account, so that machines accepting the card need no
network connectivity are in use throughout Europe since the mid-1990s.
30
A consumer who is not credit worthy and may find it difficult or impossible to obtain
a credit card can more easily obtain a debit card, allowing him/her to make plastic
transactions. For example, legislation often prevents minors from taking out debt,
which includes the use of a credit card, but not online debit card transactions.
For most transactions, a check card can be used to avoid check writing altogether.
Check cards debit funds from the user's account on the spot, thereby finalizing the
transaction at the time of purchase, and bypassing the requirement to pay a credit card
bill at a later date, or to write an insecure check containing the account holder's
personal information.
Like credit cards, debit cards are accepted by merchants with less identification and
scrutiny than personal checks, thereby making transactions quicker and less intrusive.
Unlike personal checks, merchants generally do not believe that a payment via a debit
card may be later dishonored.
Unlike a credit card, which charges higher fees and interest rates when a cash advance
is obtained, a debit card may be used to obtain cash from an ATM or a PIN-based
transaction at no extra charge, other than a foreign ATM fee.
Disadvantages of debit cards
Use of a debit card is not usually limited to the existing funds in the account to which
it is linked, most banks allow a certain threshold over the available bank balance
31
which can cause overdraft fees if the users transaction does not reflect available
balance.
Many banks are now charging over-limit fees or non-sufficient funds fees based upon
pre-authorizations, and even attempted but refused transactions by the merchant
(some of which may be unknown until later discovery by account holder).
Many merchants mistakenly believe that amounts owed can be "taken" from a
customer's account after a debit card (or number) has been presented, without
agreement as to date, payee name, amount and currency, thus causing penalty fees for
overdrafts, over-the-limit, amounts not available causing further rejections or
overdrafts, and rejected transactions by some banks.
In some countries debit cards offer lower levels of security protection than credit
cards. Theft of the users PIN using skimming devices can be accomplished much
easier with a PIN input than with a signature-based credit transaction. However, theft
of users' PIN codes using skimming devices can be equally easily accomplished with
a debit transaction PIN input, as with a credit transaction PIN input, and theft using a
signature-based credit transaction is equally easy as theft using a signature-based
debit transaction.
In many places, laws protect the consumer from fraud much less than with a credit
card. While the holder of a credit card is legally responsible for only a minimal
amount of a fraudulent transaction made with a credit card, which is often waived by
the bank, the consumer may be held liable for hundreds of dollars, or even the entire
value of fraudulent debit transactions. The consumer also has a shorter time (usually
just two days) to report such fraud to the bank in order to be eligible for such a waiver
with a debit card, whereas with a credit card, this time may be up to 60 days. A thief
who obtains or clones a debit card along with its PIN may be able to clean out the
consumer's bank account, and the consumer will have no recourse
32
They help people to be disciplined financially, since one cannot splurge with the
limited amount of funds deposited for the card.
A person with poor credit can obtain a debit card too much trouble.
They provide freedom from carrying cash checks while traveling, herby offering more
safety.
Bank of America
Citibank
American Express
Standard Chartered
HSBC
Similarities
The same financial institutions offer both debit cards and credit cards. Both cards
offer special rewards, such as points and cash back on purchases made through the
card.
Debit cards and credit cards can be used to make online payments with the help of the
pin number assigned to them.
They can be used to withdraw money from ATMs depending on the cash limit
available on these cards.
Differences
In the case of a credit card, the issuer offers credit and overdraft facilities. This facility is
not available with a debit card, which will only debit payments from existing and
available funds within the cardholders account.
A credit cardholder therefore has a monthly bill to pay in every month that the card is
used. If they dont pay that bill, high interest charges are applied. A debit card holder is
free from the hassle of paying those bills and from the risk of building up large debts to
credit card companies.
The reverse side of the debit card will display the names or symbols of the various ATM
systems that will accept the card. Debit card can be used at any ATM in the world as long as
the ATM displays one of the same system names or symbols that is on debit card. When
obtaining funds at an ATM in a foreign country the funds dispersed will be in the currency of
the country going to visit.
DEBIT CARDS
Combining the wide acceptability of a credit card and the thoughtful prudence of an ATM
card, the ICICI Bank Debit Card is the most convenient accessory. No more fear of
overspending. No more searching for the nearest ATM. Only more comfort and convenience
in the debit cards provided by ICICI.
Various Products
35
DEBIT CARD
HDFC BANK Debit Cards give you complete and instant access to the money in accounts
without the risk or hassle of carrying cash.
TYPES OF DEBIT CARDS
Easy Shop International Debit Card
Easy Shop International Gold Debit Card
Easy Shop International Business Debit Card
Easy Shop Woman's Advantage Debit Card
Kisan card
RESEARCH
COMPARISION BETWEEN HDFC BANK AND ICICI BANK
36
BOARD OF DIRECTORS
Managing Director
Aditya Puri
37
Executive Director
Paresh Sukhthankar
Executive Director
Harish Engineer
Chairman
C.M. Vasudev
Pralay Mondal
38
BOARD OF DIRECTORS
Chanda Kochhar
Sandeep Bakhshi
Executive Director
N.S.Kannan
CLASSIC CARDS
Silver Credit Card
Value plus Credit Card
Health plus Credit Card
Gold Credit Card
Titanium Credit Card
TYPES OF CARDS
Premium Cards
Classic Cards
may have been lower, we were able to cross-sell products so that the overall returns
were better. We may have grown slower than our peers, but the risks were lower."
HDFC Bank ventured into retail lending in 1998, a year before ICICI Bank. But in
products like credit cards, it was slow to get off the mark. For instance, its credit cards
were launched only two years ago.
By then ICICI Bank had been present in the credit card business for nearly three
years. According to some industry experts, growth for ICICI Bank may have come at
the cost of quality.
BETTER PICK UP
The number tell story
Mar-10
HDFC
Bank
ICICI
Bank
Branches
1725
2016
ATMs
4232
5219
Cities
789
932
Total assets
(USD)
39.723
108.7
Revenue(Rs
crore)
20,666
59,599
Credit cards
(Mn)
2.6
5.14
customers
12
24
41
(Mn)
Profit
(crore)
3,032
4,843
ICICI Bank has issued 5.14 million credit cards -- that is more than twice the number of
HDFC Bank's credit card users. However, industry observers point out that ICICI Bank's
effective users for credit cards may not be high.
However, consultants believe that HDFC Bank could have leveraged its parent's customers
far more effectively to cross-sell products and grow faster.
Says a banking consultant, "While HDFC Bank has about two years to get ready for the
future, ICICI Bank probably has three years." Should HDFC Bank and its parent be merged,
it could catapult them to a new league.
But round one of the banking sweepstakes has clearly gone to ICICI Bank.
direct communication right rather than focus on the masses. Meeting the customer
face-to-face is important."
Is the brand visible enough? The ICICI brand does have greater visibility, though that
HDFC Bank is well-known even in smaller towns.
It should provide online training and for those who are in jobs and
want to become advisors ICICI should provide evening training
classes, so that they can join the training after doing there jobs.
CONCLUSION
In the last two years, spending pattern through plastic money has changed drastically.
Travelling, dining and jewellery are the top three purchases that Indians make through
credit cards. Two years ago, it was jewellery and apparel purchases that formed the
largest chunk of purchases through plastic money. Fuel accounts for a very small
portion of credit card purchases as these are largely paid through debit cards.
Consumers were not only more open to the possibility of owning a financial card, but were
also more than willing to use their cards to settle dues. The status symbol aspect of owning
and using cards, too, played its part in bringing about such robust growth over the space of a
single year. Debit cards, in particular, proved immensely popular.
According to projections for the 2003-2008 period, the number of financial cards in
circulation will register a compounded annual growth rate of nearly 51 per cent so the
satisfaction of consumers has also increased. There are many ethical issues and
challenges for plastic money issuing banks/companies. Security relating to card
should be first priority for each bank/company.
Consumers are preferring these cards mostly for shopping online E-commerce has
given a better way to use the plastic money. At last it is concluded that plastic money
44
has a very bright future in the coming years because of the increasing trend of ecommerce.
After doing a research and studying the materials available on internet, newspapers,
and journals. I want to conclude that people prefers ICICI Bank more than HDFC
BIBLIOGRAPHY
Books
www.hdfcbank.com
www.google.com
www.icicibank.com
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