PLASTIC MONEY

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. This book on plastic money is divided into two sections titled Concepts and
Experiences. The former covers articles on the emergence of plastic money, different types of
plastic cards and their growth in India and other related issues. An experience discusses the
experiences of banks like Standard Chartered, Citibank, which deal with plastic money and their
growth in the market.
Plastic money are one of those types of innovation through which the customers can
make use of banking services just by awning the card issued by bank and too without restricting
himself in the official banking hours. Plastic money as the component of e banking has been use
in the country for many years now. Payment by card is now becoming a much preferred mode for
making retail payment nowhere days. Thus, plastic money are such payment tool which gives a
customer an opportunity do non cash payment of good and services.

MEANING
Plastic money refers to credit cards, you use them whenever you want and pay later (with
interest, of course). It makes it too easy for people to buy things they normally could not afford,
which makes it easier to get into debt.

PLASTIC MONEY: SIGN OF MODERNIZING ECONOMY

Money is always regarded as an important medium of exchange and payment tool. Initially
barter system was used as the significant mode of payment. Over the years, money has
changed its form from coins to paper cash and today it is available in formless form as
electronic money or plastic card. Hence, the major change in banks which has been brought
in by technology is through introduction of products which are alternative to cash or paper
money. Plastic cards are one of those types of innovations through which the customers can
make use of banking services just by owning the card issued by bank and that too without
restricting himself in the official banking hours. Payment by cards is now becoming a much
preferred mode for making retail payments in the country. Thus, plastic cards are such
payment tool which gives a customer an opportunity of non cash payment of goods and
services and are designed to facilitate small value retail payments by offering a substitute for
bank notes and coins and thus to complement traditional payment instruments.

ADVANTAGES OF PLASTIC MONEY

1. Plastic money, unlike paper money, will not burn easily and can resist higher
temperatures than paper money.
2. You have no fear to be theft. And its easy to use.
3. Plastic money, unlike paper money, will not burn easily and can resist higher
temperatures than paper money.
4. Paper money also picks up dirt and stains more easily than plastic money.
5. Plastic money is the debit and credit cards. Plus point of plastic money is
6. That you won't have to carry your cash around all the time.
7. It also doesn't wear after time as paper does nor does it rip and tear.
8. Give you incentives, such as reward points, that you can redeem.
9. Be more convenient to carry than cash.
10. Provide a convenient payment method for purchases made on the Internet
11. Help you establish a good credit history.

DISADVANTAGES OF PLASTIC MONEY

1. Cost much more than other forms of credit, such as a line of credit or a
2. Personal loan, if you don't pay on time.
3. Damage your credit rating if your payments are late.
4. Allow you to build up more debt than you can handle.
5. Have complicated terms and conditions.
6. It also doesn't wear after time as paper does nor does it rip and tear.
7. Paper money also picks up dirt and stains more easily than plastic money.
8. I can't really see any advantages to have paper money, unless it is cheaper to make.

9. Its disadvantage is that, some extra money will be deducted for the bank services.

TYPES OF PLASTIC MONEY

1. Credit card: - A credit card is plastic money that is used to pay for products and services
at over 20 Million locations around the world. All you need to do is produce the card and sign a
charge slip to pay for your purchases. The institution which issues the card makes the payment to
the outlet on your behalf; you will pay this 'loan' back to the institution at a later date.

2. Debit card: - Debit cards are substitutes for cash or check payments, much the same way
that credit cards are. However, banks only issue them to you if you hold an account with them.
When a debit card is used to make a payment, the total amount charged is instantly reduced from
your bank balance. Don't borrow on your credit card! Here's why a debit card is only accepted at
outlets with electronic swipe-machines that can check and deduct amounts from your bank
balance online.

3. 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. When you
use a credit card you are not declared a defaulter even if you miss your due date. A 2.95 per cent
late payment fees

4. 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. Credit cards: Remember these dos and don'ts. This card is typically meant
for high-income group categories and companies and may not be acceptable at many outlets.

6. Master & visa card: Master and Visa card are global non-profit organizations dedicated to promote the growth of the
card business across the world. They have built a vast network of merchant establishments so
that customers worldwide may use their respective credit cards to make various purchases

7. 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 authorization 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

CREDIT CARD

INTRODUCTION
A credit card is a small plastic card issued to users as a system of payment. It allows its
holder to buy goods and services based on the holder's promise to pay for these goods and
services. The issuer of the card grants a line of credit to the consumer or the user) from which the
user can borrow money for payment to a merchant or as a cash advance to the user. Usage of the
term "credit card" to imply a credit card account is a metonym.
When a purchase is made the user would indicate consent to pay by signing a receipt with a
record of the card details and indicating the amount to be paid. Issuer agrees to pay the merchant
and the credit card user agrees to pay the card issuer.

DEFINATION
The credit card can be defined as A small plastic card that allows its holder to buy goods
and services on credit and to pay at fixed intervals through the card issuing agency

MEANING
A credit card is a card or mechanism which enables card holder to purchase goods,
travels and dine in a hotel without making immediate payments. The holders can use the cards to
get credit from banks up to 45 days.

TYPES OF CREDIT CARD

Credit card now is of various types with different fees, interest rates and rewarding programs.
When applying for a credit card, it is important to learn of their diverse types to know the one
best suited to their lifestyle and financial status.

Standard Credit Card:

This is the most commonly used. One is allowed to use money up to a certain limit. The account
holder has to top up the amount once the level of the balance goes down. An outstanding balance
gets a penalty charge.

Premium Credit Card:

This has a much higher bank account and fees. Incentives are offered in this over and above that
in a standard card. Credit card holders are offered travel incentives, reward points, cask back and
other rewards on the use of this card. This is also called the Reward Credit Card. Some examples
are: airlines frequent flier credit card, cash back credit card, automobile manufacturers' rewards
credit card.

Secured Credit Card:

People without credit history or with tarnished credit can avail this card. A security deposit is
required amounting to the same as the credit limit. Revolving balance is required according to
the 'buying and selling' done.

Limited Purpose Credit Card:

There is limitation to its use and is to be used only for particular applications. This is used for
establishing small credits such as gas credits and credit at departmental stores. Minimal charges
are levied.

Charge Credit Card:

This requires the card holder to make full payment of the balance every month and therefore
there is no limit to credit. Because of the spending flexibility, the card holder is expected to have
a higher income level and high credit score. Penalty is incurred if full payment of the balance is
not done in time.

Specialty Credit Card:

Specialty Credit Card is used for business purposes enabling businessmen to keep their
businesses transactions separately in a convenient way. Charge cards and standard cards are
available for this. Also, students enrolled in an accredited 4-year college/university course can
avail this benefit.

FEATURES OF CREDIT CARD

Alternative to cash: -

Credit is a better alternative to cash. It removes the worry

of carrying various currency denominations to pay at the trade counter. It is quite easy
and way fast to use a credit card rather than waiting for completion of cash transaction

Credit limit: - The credit cardholder enjoys the facilities of a credit limit set on his
card. This limit of card is determined by the credit card issuing entity only after analyzing
the credit worthiness of the cardholder

Record keeping of all transaction: -

Credit card entitle like banks or NBFCs

keeps a complete record of all transaction made by their credit cardholder. Such a record
helps these entitles to raise appropriate billing amounts payable by their cardholder, either
on a monthly or some periodic basis.

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

Additional charges if 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 made on time then the card company charged extra cost

ADVANTAGES OF CREDIT CARD

Goods and services can purchase in large number of outlets without cash or cheque. The card
is useful in emergency, and can save embarrassment.

The risk factor of carrying and storing cash is avoided. It is convenient for him to carry credit
card and he has trouble free travel and may purchase his without carrying cash or cheque.

Months purchases can be settled with a single remittance, thus, tending to reduce bank and
handling charges.

The card holder has the period of free credit usually between 30-50 days of purchase.

Availing credit with minimum formality.

The credit card saves trouble and paper work to traveling business man.

DISADVANTAGES OF CREDIT CARD

Some credit card transactions take longer time than cash transactions because of various
formalities.

The customer tend to overspent out of immerse happiness.

The cardholder is responsible for charges due to loss or theft of the card and the bank may
not be party for loss due to fraud or collusion of staff, etc

Customers may be denied cash discount for payment through card.

Avoid the entire cost and security problem involved in handling cash.

Losses to bad debts and reduced an additional liquidity.

It also allows him to delegate spending power to add on members.

How to Use Credit Cards Safely - Online and Offline:

Possession of a credit card immediately transfers you to an elite society! One is looked down
upon if one does not have a credit card.
Credit cards are increasingly being used in buying and selling online as well as offline. This is an
age of e-commerce. Along with this increasing use of the card comes the valid fear of theft.
Large amounts of money have been stolen from various people's bank accounts because of this
undercover illegal activity.
Guarding the details of our credit card is more important than that required for our debit card.
Theft of credit cards/their information not only deprives us of our money but at times even of our
own identity. Out there are not just money thieves but identity thieves as well!
We may be making purchases offline with a credit card at a grocery store or paying up at a
restaurant. At the counter our credit card needs to be swiped to deduct the payment from the
bank. That is the time one has to be very alert. We should make sure that there is no magnetic
reader connected behind the scenes which can read the card's full details within seconds.
Immediately inform the company/the bank in case the credit card/its details are stolen.

Maintain great precautions with your credit card. Ensure to keep it on you all the time. Do not
ever give away any of its information to strangers or even friends. Keep one copy of the card
details like its number, expiry date and the security number safely somewhere e.g. in the house,
and another on your person but never keep with the credit card or in the wallet.
Online use of the credit card is just as important as its use offline since either way, it is the details
of the card the thieves are after.
When making online purchases, ensure to send your credit card details on an encrypted
connection. This can be checked on the address bar of the web browser. A website with the link
'https' is secure, as the link is using Secure Sockets Layer protocol, a powerful encryption
system. If it is without hes i.e. just 'http' it is not an encrypted connection and therefore unsafe
for credit card transactions.
At the same time make sure that the person on the other side of the 'https' is not a thief himself!
You will be confidently sending all your credit card details right into his lap! Actually, such
vendors give themselves away because they themselves are selling illegal things like drugs
without prescriptions, pornography etc... So beware.
Ensure that the website domain is proper and not an imitation e.g. 'paypal.com' and not
'paypals.com'. Another worthwhile precaution is never to click on any link sent by an unknown
person through email.
Because of the fragility in use of permanent credit cards, nowadays, disposable, single use credit
cards are increasingly being used ensuring enhanced safety and peace of mind while making
online money transactions.

STEPS FOLLOWED IN CREDIT CARD TRANSACTION

1. AUTHORIZATION
For Internet Merchants, the shopping card is connected to or integrated with a Payment Gateway.
For Retail Merchants, the card is swiped through a magnetic reader on the point of sale terminal
the authorization is transmitted to the appropriate card issuer for approval. The issuing bank of
card issuer authenticates the card holder and approves or declines the transaction amount.

2. Merchant balancing
This is also known as batching out. Most pos terminals and all payment gateway per firm an auto
close functions at the end of the day and batch out automatically.

3. Capture
The front end processor matches the authorization data to the settlement data and transmits the
card capture file to a back end processor for V/MC transactions or to the appropriate card issuer
for other card types.

4. Clearing
During this stage the back end processor performs compliance checks and risk management
procedures and transmits the transaction to V/MC or to the appropriate card issuer for other card
types.

5. Interchange (VS/MC Only)

During this stage the V/MC Association sort the transactions by issuing bank and transmit them
to the appropriate issuing banks for settlement.

6. Settlement
During this stage the Issuing Bank calculates fees and deductions and routs the net funds to the
appropriate Card Issuer which determines the daily deposits for the merchants.

7. Merchant ACH
During this stage the acquiring bank or card issuer transmits the merchant deposit to the
merchants checking account.

Credit Card Issuing Banks in India

If you are planning to get a credit, the first thing you should know is which the credit card
issuing banks in India are. There are several banks which provide credit cards in India. Given
below is a list of Credit Card service providing banks along with the various types of Credit
Cards they offer.

Indian Banks offering Credit Card facility to its customers are:

Axis Bank

Bank of Baroda

Canara Bank

Corporation Bank

HDFC

ICICI Bank

Indian Overseas Bank

Kotak Mahindra.

Major Foreign Banks which offer Credit Card service in India are:

ABN Amro

American Express

Barclays Bank

Citibank

HSBC

Standard Chartered

DIFFERENT CLASSES OF CREDIT CARD

SILVER CARD

Silver credit cards rank lowest among the metal named cards, and, because of lower
prestige when compared to gold and platinum cards, are commonly known as basic and standard
credit cards. Silver credit cards come with advantages such as lower annual membership fees if
there is any, and a lower threshold salary which banks use to evaluate your application in case
you should apply.

Silver credit cards will provide you with almost the same credit limit as other cards
provided you have a good credit history. You can also avail of 0% interest balance transfer
schemes which are made available for a period of 6-9 months for silver card holders.
There are also some disadvantages to using silver credit cards. One would be the lower
cash advance limits, less rewards and promotional packages, and less travel perks compared to
gold and platinum cards.

GOLD CARD

Individuals with higher income can avail a gold credit card from any bank in India. Applicants
for any type of gold credit card should have a good credit score. The common features available
with a gold credit cards are - higher cash withdrawal limits, higher credit limits, add-on card
facility for family members like spouse, parents or children, travel insurance, cash back offers,
rewards program and much more.

PLATINUM CARD

As one of the most popularly availed credit card category, Platinum credit cards come loaded
with exciting benefits ranging from lifestyle to dining to entertainments to shopping. Platinum
credit cards come with slightly higher annual, joining and renewal fees when compared to other
category of cards. As a superior card, Platinum credit card offers some of the best benefits on the
planet. Every Platinum credit card come with an exceptional welcome package with gift
vouchers from retail brands, annual spend rewards, accelerated rewards points, cash back offers,
Priority Pass membership with access to premium airport lounges, renewal gift vouchers, global
lifestyle and golfing privileges, easy cash withdrawals, fuel surcharge waiver, add-on cards for
family, emergency card replacement services, etc. Platinum card members generally also get
other exclusive privileges, deals and offers with every card availed, depending on the financial
institution they are banking with.

CREDIT CARD OPERATIONS OF BANK

RBI guidelines
Pursuant to the announcement made in the Annual Policy Statement 2004-05, the Reserve
Bank of India had constituted a Working Group on Regulatory Mechanism for Cards. The Group
has suggested various regulatory measures aimed at encouraging growth of credit cards in a safe,
secure and efficient manner as well as to ensure that the rules, regulations, standards and
practices of the card issuing banks are in alignment with the best customer practices. The
following guidelines on credit card operations of banks have been framed based on the
recommendations of the Group was also the feedback received from the members of the public,
card issuing banks and others. All the credit card issuing banks / NBFCs should implement these
guidelines immediately.

Each bank / NBFC must have a well documented policy and a Fair Practices Code for
credit card operations. In March 2005, the IBA released a Fair Practices Code for credit card
operations which could be adopted by banks / NBFCs. The bank / NBFC's Fair Practice Code
should, at a minimum, incorporate the relevant guidelines contained in this circular.

CREDIT CARD FRAUAD

Credit card fraud is a wide-ranging term for theft and fraud committed using or involving
a payment card, such as a credit card or debit, as a fraudulent source of funds in a transaction.
[1] The purpose may be to obtain goods without paying, or to obtain unauthorized funds from an
account. Credit card fraud is also an adjunct to identity theft. According to the United
States Federal Trade Commission, while identity theft had been holding steady for the last few
years, it saw a 21 percent increase in 2008. However, credit card fraud, that crime which most
people associate with ID theft, decreased as a percentage of all ID theft complaints for the sixth
year in a row.

Although incidence of credit card fraud is limited to about 0.1% of all card transactions, this has
resulted in huge financial losses as the fraudulent transactions have been large value transactions.
In 1999, out of 12 billion transactions made annually, approximately 10 millionor one out of
every 1200 transactionsturned out to be fraudulent.[3] Also, 0.04% (4 out of every 10,000) of
all monthly active accounts was fraudulent. Even with tremendous volume and value increase in
credit card transactions since then, these proportions have stayed the same or have decreased due
to sophisticated fraud detection and prevention systems. Today's fraud detection systems are
designed to prevent one twelfth of one percent of all transactions processed which still translates
into billions of dollars in losses.

DEBIT CARD

INTRODUCTION
A debit card (also known as a bank card or check card) is a plastic card that provides an
alternative payment method to cash when making purchases. Functionally, it can be called an
electronic cheque, as the funds are withdrawn directly from either the bank account or from the
remaining balance on the card. In some cases, the cards are designed exclusively for use on the
Internet, and so there is no physical card.

In many countries the use of debit cards has become so widespread that their volume of
use has overtaken the cheque and, in some instances, cash transactions.

Like credit cards, debit cards are used widely for telephone and Internet purchases and, unlike
credit cards, the funds are transferred immediately from the bearer's bank account instead of
having the bearer pay back the money at a later date.

Debit cards may also allow for instant withdrawal of cash, acting as the ATM card for
withdrawing cash and as a cheque guarantee card. Merchants may also offer cash back facilities
to customers, where a customer can withdraw cash along with their purchase.

FEATURES OF DEBIT CARD

It is a combination of a Cheque and ATM card. Therefore, there are no fees for using the
ATM for cash withdrawal, or as a debit card for purchase.

The Debit Card services in meant for withdrawals against the balance already available in
the designated account.

It is the card holders obligation to maintain sufficient balance in the designated account
to meet withdrawals and service charges.

A Debit card is more affordable than credit card. We just own bank account for all our
transactions. No credit period. Our bank account is debited immediately.

No credit check is required to get a Debit card.

Use of card is terminated without notice, upon the death, bankruptcy or insolvency of the
cardholder or for other valid reasons.

Spending is limited to our bank balance.

ADVANTAGES OF DEBIT CARD

One of the biggest advantages of having a debit card is you dont need to push yourself under
pressure since the money is yours. Credit cards encourage you to spend money, but debit
cards encourage you to earn money.

Always cards are much more comfortable than cash. Literally a thin card is better than 20 or
30 notes in your wallet. It makes very fewer chances of loose your money to thieves.

Unlike credit cards, debit cards are easy to get from the bank. Just do some paper works and
you will get your debit card in 1 or 2 weeks once you are eligible to use.

After all, we all are human beings. If we have more money, we spent more. This is the
chance for credit card suppliers; they provide more money and encourage us to spend more.
But as long as you only have debit cards, you never exceed the budget limits.

Having a debit card is protecting you in some way. There is some everyday ATM withdrawn
limit which is good for you. if someone steal your card, they wont withdraw all amount from
you card in a day. Next day bank will deactivate your card as soon as you inform them.

DISADVANTAGES OF DEBIT CARD

In emergency situations credit card give you a hand while debit card does not do so unless
you maintain a good balance on your debit card. If you dont have money in emergency
situations it will push you to distress.

Debit card means whatever you earn can spendable and no more. You wont get any benefits
from your debit cards. But some banks like NatWest bank in the UK provides debit cards,
named Platinum or Silver or Gold. If you get one of these cards, you will get some benefits
but you need to pay some extra money monthly to the bank.

Fees applied in different ATMs There are some charges applied when you withdraw money
from different bank ATMs.

When you have a debit card, fees are likely a part of your life as well. Banks inflict a wide
variety of different fees to debit card holders, which can add up very fast. Some of these
include monthly use charges, major overage fees, and transaction fees or limits.

If the card holder forgot the password of the debit card then the card holder cannot withdraw
the money.

In case of theft if thief got the card password he can withdraw money and this money is
deducted from your savings, this does not happen in case of credit card money is not
deducted for your savings.

Internet scams are commonplace. If you use your debit card to purchase goods online then
you have to be careful. Your information can get lost in cyberspace and fall into the wrong
hands.

TYPES OF DEBIT CARD SYSTEMS

Online Debit System

Online debit cards require electronic authorization of every transaction and the debits are
reflected in the users account immediately. The transaction may be additionally secured with the
personal identification number (PIN) authentication system and some online cards require such
authentication for every transaction, essentially becoming enhanced automatic teller machine
(ATM) cards. One difficulty in using online debit cards is the necessity of an electronic
authorization device at the point of sale (POS) and sometimes also a separate PIN pad to enter
the PIN, although this is becoming commonplace for all card transactions in many countries.
Overall, the online debit card is generally viewed as superior to the offline debit card because of
its more secure authentication system and live status, which alleviates problems with processing
lag on transactions that may only issue online debit cards. Some on-line debit systems are using
the normal authentication processes of Internet banking to provide real-time on-line debit
transactions. The most notable of these are Ideal and POL.

Offline Debit System

Offline debit cards have the logos of major credit cards (e.g. Visa or MasterCard) or major debit
cards (e.g. Maestro in the United Kingdom and other countries, but not the United States) and are
used at the point of sale like a credit card (with payer's signature). This type of debit card may be
subject to a daily limit, and/or a maximum limit equal to the current/checking account balance
from which it draws funds. Transactions conducted with offline debit cards require 23 days to
be reflected on users account balances. In some countries and with some banks and merchant
service organizations, a "credit" or offline debit transaction is without cost to the purchaser
beyond the face value of the transaction, while a small fee may be charged for a "debit" or online
debit transaction (although it is often absorbed by the retailer). Other differences are that online
debit purchasers may opt to withdraw cash in addition to the amount of the debit purchase (if the
merchant supports that functionality); also, from the merchant's standpoint, the merchant pays
lower fees on online debit transaction as compared to "credit" (offline) debit transaction.

Electronic Purse Card System

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, most notably in Germany
(Geldkarte), Austria (Quick), the Netherlands (Chipknip), Belgium and Switzerland (CASH). In
Austria and Germany, all current bank cards now include electronic purses.

Prepaid Debit Card

Prepaid debit cards, also called reload able debit cards or reload able prepaid cards, are
often used for recurring payments. The payer loads funds to the cardholder's card account.
Prepaid debit cards use either the offline debit system or the online debit system to access these
funds. Particularly for companies with a large number of payment recipients abroad, prepaid
debit cards allow the delivery of international payments without the delays and fees associated
with international checks and bank transfers. Providers include Caxton FX prepaid cards,
[Escape prepaid cards and Travelex prepaid cards. [ Whereas, web-based services such as stock
photography websites (stockpot), outsourced services (odes), and affiliate networks (Media
Whiz) have all started offering prepaid debit cards for their contributors/freelancers/vendors.

PROCESS OF DEBIT CARD TRANSACTIONS

A successful business will usually accept debit cards as a part of their overall profile of payment
solutions. If you dont process debit cards, you may not be taking full advantage of all the
potential that your merchant account can deliver. There are essentially two ways you can accept
debit cards, online and offline.

Off line debit card transactions

An offline debit card transaction is still the way most merchants accept debit cards.
This is essentially the same as processing credit cards. You swipe your customers debit card
through a credit card terminal and have them sign the receipt. If you choose to accept debit cards
offline, be sure that the debit card has a VISA or MasterCard logo. Otherwise, the debit card
wont be approved and you wont be able to process the debit card offline

Online debit card transactions

The most advantageous way to process debit cards is to do it online. You will still be able
to accept debit cards at the point of sale, but you will need to install a PIN pad on your credit
card terminal.
An online debit card transaction works much like a credit card transaction,
except that after your customer swipes his or her debit card, they will enter a PIN instead of
signing the receipt.
At this point the encrypted debit card information is sent to the customers bank for
authorization, and youll receive the funds just as you would for a credit card transaction. Your
business has many advantages when you accept debit cards.
For example, you pay a flat fee for each debit card transaction that you process, instead the flat
fee plus percentage rate that you are charged when you accept credit cards. Over time, this can
potentially save you a lot of money.

Another advantage when you process debit cards is that you cant be charged higher
downgrade fees.
In a credit card transaction, you are usually charged the discount rate. However, some
transactions are considered to be a higher risk or expense to the bank, and you are charged a
higher rate as a result. But when you accept debit cards, you always pay the same flat rate, with
no danger of the rate increasing.

DISTINGUSHED BETWEEN: - DEBIT CARD & CREDIT CARD

DEBIT CARD
MEANING

CREDIT CARD

Credit cards are lines of credit. When Any time you use a debit
you use a credit card, the issuer puts card

to

buy

something,

money toward the transaction. This is a money is deducted from

loan you are expected to pay back in full your account. With a debit
(usually within 30 days), unless you want card, you can really only
to be charged interest.

CONNECTED
TO
APPLICATION
PROCESS
SPENDING
LIMIT

spend the money you have

available to you.
Not required to be connected to a It is connected to customers
checking account.

bank account like , saving

account
Somewhat difficult, depending on one's Easy, with
credit score and other details.

basically

no

barrier to receiving a debit

card.
The credit limit set by the credit issuer. However much is in the
Limits increase or stay the same over bank account connected to
time as a borrower's creditworthiness the card.

INTEREST
CHARGED

changes.
If a credit card bill is not paid in full, No
interest

is

charged

on

interest

outstanding because

is

no

charged

money

is

balance. The interest rate is usually very borrowed.

SECURITY

high.
Credit cards in the U.S. are not very A PIN makes them secure so
secure in and of themselves because long as no one steals the card
many still use dated card security number and PIN, and as long
technology. However, consumers are not as you don't lose the card
held liable for this poor security.

itself. If the card/info is

stolen, debit cards are very

FRAUD
LIABILITY

insecure.
Low. Rarely held liable for fraudulent High. If someone steals your
activity.

card and makes purchases,

that money is removed from
your

bank

account.

Investigating this damage

CREDIT

Responsible

credit

card

usage

takes time.
and Does not

affect

credit

HISTORY

payment can improve one's credit rating. history.

Credit cards typically report account
activity to at least one of the three major

OVERDRAW
FEES

credit bureaus on a monthly basis.

Low. Some credit card companies allow High

"overdraft"

fees.

overdrawing amount over the maximum Possible to overdraw amount

credit line with a fee.

over the account limit.

The History of Credit Cards and Debit Cards In Plastic Money

Credit cards have evolved into a safe and secure manner to purchase goods and services.
The Internet has given credit card users additional purchasing power. Banks have options like
cash-back rewards, savings plans and other incentives to entice people to use their cards. Debit
cards allow people the convenience of cards without the worry of racking up debt. The
convenience, security and rewards offered by credit and debit cards keep shoppers using their
cards as opposed to checks or cash.

CREDIT CARD ORIGINS

The first credit cards were issued by individual stores and merchants. These cards were
issued in limited locations and only accepted by the businesses that issued them. While the cards
were convenient for the customers, they also provided a customer loyalty and customer service
benefit, which was good for both customer and merchant. It was not until 1950 that the Dinner's
Club card was created by a restaurant patron who forgot his wallet and realized there needed to
be an alternative to cash only. This started the first credit card specifically for widespread use,
even though it was primarily used for entertainment and travel expenses.

PLASTIC BECOMES THE STANDARD

The first Diner's Club cards were made out of cardboard or celluloid. In 1959 American Express
changed all that with the first card made of plastic. American Express created a system of
making an impression of the card presented at the register for payment. Then that impression was
billed to the customer and due in full each month. Several American Express cards still operate
like this as of 2010. It was not until the late 1980s that American Express began allowing people
to pay their balance over time with additional card options.

BANK CARD ASSOCIATIONS

In 1966, Bank of America created a card that was a general purpose card or "open loop" card.
These "closed loop" agreements limited cards like Diners Club and American Express to certain
merchants, unlike the new "open loop" cards. The new general purpose system required
interbank cooperation and additional regulations. This created additional safety features and
began building the credit card system of today. Two systems emerged as the leaders--Visa and
Master Card. However, today there is little difference between the two and most merchants
accept both card associations.

DEBIT CARDS EMERGE

The Visa association of cards took credit cards to a new level in 1989 when they introduced debit
cards. These cards linked consumers to their Checking accounts. Money was now drawn from a

checking account at the point of sale with these new cards and replaced check writing. This
helped the merchants check that money was available and made it easier to track the customer if
the funds could not be obtained. Consumers liked the convenience of not having to write checks
at the point of sale, which made debit cards a safe alternative to cash and checks.

THE FUTURE
There were almost 29 million debit card users as of 2006, with a projected 34.4 million users by
2016. However, online services like PayPal are emerging as a way for people to pay their debts
in new, secure and convenient ways. Technology also exists to have devices implanted into
phones, keys and other everyday devices so that the ability to pay at the point of sale is even
more convenient.

The role of various parties involved in plastic cards payment

1. Customers or Cardholder: The authorized person holding the card and can use it for purchase
of goods and services also.

2. Card issuing bank: The bank or institution which issues the card to its eligible customers.

3. Merchants: Entities which sell the goods and services to the cardholder and duly agree to
accept the card for payment.

4. Bank Card Association: The associations (VISA, Master Card, American Express)

MASTER CARD

MasterCard Incorporated or MasterCard Worldwide (stylized as MasterCard) is an

American multinational financial services corporation headquartered in the MasterCard
International Global Headquarters, Purchase, New York, United States, in Westchester County.
The Global Operations Headquarters is located in O'Fallon, Missouri, United States, a suburb
offset. Louis, Missouri. Throughout the world, its principal business is to process payments
between the banks of merchants and the card issuing banks or credit unions of the purchasers
who use the "MasterCard" brand debit and credit cards to make purchases. MasterCard
Worldwide has been a publicly traded company since 2006. Prior to its initial public offering
MasterCard Worldwide was a cooperative owned by the more than 25,000 financial
institutions that issue its branded cards?

MasterCard, originally known as Interbank/Master Charge, was created by several California

banks as a competitor to the Bank Americard issued by Bank of America, which later became the
Visa credit card issued by Visa Inc. From 1966 to 1979, MasterCard was called "Interbank" and
"Master Charge".

History
The original banks behind MasterCard were United California Bank (later First Interstate
Bank and subsequently merged into Wells Fargo Bank), Wells Fargo, Crocker National
Bank (also subsequently merged into Wells Fargo), and the Bank of California (subsequently
merged into the Union Bank of California). Robert Leavelle, Senior Vice President of Farmer's &
Merchants Bank of Long Beach, California, along with his son Martin Leavelle, created the
graphic image based on the two overlapping circles with the Master Charge title overlaid in the
center of the logo. This was part of an effort by The Independent Bankers Association.
In 1966, the aforementioned group of California banks formed the Interbank Card Association
(ICA). With the help of New York's Marine Midland Bank, now HSBC Bank USA, these banks
joined with the ICA to create "Master Charge: The Interbank Card". The card was given a
significant boost in 1969, when First National City Bank joined, merging its
proprietary Everything Card with Master Charge.
In 1968, MasterCard International and Euro card started a strategic alliance, which effectively
allowed MasterCard access to the European market, and for Euro card to be accepted on the
MasterCard network. The Access card system from the United Kingdom joined the
MasterCard/Euro card alliance in 1972.
In 1979, "Master Charge: The Interbank Card" was renamed simply "MasterCard". In the early
1990s MasterCard then bought the British Access card and the Access name was dropped.
In 2002, MasterCard International merged with Euro pay International SA, another large creditcard issuer association, which for many years issued cards under the name Euro card (payment
card).
In 2006, MasterCard International underwent another name change to MasterCard Worldwide.
This was done in order to suggest a more global scale of operations. In addition, the company

introduced a new corporate logo adding a third circle to the two that had been used in the past
(the familiar card logo, resembling a Venn diagram, remains unchanged). A new corporate
tagline was introduced at the same time: "The Heart of Commerce".
In 2010, MasterCard expanded its e-commerce offering with the acquisition of Data Cash, a UKbased payment processing and fraud/risk management provider.
In 2012, MasterCard announced the expansion of its mobile contactless payments program,
including markets across the Middle East.
In 2014, MasterCard acquired Australian leading rewards program manager company Pinpoint
for an undisclosed amount.
MasterCard teamed with Apple in September 2014, to incorporate a new mobile wallet feature
into Apple's new iPhone models, enabling users to more readily use their MasterCard, and other
credit cards.

NOTE:

other than master card there are more financial services association who provide
process payments between the banks of merchants and the card issuing banks or credit unions of
the purchasers

For example: - visa card, maestro card, rupay card.

PLASTIC MONEY FRAUDS

State-of-the-art thieves are concentrating on plastic cards. In the past, this type of fraud was
not very common. Today, it is a big business for criminals. Plastic cards bring new
convenience to your shopping and banking, but they can turn into nightmares in the wrong
hands. This pamphlet describes credit and debit cards and some common schemes involving
card fraud with tips to help you avoid them

The following are the types of frauds

1. Stolen Cards at the Office
2. Extra Copies of Charge Slips
3. Discarded Charge Slips
4. Unsigned Credit Cards
5. Loss of Multiple Cards
6. Strange Requests for Your PIN Numbers
7. Altered Cards
8. Counterfeit Cards

Protecting Against Credit Card Fraud

Credit card fraud takes place every day in a variety of ways. You cant always prevent it
from happening, but you can create some obstacles and make it tougher for someone to get hold
of your cards and card numbers. Treating your credit cards and account numbers like cash that is,
very carefully is one way to head off potential misuse.

How Does Credit Card Fraud Happen?

Theft, the most obvious form of credit card fraud, can happen in a variety of
ways, from low tech dumpster diving to high tech hacking. A thief might go through the trash to
find discarded billing statements and then use your account information to buy things. A retail or
bank website might get hacked, and your card number could be stolen and shared. Perhaps a
dishonest clerk or waiter takes a photo of your credit card and uses your account to buy items or
create another account. Or maybe you get a call offering a free trip or discounted travel package.
But to be eligible, you have to join a club and give your account number, say, to guarantee your
place. The next thing you know, charges you didnt make are on your bill, and the trip promoters
who called you are nowhere to be found.

What Can You Do?

Incorporating a few practices into your daily routine can help keep your cards and account
numbers safe. For example, keep a record of your account numbers, their expiration dates and
the phone number to report fraud for each company in a secure place. Dont lend your card to
anyone even your kids or roommates and dont leave your cards, receipts, or statements
around your home or office. When you no longer need them, shred them before throwing them
away.

Other fraud protection practices include:

Dont give your account number to anyone on the phone unless youve made the call to a
company you know to be reputable. If youve never done business with them before, do an
online search first for reviews or complaints.

Carry your cards separately from your wallet. It can minimize your losses if someone
steals your wallet or purse. And carry only the card you need for that outing.

During a transaction, keep your eye on your card. Make sure you get it back before you
walk away.

Never sign a blank receipt. Draw a line through any blank spaces above the total.

Save your receipts to compare with your statement.

Open your bills promptly or check them online often and reconcile them with the
purchases youve made.
Report any questionable charges to the card issuer.

Notify your card issuer if your address changes or if you will be traveling.

Dont write your account number on the outside of an envelope.

Report Losses and Fraud

Call the card issuer as soon as you realize your card has been lost or stolen. Many
companies have toll-free numbers and 24 hour service to deal with this. Once you report the loss
or theft, the law says you have no additional responsibility for charges you didnt make; in any
case, your liability for each card lost or stolen is $50. If you suspect that the card was used
fraudulently, you may have to sign a statement under oath that you didnt make the purchases in
question

The keys to credit card safety and help protect against fraud.
Peoples use credit cards more than ever these days which makes credit card protection more
important than ever. There's a lot you can do to help protect your credit cards, and most of it
comes down to common sense. Read these credit card safety tips and learn simple ways to
safeguard your card.

1. Credit card safety first

Sign the signature panel on the back of your card as soon as you get it
Never keep your PIN code in the same place as your card

2.

Keep your account number private

Thieves dont need the card to get into your account, just the number. So for the sake of
credit card safety:
Keep your card privatedon't let anyone see it when you're out in public
Don't give the number out over the phone unless you initiated the call and you're talking to
your bank or a merchant you trust
Never answer an email that asks for your account number or personal informationeven if it
looks like it's from your bank or a reputable company or organization
Consider paperless statements to remove your sensitive information from the postal system
Store paper statements and other documents with sensitive information securelyand shred
prior to disposal
Tell your credit card issuer if youre changing addresses so statements and other notifications
about your credit card follow you to your new home
Periodically check to ensure your bank or credit card issuer has your current phone number
and email address on file so you can be contacted quickly if necessary
Use online payments where possible to avoid the risk of a lost or stolen check or account
number in the mail

3. be careful with your receipts

Extra spaces on the receipt? Draw a line through them before you sign, so nothing can be
added later
Keep your receipts and check them against your billing statements
Dont just toss receipts and duplicatesshred the ones you dont need and securely file the
rest

4. Make sure your devices and networks are secure

Make sure your computer is equipped with a firewall, which prevents unauthorized users
from gaining access to your computer or monitoring transfers of information to and from the
computer.
Be sure to download and install any operating system and software updates (sometimes
called patches or service packs) in a timely manner
Make sure your browser software is up to date
Equip your computer with virus-protection software, such as McAfee Internet Security
Utilize fraud protection software. Bank of America customers can download free Trusteer
Rapport software to help protect their account information
Avoid downloading software or programs from unknown sources

5. Think credit card protection when you shop online

Shop with established businesses that you can contact easily if theres an issue
When shopping on your mobile device, check to be sure the sites are secure by looking for
web addresses with https: in the address
Don't share personal info unless you absolutely have toand you know how it will be used
Check payment terms, refund and return policies, shipping costs and guidelines
Print or save (to your desktop) electronic copies of receipts, confirmation numbers and
emails

6. Keep your passwords secret

Choose effective passwords that use both letters and numbers

Avoid using names, birthdays or anniversaries
Never share your passwordsand never keep them near your card
Consider changing your passwords periodically and dont use the same password for all your
accounts

7.

Report lost cards and suspected fraud right away

If you lose your credit card or suspect fraudulent activity, contact your bank or credit card
issuer right away. Your credit card issuer can block your card and account number so no one
else can use them, and then give you a new card and account number. Remember: Speed is
critical. According to U.S. law, once you notify your issuer that your card was lost or stolen,
the most youll have to pay is $50and many issuers waive that as long as you notify them
promptly.

Stolen cards

When a credit card is lost or stolen, it may be used for illegal purchases until the holder notifies
the issuing bank and the bank puts a block on the account. Most banks have free 24-hour
telephone numbers to encourage prompt reporting. Still, it is possible for a thief to make
unauthorized purchases on a card before the card is cancelled. Without other security measures, a
thief could potentially purchase thousands of dollars in merchandise or services before the
cardholder or the card issuer realizes that the card has been compromised.
The only common security measure on all cards is a signature panel, but, depending on its exact
design, a signature may be relatively easy to forge. Some merchants will demand to see a picture
ID, such as a driver's license, to verify the identity of the purchaser, and some credit cards
include the holder's picture on the card itself. In some jurisdictions, it is illegal for merchants to
demand card holder identification. Self-serve payment systems (gas stations, kiosks, etc.) are
common targets for stolen cards, as there is no way to verify the card holder's identity. There is
also a new law that has been implemented that identification or a signature is only required for
purchases above $50, unless stated in the policy of the merchant. This new law makes it easier
for credit card theft to take place as well because it is not making it necessary for a form of

identification to be presented, so as long as the fraud is done at what is considered to be a small

amount, little to no action is taken by the merchant to prevent it.
A common countermeasure is to require the user to key in some identifying information, such as
the user's ZIP or postal code. This method may deter casual theft of a card found alone, but if the
card holder's wallet is stolen, it may be trivial for the thief to deduce the information by looking
at other items in the wallet. For instance, a U.S. driver license commonly has the holder's home
address and ZIP code printed on it. Visa Inc. offers merchants lower rates on transactions if the
customer provides a ZIP code.
In Europe, most cards are equipped with an EMV chip which requires a 4 to 6 digit PIN to be
entered into the merchant's terminal before payment will be authorized. However, a PIN isn't
required for online transactions, and is often not required for transactions using the magnetic
strip. However magnetic strip transactions are banned under the EMV system (which requires the
PIN). In many/most European countries, if you don't have a card with a chip, you will usually be
asked for photo-ID - e.g. national ID card, passport, etc. at the point of sale. Many self-service
machines (e.g. ticket machines at railway stations and self-service check-in at airports) require a
PIN and chip in EMV-land (i.e. which is most of Europe, Asia, and Middle East etc.).
Requiring a customer's ZIP code is illegal in California, where the state's 1971 law prohibits
merchants from requesting or requiring a card-holder's "personal identification information" as a
condition of accepting the card for payment. The California Supreme Court has ruled that the
ZIP code qualifies as personal identification information because it is part of the cardholder's
address. Companies face fines of $2501000 for each violation Requiring a "personal
identification number" (PIN) may also be a violation.
Card issuers have several countermeasures, including sophisticated software that can, prior to an
authorized transaction, estimate the probability of fraud. For example, a large transaction
occurring a great distance from the cardholder's home might seem suspicious. The merchant may
be instructed to call the card issuer for verification, or to decline the transaction, or even to hold
the card and refuse to return it to the customer. The customer must contact the issuer and prove
who they are to get their card back (if it is not fraud and they are actually buying a product).
In Australia, there is a service called "Pay pass" or more colloquially known as "tap and go".
This is where a person can purchase goods or services and can just tap the credit (or debit) card
on the card reader. If the transaction is less than Aud$100.00, no PIN or signature is required. A
stolen credit or debit card could be used for a significant amount of these transactions before the
true owner can have the account cancelled.

ANNUAL PERCENTAGE RATE

What is an APR?
If youre like millions of credit card holders, youve probably seen the phrase annual percentage
rate or APR on your monthly statement, but you may not truly understand what an APR is, or
know how its calculated. Fortunately, its not difficult to understandand knowing what an
APR is can help you make more informed credit card decisions.
The annual percentage rate or APR is the interest rate charged on the amount borrowed. It
reflects the annual cost of borrowing money. APR makes it easier to compare different loan and
credit card, because you can easily see which loan/ credit card would be cheaper. For example, a
loan with a 10% interest rate is less expensive than a loan with 15% interest rate (assuming other
things are equal).

Definition of annual percentage rate (APR)

The annual rate that is charged for borrowing (or made by investing) expressed as a single
percentage number that represents the actual yearly cost of funds over the term of a loan. This
includes any fees or additional with the transaction.

Nominal APR vs. effective APR

There are several classifications of APRs. The nominal APR is the interest rate that states on a
loan. The effective APR includes fees that have been added to your balance, the effective APR on
a credit card or loan might be higher that the nominal APR.

TECNOLOGY AND INFRASTRUCTURE

FOR
PLASTIC MONEY
One of the most important features that Plastic Money offers is the technology associated
with this business.
Credit card businesses rely on very reliable and secure technology and demands very
Strong connectivity backbone.
Although a third world country, with lot of insecurities and almost no infrastructure,
Pakistan has no exception when it comes to credit card business.
There is approximately 3000 Point of Sale Terminals (POST) present on merchant's sites
connected with bank host system.
Inter-city connectivity is accomplished through X.25 networks.
Perhaps, it is the most important time in the history of Pakistan as the parameters of its
Infrastructures are coming into existence.
There is an immense need of reliable wide area connectivity and this market is so huge and
lucrative that it can accommodate many more industry giant

SMART CARD

A smart card, chip card, or integrated circuit card (ICC) is any pocket-sized card that has
embedded integrated circuits. Smart cards are made of plastic, generally polyvinyl chloride, but
sometimes polyethylene
terephthalate based polyesters, acrylonitrile
butadiene
styrene or polycarbonate. Since April 2009, a Japanese company has manufactured reusable
financial smart cards made from paper.
Smart cards can be either contact or contactless smart card. Smart cards can provide personal
identification, authentication, data storage, and application processing. Smart cards may provide
strong security authentication for single sign-on (SSO) within large organizations.

Benefits
The benefits of smart cards are directly related to the volume of information and applications that
are programmed for use on a card. A single contact/contactless smart card can be programmed
with multiple banking credentials, medical entitlement, drivers license/public transport
entitlement, loyalty programs and club memberships to name just a few. Multi-factor and
proximity authentication can and has been embedded into smart cards to increase the security of
all services on the card. For example, a smart card can be programmed to only allow a
contactless transaction if it is also within range of another device like a uniquely paired mobile
phone. This can significantly increase the security of the smart card.
Governments and regional authorities save money because of improved security, better data and
reduced processing costs. These savings help reduce public budgets or enhance public services.
There are many examples in the UK, many using a common open lasseo specification.
Individuals have better security and more convenience with using smart cards that perform
multiple services. For example, they only need to replace one card if their wallet is lost or stolen.

The data storage on a card can reduce duplication, and even provide emergency medical
information.

Advantages of smart card

The first main advantage of smart cards is their flexibility. Smart cards have multiple functions
which simultaneously can be an ID, a credit card, a stored-value cash card, and a repository of
personal information such as telephone numbers or medical history. The card can be easily
replaced if lost, and, the requirement for a PIN (or other form of security) provides additional
security from unauthorized access to information by others. At the first attempt to use it illegally,
the card would be deactivated by the card reader itself.
The second main advantage is security. Smart cards can be electronic key rings, giving the bearer
ability to access information and physical places without need for online connections. They are
encryption devices, so that the user can encrypt and decrypt information without relying on
unknown, and therefore potentially untrustworthy, appliances such as ATMs. Smart cards are
very flexible in providing authentication at different level of the bearer and the counterpart.
Finally, with the information about the user that smart cards can provide to the other parties, they
are useful devices for customizing products and services.
Other general benefits of smart cards are:

Portability

Increasing data storage capacity

Reliability that is virtually unaffected by electrical and magnetic fields.

QUESTIONNAIRE

Here some FAQ on the most popular plastic cards used in India.

What is a credit card?

A credit card is plastic card that is used to pay for products and service at over 20 million
locations around the world. All you need to do is produce the card and sing a charge slip to pay
for your purchases. The institution which issues the card makes the payment to the outlet one
your behalf you will pay this loan back to the institution at a later date.

What is a debit card?

Debit card are substitutes for cash or check payment, much the same way that credit card are.
However, banks only issue them to you if you hold an account with them. When a debit card is
used to make a payment, the total amount charged is instantly reduced from your bank balance.

What is a charge card?

A charge card carries all the features of credit card. 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..

When you use a credit card you are not declared even if you miss your due date. A 2.95 per cent
late payment fees (this differs from one bank to another) is levied in your next billing statement.

What is a 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 authorization 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.

What is an 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 master card.

What is visa and master cards?

Master and Visa card are global non-profit organizations dedicated to promote the growth of the
card business across the world. They have built a vast network of merchant establishments so
that customers worldwide may use their respective credit cards to make various purchases.

Which card customer prefers to buy credit card or debit card?

In today risky market ever one wants safety whether its about customer or any banks or
institution that provide credit card or debit card service. But let us see from the point of view of
customer. Customers prefer debit card then credit card because its less risky then credit card in
credit card there are less security than debit card.

CONCLUSION

21ST Century banking has become wholly customer-driven & technology driven by challenges of
competition, rising customer expectations & shrinking margins, banks have been using
technology to reduce cost & enhance efficiency, productivity & customer convenience.
Technology intensive delivery channels like net banking, mobile banking, etc.
I have concluded from my project that demand of plastic money increasing rapidly as the
population of the world is increasing. According to top banking professionals, the credit card
business will grow by over 100% every year.
From educating customers about credit cards there is a need to educate them about the
differentiating factors of the cards. Because visa and master card are advertising regularly and
thereby increases awareness. The strategy should be to emphasize on its differentiating
characteristics.

BIBLIOGRAPHY
WEBSITS
www.scribd.com
http://en.wikipedia.org
www.360financialliteracy.org
www.slideshare.net

REFERENCE BOOK
Innovation in banking & insurance sheth publication
Financial market & services
Indian banking industries