Consumer Behavior Towards Credit Card In

India: An Analytical Study

SUBMITTED TO:

Dr. Eritriya Roy

(Assistant Professor, Economics)

SUBMITTED BY:

Ayush Kabra

Roll No. - 49

Semester - 1st

Section - A

B.A. L.L.B (Hons.)

SUBMITTED ON:

23 October, 2019

HIDYATULLAH NATIONAL LAW UNIVERSITY, ATAL NAGAR, RAIPUR,

CHHATTISGARH
 DECLARATION

I hereby declare that this project work titled “Consumer Behavior towards Credit Card in
India: An Analytical Study” is my own work and represents my own ideas, and where others’
ideas or words have been included, I have adequatly cited and referenced the original sources. I
also declare that I have adhered to all principles of academic honesty and integrity and have not
misrepresented or fabricated or falsified any idea/data/fact/source in my submission.

Ayush Kabra
Roll No. - 49
Section – A
 ACKNOWLEDGEMENTS

First & foremost, I would like to thank my Faculty of Economics Dr. Eritriya Roy for giving me
opportunity to work on this project named “Consumer Behavior Towards Credit Card In
India: An Analytical Study”. Her guidance and support has been instrumental while making
my project on this important issue.

I would also like to thank all authors, writers, columnists and social thinkers whose ideas and
works have been made use of in my Project. My heartfelt gratitude also goes to all staff and
administration of HNLU for the infrastructure in the form of our library and IT lab that was a
great source of help in the completion of this Project.

I also thank my friends for their precious inputs which have been very useful in the completion
of this Project.

I would also like to thank my parents, my seniors, dear colleagues and friends in the University,
who have helped me with ideas about this work. I hope you will appreciate my true work which
is indeed a hard work and a result of my true research and work.

Ayush Kabra
Roll No. - 49
Section - A
TABLE OF CONTENTS
 WHAT IS A CONSUMER?

Any individual who purchases products or services for his personal use and not for
manufacturing or resale is called a consumer. A consumer is one who is the decision maker
whether or not to buy an item at the store, or someone who is influenced by advertisement and
marketing. Every time someone goes to a store and buys a shirt, toy, beverage or anything else,
they make a decision as a consumer. Consumer refers to any person who purchases some goods
for a consideration that has been either paid or promised to pay or partly paid and partly
promised, or found under any system of deferred payment and does include any user of this type
of goods other than the person who purchases these types of goods for consideration paid or
promised or partly paid or partly promised, or under any type of system of deferred payment
when this type of use is done with the agreement of such person, and does not include a person
who gets such goods for resale or for any business purpose or hires or avails of some services for
a consideration which has been paid or promised or partly paid and partly promised, or under
some system of deferred payment as well as includes some beneficiary of such services other
than the people who ‘hire or avail of the services for consideration paid or promised, or partly
paid and partly promised, or under any system of deferred payment, when such services are
provided having the approval of the first described person and does not include a person who
takes such services for any business purposes.
 WHAT IS CONSUMER BEHAVIOUR ?

Consumer behaviour is the study of individuals, groups, or organizations and all the activities
associated with the purchase, use and disposal of goods and services, including the consumer's
emotional, mental and behavioural responses that precede or follow these activities. Consumer
behaviour emerged in the 1940s and 50s as a distinct sub-discipline in the marketing area.

Consumer behaviour is an inter-disciplinary social science that blends elements,

especially behavioural economics. It examines how emotions, attitudes and preferences affect
buying behaviour. Characteristics of individual consumers such
as demographics, personality lifestyles and behavioural variables such as usage rates, usage
occasion, loyalty, brand advocacy, willingness to provide referrals, in an attempt to understand
people's wants and consumption are all investigated in formal studies of consumer behaviour. The
study of consumer behaviour also investigates the influences, on the consumer, from groups such
as family, friends, sports, reference groups, and society in general.

The study of consumer behaviour is concerned with all aspects of purchasing behaviour – from pre-
purchase activities through to post-purchase consumption, evaluation and disposal activities. It is
also concerned with all persons involved, either directly or indirectly, in purchasing decisions and
consumption activities including brand-influencers and opinion leaders. Research has shown that
consumer behaviour is difficult to predict, even for experts in the field. However, new research
methods such as ethnography and consumer neuroscience are shedding new light on how
consumers make decisions.
 INTRODUCTION

In this present scenario, credit cards are a popular medium of payment for consumers and also
serve as an indispensable credit and payment mechanism throughout the world. Carrying a lot of
cash can be bulky, risky and sometimes, one may run short of it, just when it is needed most. A
credit card is the smart solution to these problems and is safe and suitable alternative to cash.
Greater status was enjoyed by those who possessed a number of credit cards. Most people
associate a credit card with prestige and the customers take the accountability of being
responsible to be extended credit. Lee and Kwon (2002) describe that credit cards are used as a
financing mechanism instead of a medium of convenience. It allows us to obtain goods and
services with the concept of buy now and pay later. Credit card is a new concept in developing
country like India and is treated as a status symbol. Demographics also seem to play a vital role
in making a choice and the use of credit cards as a convenience user or resolver. Age and income
level have been studied previously and suggest some indication for correlation between
demographic and use of credit card. Occupation and income are generally accepted as one of the
most popular indicator that explained and significantly correlates with the usage of credit card In
fact, income also acts as a factor in determining of how much the purchasing power of
consumers will be spent on goods or services (Bowers, 1979). The credit card is extremely useful
to those people who use it properly and have knowledge about such card. High credit limits, low
interest rates and pre-approval, these have become familiar terms to many customers, who are
increasingly bombarded with unsolicited credit card. However, this explosion has brought in a
lot of obstacles among the card holders that directly impact the consumers towards the credit
card acceptance (Anneke& Nederlandsche, 2010).
 WHAT IS A CREDIT CARD?

A credit card is a thin rectangular slab of plastic issued by a financial company, that lets
cardholders borrow funds with which to pay for goods and services. Credit cards impose the
condition that cardholders pay back the borrowed money, plus interest, as well as any additional
agreed-upon charges.

The credit company provider may also grant a line of credit (LOC) to cardholders, enabling them
to borrow money in the form of cash advances. Issuers customarily pre-set borrowing limits,
based on an individual's credit rating. A vast majority of businesses let the customer make
purchases with credit cards, which remain one of today's most popular payment methodologies
for buying consumer goods and services.

Types of Credit Cards:

1. The Standard Credit Card: These are general purpose credit cards with revolving balance
(i.e. credit is used up when purchases are made, and is open again once the bill is paid).
Standards cards are usually starter credit cards, usually for applicants with little or no credit
history who meet the minimum required criteria.

2. Reward Credit Cards: These cards offer several rewards programs in the form of cash,
points or discounts, and are intended to influence your spending. Reward cards usually come
with an associated annual fee and a lot of fine print; the key is to make sure the rewards earned
exceed the annual fee.

3. Secured Credit Cards: Also known as pay-as-you-go cards, their primary purpose is to give
people with bad credit history a chance to reestablish credit. The user first deposits a "secure"
amount into a savings account — that makes for the credit line. The credit limit is usually a
percentage (50%-100%) of this amount. These cards come with an annual fee and a high APR.
4. Charge Cards: Charge cards do not have a preset spending limit and balances must be paid
in full at the end of each month.

5. International Credit Cards: If one has noticed, most cards have "Valid only in India and
Nepal" printed on them. An International card is valid in India as well as anywhere in the world.
Which means that you spend in foreign currency on the card but pay back in Indian Rupees on
your return . As an Indian resident, you can buy foreign exchange using your International Credit
card from an authorized dealer or moneychanger against your Basic Travel Quota (BTQ). To
find out your entitlement to foreign exchange for business or other trips abroad, you should
contact any bank authorized to deal in foreign exchange in India. You can incur expenses on
your International Credit card mainly for personal spending. You cannot use your card for
expenditure that is not permissible by the Reserve Bank of India.

6. Virtual Cards: In a world that's turning to the net for all its needs, it is only natural that you
should own a card that is for the internet alone. The virtual card from Citibank is just that. The
answer to all your questions on the safety of transacting online. The virtual card, or the Citibank
e-Card is the first ever web card only in India. Now you don't need a Credit Card to shop online.
Accepted wherever MasterCard is, the Citibank eCard offers you a safe and easy way to shop on
the Internet. On approval, you get your card number, valid dates and a card verification number.
Unlike with other credit cards, you don't get a physical plastic card. All you get is a card number
and expiry date. Therefore, this Card cannot be used for transactions that require in person
presentation of a physical MasterCard card. The Citibank e Card cannot be used for 'dualmode'
transactions i.e. it cannot be used to purchase an item over the Internet that subsequently requires
a presentation of a physical MasterCard Card to obtain that item.

7. MasterCard’s: MasterCard started in the late 1940's when banks in US issued special paper
that could be used like cash. In 1951 The Franklin National Bank in New York formalized the
practice by introducing the first real credit card. Several franchisees evolved over the next
decade. Interbank Card Association (ICA) to be renamed as MasterCard as it 12 is known today
was born on August 16th 1966. Member committees were established to run the association.
These committees established rules for authorization, clearing and settlement, handled
marketing, security and legal aspects of running the organization.
 PROS AND CONS OF CREDIT CARD

PROS CONS

1. You can make a large purchase now and pay it 1. You can easily dig yourself into debt if you’re
off in smaller amounts over time. not careful about your spending.

2. Carrying credit cards is more convenient (and 2. The ease of using credit cards can cause you to
safer) than carrying a wad of cash, and credit overspend.
cards are more widely accepted than personal
checks.

3. With responsible use, you can build your 3. Missing payments or maxing out a card can
credit, which will be important later on. sink your credit score quickly.

4. Many credit cards give you rewards, 4. Interest can make even a small debt become
essentially giving you back 1% or more of the large over time.
money you spend.