Вы находитесь на странице: 1из 23



. K
The development of credit card is one of the recent phenomenon in

the banking sector.

A credit card is a charge card.

It is a direct charge against the limit sanctioned.

It is step forward towards cashless and chequeless society

The operation is through electronic funds transfer (EFT)

installations and interbank network

Credit cards are the key to the opening of bank accounts for daily

payments by the card holders

Many Indian and foreign banks have issued credit cards to their


The issuing bank ties up with a number of establishments including

hotels, hospitals, shops, petrol-pumps and departmental stores which

honor the credit cards.

The issuing bank provides the facility of credit cards to selected

number of customers depending upon their monthly income,

creditworthiness or to company executives, businessmen and high and

middle income individuals etc.

What is credit card?
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 creates a revolving account and 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.

Eligibility for getting the card
He should have an account with the bank

His assets and liabilities on a particular date are reported to


A statement of annual or monthly income

He is considered creditworthy up to certain limit depending upon

his income, assets and expenditure.

The eligible customer is asked to fill in an application form giving

the details of account number, name, address, income, wealth

status and a proof of his income/wealth etc.

Types of credit cards
Based on the mode of credit recovery
1. Revolving credit card

This type of credit card follows the revolving credit principle. A limit

is set on the limit of money one can spend on the card for a

particular period. The cardholder has to pay a minimum percentage of

the outstanding credit.

2. Charge card

A charge card is not a credit instrument. It is a convenient mode of

making payment. This facility gives a consolidated bill for a specific

period and bills are payable in full on presentation. There is no

Based on Status of Credit Card

1. Standard card
Credit cards that are regularly issued by all card-issuing banks are called
standard cards. With these cards, it is possible for a cardholder to make
purchases without having to pay cash immediately. It however offers only
limited privileges to cardholders.

2. Business card
Business card, also called “Executive” cards, are issued to small partnership
firms, solicitors, firms of chartered accountants, tax consultants and
others, for use by executives on their business trips. The card enjoys
higher credit limits and more privileges than the standard cards. These
cards are issued in the name of the executives of the firm.

3. Gold card
It offers many additional benefits and facilities such as higher credit
limits, more cash advance limits etc. that are not available with standard or
Based on Geographical Validity

Domestic card

Cards that are valid only in India and Nepal are called ‘domestic cards’. All

transactions will be in Rupees. These cards are issued by most of the banks

in India.

International card.

Credit cards that have international validity are international cards. They

are issued to people who travel abroad frequently. These cards are

accepted in every part of the world except in India and Nepal.

Based on Franchise/Tie-up
Proprietary card

Cards that are issued by banks themselves, without any tie-up, are called

proprietary cards. A bank issues such cards under its own brand. Examples are SBI

Card, CanCard of Canara Bank etc.

Master Card

This is a type of credit card issued under the umbrella of ‘MasterCard

International’. The issuing bank has to obtain a franchise from the MasterCard

Corporation of USA.


This is a type of credit card, which can be issued by any bank having tie-up with

VISA International Corporation, USA.

Domestic tie-up card

These are cards issued by a bank having a tie-up with domestic credit card brands
Based on the issuer category

Individual cards

These are non-corporate credit cards that are issued to individuals.

Corporate cards

These are credit cards issued to corporate and business firms.

Innovative Cards
ATM cards

It allows customers to access their accounts at any time-24 hours a day of

the year, through automated teller machines. Customers can withdraw cash,

transfer funds, find out their account balance and perform other banking

and financial transactions with the help of ATMs.

Prepaid cards

Also known as Stored Value Cards are cards with stored value paid in

advance, by the holder. Its use is often restricted to a number of

identified points of sale within a specified location.

Private label cards

These cards are uniquely tied to the retailer issuing the card and can be

used only in that retailer’s store.

Smart cards

A smart card is a credit card sized plastic card with an embedded

computer chip. The chip allows the card to carry a much greater amount

of information than a magnetic strip card. There are two types of smart

cards, namely memory cards and microprocessor cards.

Memory cards are static. They store information and value and are not

programmable. Phone cards and other prepaid cards are examples.

Microprocessor cards have internal memory, have high storage capabilities

and the data stored in the chip is dynamic.

Mechanics of Credit Card Operation
Contract for credit card(1)

Issue of Credit card(2)

Credit Issuing Bank Card user/ Customer
Payment on Credit Card

Charging of Credit Card

Purchase of Goods and

and raising Bill (4)
Settlements (7)

Services (3)
Clearing and

Submission of bills for

collection (5)

Merchant’s Bank Payment of bills (6)

Merchant Establishmen
An example of the front of a typical credit card

1. Issuing Bank Logo

2. EMV chip on “smart cards”

3. Hologram

4. Credit card number

5. Card brand logo

6. Expiration date

7. Card holder name

8. Contactless chip
An example of the reverse side of a
typical credit card

1. Magnetic stripe

2. Signature strip

3. Card security code

Benefits of Credit Cards

Benefits to Card holders

Shopping convenience
Credit facility
Meticulous record

Benefits to Merchants
Enhanced sales
Easy validation
No risk

Benefits to issuer banks

Source of income
Market expansion
Drawbacks of Credit Cards

Waste of money

Thoughtless buying

Financial problem

Mental agony

What is Debit Card?
It is a plastic card similar to the credit

card where the expenditure amount is

automatically debited to the

corresponding bank account. This amount

will appear , in due course, on the monthly

statement of the account. It is a variant

of an ATM card, which helps the

customers to make payments

instantaneously for goods and services

Mechanics of Debit Card Operation-Purchase Transaction
Contract for Debit Card (1)
Debit Card issuing Bank Issue of Debit Card (2) Customer





Electronic Data Interchange (EDI)

le m


t t











Merchant Establishment
Dangers of Debit Cards

Most debit card holders prefer using the debit cards only for standard ATM

withdrawals. There is always a lurking fear in the minds of customers that

their bank balance may be knocked off by card thieves. This is the reason for

the limited use of such cards at restaurants, department stores and other

retail outlets which accept debit cards.

Difference between Debit Cards and Credit
Debit Card Credit Card

Drawings are against own assets or It allows a borrowing power on the
money lying in the savings bank bank for which the customer or
No risk of over spending as the The customer tends to over spend
customer can spend what he has holder
heto pay
can somemoney
spend charges or
he does not have at that moment
Debit Card Credit Card

Does not involve any interest 
Holder of credit card has to pay
payment or cost to the holder interest on the overdrawn amount
The holder need not carry any cost It provides additional finance to
or even traveller’s cheque. It is as the holder by allowing him to
good as money in the accounts with overdraw if necessary. Payments are
his bank made by the bank to the extent of
purchases and if they exceed this
limit, he pays interest on the excess