A PROJECT ON

"ON CREDIT CARD"

(THE PLASTIC MONEY)









BY:
RUBYJAIN
HIMANI MALIK
ROHIT TANWAR




CONTENTS
EXECUTIVE SUMMARY OF CREDIT CARD INDUSTRY
INTRODUCTION
TYPES OF CARDS
SALIENT FEATURES
COMPARISON OF CREDIT CARDS
CONCLUSION










INTRODUCTION
ORIGIN
The credit card had its beginning in an embarrassing incident that took
place in the early 1950s in America. The story goes that Mr. McNamara; a
New York businessman took his friends out to dinner. At the end of meal
he discovered that he had forgotten his wallet at home, the proprietor
was kind enough to allow him a later settlement of bill. As McNamara
stepped out of the restaurant he had the brainwave for the introduction
of credit cards - system of availing instant credit upon confirming the
identity of cardholder. Thus was born the Diners Club Cards, the pioneer
of todays multibillion-dollar plastic money business.
Diners Club adopted a promising approach by recruiting various hotels
and restaurants to act as member establishments for accepting the cards.
Not only did these establishments pay a commission on members
purchases but the members also paid an annual subscription fee. Diners
Club vetted its members for credit worthiness and guaranteed payment
to participating establishment. Thus was born the first Travel and
Entertainment Card. It was followed by American Express, which is now a
dominant force in the Travel and Entertainment cards industry, and by
1959 by Carte Blanche, after many vicissitudes is now a part of Citi Bank
Empire Together With Diners Club. In the present time American Express
leads the travel and entertainment (T&E) card industry.
The next great leap-forward came from Bank of America, which in other
banks. Such cardholders could use their card 1966 offered to license its
successful blue, white and gold Bank America card to at any accepting
merchant establishments around the globe. Later in 1977 all the national
and international Bank America licenses were pulled together under the
single name of Visa.
Not to be outdone, a rival group of American Banks came together in
1966 under the name of Interbank, later renamed Master Charge and
later still Master Card. Ever since Master Card and Visa and their affiliates
have carved the world credit card market.
In the 1980s credit card concept was launched in India through the Diners
Club card, and soon, within a couple of months both Visa and Master card
entered into the Indian market.

What is a Credit Card?
Credit Cards its credit to you!
A Credit Card is referred to as 'plastic money'. Carrying a lot of cash on
you can be cumbersome, risky and sometimes, you run short of it, just
when you most need it. (Remember the SALE at your favorite ready-
mades store?). A Credit card is the smart solution to these problems. It is
a convenient and safe alternative for cash.
Besides, it says things about you. Most people associate a credit card with
a prestige, which it most certainly bestows on you, but more importantly,
it says that you have taken the onus of being responsible - to be extended
credit! So, when you get yourself a card, remember that, because your
bank does!

Before i go any further, why not become familiar with the various terms
and jargons used by the credit card industry.
Credit Card A credit card is a financial instrument, which can be used
more than once to borrow money or buy products and services on credit.
Banks, retail stores and other businesses generally issue these.
Credit limit The maximum amount of charges a cardholder may apply to
the account.
Annual fee A bank charge for use of a credit card levied each year,
which ranges depending upon the type of card one possesses. Banks
usually take an initial fixed amount in the first year and then a lower
amount as yearly renewal fees.
Revolving Line Of Credit - An agreement to lend a specific amount to a
borrower and to allow that amount to be borrowed again once it has
been repaid. Most credit cards offer revolving credit.
Personal Identification Number (PIN) - As a security measure, some cards
require a number to be punched into a keypad before a transaction can
be completed. The cardholder can usually change the number.
Teaser Rate - Often called the introductory rate, it is the below-market
interest rate offered to entice customers to switch credit cards.
Joint Credit - Issued to a couple based on both of their assets, incomes
and credit reports. It generally results in a higher credit limit, but makes
both parties responsible for repaying the debt.
TYPES OF CARDS
MasterCard MasterCard is a product of MasterCard International
and along with VISA are distributed by financial institutions around
the world. Cardholders borrow money against a line of credit and
pay it back with interest if the balance is carried over from month to
month. 23,000 financial institutions in 220 countries and territories
issue its products. In 1998, it had almost 700 million cards in
circulation, whose users spent $650 billion in more than 16.2 million
locations.
VISA Card VISA cards are financial institutions around the world
distribute a product of VISA USA and along with MasterCard. A VISA
cardholder borrows money against a credit line and repays the
money with interest if the balance is carried over from month to
month in a revolving line of credit. Nearly 600 million cards carry
one of the VISA brands and more than 14 million locations accept
VISA cards.
Standard Card It is the most basic card (sans all frills) offered by
issuers.
Classic Card Brand name for the standard card issued by VISA.
Affinity Cards - A card offered by two organizations, one a lending
institution, the other a non-financial group. Schools, non-profit
groups, pro wrestlers, popular singers and airlines are among those
featured on affinity cards. Usually, use of the card entitles holders
to special discounts or deals from the non-financial group.
Gold Card/Executive Card A credit card that offers a higher line of
credit than a standard card. Income eligibility is also higher. In
addition, issuers provide extra perks or incentives to cardholders.
Platinum Card A credit card with a higher limit and additional
perks than a gold card.
Titanium Card A card with an even higher limit than a platinum
card.
Secured Card A credit card that a cardholder secures with a
savings deposit to ensure payment of the outstanding balance if the
cardholder defaults on payments. It is used by people new to
credit, or people trying to rebuild their poor credit ratings.

Smart Card Smart cards, sometimes called chip cards, contain a
computer chip embedded in the plastic. Where a typical credit
card's magnetic stripe can hold only a few dozen characters, smart
cards are now available with 16K of memory. When read by a
special terminal, the cards can perform a number of functions or
access data stored in the chip. These cards can be used as cash
cards or as credit cards with a preset credit limit, or used as ID cards
with stored-in passwords.
Charge Card fall between a debit and credit card. Works like the
latter and you don't have to be an accountholder. Just pay up in full
when the bill arrives with the mail. No outstanding are allowed, in
other words, no revolving credit facility either. American Express
and Diners are providers.
Rebate Card This is a card that allows the customer to accumulate
cash, merchandise or services based on card usage.
Co-Branded Card This is a marriage of convenience between two
service providers who want a trade-off with the other's strengths.
Specific facilities are made to members through these tie-ups. So,
Times Bank and Citibank have a co-branded card that allows
concessional rates for add-on cards or telephone banking. Stan
chart and Hindustan Lever Limited have a co-branded card to sell
Aviance beauty products. SBI-GE Capital has a co-branded card for
retail loans.
Cash Card Cash cards, similar to pre-paid phone cards, contain a
set amount of value, which can be read by a special cash card
reader. Participating retailers will use the reader to debit the card in
increments until the value is gone. The cards are like cash -- they
have no built-in security, so if lost or stolen, they can be used by
anyone.
Travel Card these works mostly as debit cards for the limited
purpose of travel. Citibank Dollar Card, American Express, Bob card
Global and Hong bank Thomas Cook International Card are among
the players in this section.

Debit Card It is the accountholder's mobile ATM. Open an account
with a bank that offers a debit card, and payments for purchases
are deducted from your bank account. The retailer swipes the card
over an electronic terminal at his outlet, you enter the personal
identification number on a PIN pad and the money is immediately
debited at the bank. Citibank and a few domestic banks like Times
Bank offer this.
SALIENT FEATURES
Annual Fee:
All credit card issuers charge an annual fee which is payable at the start of
the year. The start of the year, of course, is your membership year, and
not the calendar year.
Forwarding Balance (or Revolving):
The most attractive feature of a credit card is that you need not pay off
your dues in whole. You can opt to pay 5% of the total amount on or
before the due date, every month, the rest is carried forward.
APR or Annual percentage Rate:
The interest rate that reflects the yearly cost of the interest the
outstanding on your card is called the annual percentage rate. It might
sound low at 3%, but when you look at the interest rate over the year, it
turns out to be as high as 43%.
Cash Advance:
An important feature - lets you withdraw cash from designated ATMs
using your credit card. Use discretion when withdrawing cash on your
credit card because the charges for this facility are high, around 2.5% to
3% per transaction!
BENEFITS:
Credit:
When you use a Credit card to pay for anything, you get an interest-
free period of 45 days. Billing cycles are structured in such a way that
you definitely get at least 30 days out of these as clean credit time,
which is especially beneficial to salaried people. Better still, you can
opt to pay your bill in full when you receive it or you can carry forward
your payments by paying as little as 5% of the total amount on or
before the due date, every month. You can spend now , pay later.
Convenience:
With a credit card on you, you don't need to run the risk of carrying a
lot of cash.
Cash Advance:
Another advantage of a Credit card is that you can use it as an ATM
card too! But remember, there's a fee to it. It typically starts with a flat
fee going up to a percentage-based fee on the amount of the
withdrawal.
Do's & Dont's
Do not leave your Credit Card lying around the house or on your
desk at work.
If your card is lost or stolen, or you suspect it is being used
fraudulently, report it immediately to your bank.
Hold on to receipts from your transactions. In fact, keep your
receipts filed or in one place - you'll find them easily, should the
need arise. And when you want to throw them away, don't just
thrash into the bin, shred or tear them before you do.
Never give your Credit Card number over the phone, unless you've
made the call, and it is to your bank or someone you trust, and you
really, really need to!
COMPARISON OF CREDIT CARDS
Card Issuers Brand Card Type Acceptance
Citibank NA Gold/Preferred Master International
Citibank NA Gold/Preferred Visa International
Citibank NA Indian Oil Master Domestic
Citibank NA Silver/Classic Master International
Citibank NA Silver/Classic Visa International
Citibank NA Women Visa Domestic
Citibank NA WWF Visa Domestic
ICICI Solid Gold Visa International
ICICI Sterling Silver Visa Domestic
ICICI True Blue Visa Domestic
SBI Classic Visa Domestic Standard
Chartered Classic Master International
Standard Chartered Gold Visa International
With the credit card truly becoming an international citizen, issuers have
begun highlighting the value-added features offered along with the basic
product. While some of them are offering attractive interest rates, others
are luring customers by their reward schemes. With a plethora of choices
on offer it is not easy to come to a decision on any particular card.



CONCLUSION
Whenever Internet transactions are discussed, immediately the thought
of credit card comes to everybodys mind. This is because in US the
payments by credit a card is quite common. Even before online purchases
have become popular, normally purchases are made through credit cards
only. Therefore in US there was no problem in making people to switch
over to online purchases as this mode of payment is already in vogue.
Even in US, much discussion is going on as to how to avoid frauds,
misappropriation, etc of credit cards once the card number is given online
to a merchant. Encryption technologies. Secure socket layers, etc are
being introduced to avoid such things In spite of all these measures, still
reports keep coming regarding credit card frauds here and there. In other
words, there is no 100% foolproof to make credit card payment a safe
mode of payment.
In other countries, where credit cards payment system is not as popular
as US, online shopping through credit cards resulted in great failures. At
least in Singapore, a mega shop had experienced a fraud of huge
magnitude and decided to suspend immediately their online business.
Similar stories are not uncommon in other countries too.
Scenario in India
In India the situation is far from satisfactory to use the credit cards as a
means of making payments for online purchases for the following
reasons;
1.Use of credit cards is popular to only a few thousands of executives,
businessmen, etc from big cities.
2.That any person using credit card is liable to declare IT made many
people surrendering their cards. In other words if credit card is made the
payment mechanism, only IT payers will be eligible to buy goods online.
3.Still many leading credit card companies are yet to install their
infrastructure to process the online payments.
4.Then there is the question of sales tax laws Each State has its own rate
of tax structure for each and every commodity. How to charge tax when a
transaction takes place online and at what rate will pose problems of
billing.
5.Many establishments do not like to offer credit card facility due
to the service charges to be paid to cr card companies. They get the
payment only after a certain period of time once the goods are sold. Both
of them make the profit margin less.
As mentioned earlier, the fraud element is applicable to India also. In
view of all these factors, in India; Use of credit cards cannot be expected
to boost the sales of online sales, particularly business to customer
Then what is the way out?
There are other methods of payments for Indian online business, which
are given below:
Payments by electronic cash/ cheque may be made legally valid
including electronic signature .I believe once the cyber laws are passed
by GOI, this is possible.
Each merchant/shopper can allot a secret code number to the existing
clients (customers). On receipt of this code number, the goods can be
dispatched by VPP and other modes of dispatch, which will ensure
collection of payment against delivery. However, this facility can be
extended only to existing customers.
Banks should be asked to immediately create necessary facilities for
any of the a/c holders to operate the a/c through online. Once a
purchase is made, the a/c holder can transfer the required amount to
the merchant A/C online. The MERCHANT BANK CAN INTIMATE the
shopper about the transaction. All these activities can be carried out
instantly though proper programming. Activity can be made part of the
ordering activity.
Large organizations can issue authorization letters to each of their
employee who wants to avail the online purchasing facility and device
a mechanism through which the company itself pays the merchant his
dues. This would require installation of transaction servers in the
companies or can be integrated with their online business activity.
Similarly all government establishments can device a mechanism to
enable their employees make online purchases. These are all some of the
ideas to making the online purchases easier and smoother without
affecting the payment due to the shoppers.
They may look difficult to achieve but with proper programming
techniques and the use of appropriate servers, they can be easily
achieved. In conclusion, payment through credit cards will not result in
increasing the online shopping as generally believed. We need to device
different mechanisms taking into account Indian laws, shoppers
requirements, banking practices prevalent in our country