56002385-Credit-and-Debit-Cards.pptx

8/10/2019 56002385-Credit-and-Debit-Cards.pptx

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CREDIT CARDS

BY:

Pr i y a l S hah

S andeep Gup t a

DEBIT CARDS


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What is credit card?

A credit card is a small plastic card issued to users as a system ofpayment. 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.


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Eligibility for getting the card

He should have an account with the bank

His assets and liabilities on a particular date are reported to

bank

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.


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Types of credit cards

Based on the mode of credit recovery1. 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 ofmaking payment. This facility gives a consolidated bill for a specific

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

interest liability and no preset sending limits either.


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Based on Status of Credit Card

1. Standard cardCredit cards that are regularly issued by all card-issuing banks are called

standard cards. With these cards, it is possible for a cardholder to makepurchases without having to pay cash immediately. It however offers onlylimited privileges to cardholders.

2. Business card

Business card, also called Executive cards, are issued to smallpartnership firms, solicitors, firms of chartered accountants, taxconsultants and others, for use by executives on their business trips. Thecard enjoys higher credit limits and more privileges than the standardcards. These cards are issued in the name of the executives of the firm.

3. Gold cardIt offers many additional benefits and facilities such as higher creditlimits, more cash advance limits etc. that are not available with standard orexecutive cards.


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Innovative Cards

ATM cards

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


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Private label cards

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

used only in that retailersstore.

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.


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1. Issuing Bank Logo

2. EMV chip on smartcards

3. Hologram

4. Credit card number

5. Card brand logo

6. Expiration date

7. Card holder name8. Contactless chip

An example of the front of a typical credit card


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An example of the reverse side of a

typical credit card

1. Magnetic stripe

2. Signature strip3. Card security code


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Benefits of Credit Cards

Benefits to Card holdersShopping convenienceCredit facilitySafetyMeticulous recordAcceptability

Benefits to MerchantsEnhanced salesEasy validationNo risk

Benefits to issuer banksSource of incomeMarket expansionCross selling


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Drawbacks of Credit Cards

Waste of money

Thoughtless buying

Financial problem

Mental agony

Costly


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What is Debit Card?

It is a plastic card similar to the creditcard where the expenditure amount is

automatically debited to the

corresponding bank account. This amount

will appear , in due course, on the monthlystatement of the account. It is a variant

of an ATM card, which helps the

customers to make payments

instantaneously for goods and servicespurchased.


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Dangers of Debit Cards

Most debit card holders prefer using the debit cards only for standard ATMwithdrawals. 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.


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Difference between Debit Cards and CreditCards

Debit Card Credit Card

Drawings are against own assets

or money lying in the savings bank

account

It allows a borrowing power on

the bank for which the customer or

holder has to pay some charges or

fees

No risk of over spending as the

customer can spend what he has

The customer tends to over

spend because he can spend money

which he does not have at that

moment


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Debit Card Credit Card

Does not involve any interestpayment or cost to the holder

Holder of credit card has to payinterest on the overdrawn amount

The holder need not carry any

cost or even travellerscheque. It

is as good as money in the

accounts with his bank

It provides additional finance to

the holder by allowing him to

overdraw if necessary. Payments

are made by the bank to the

extent of purchases and if they

exceed this limit, he pays intereston the excess amount


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Documents

56002385-Credit-and-Debit-Cards.pptx