Credit Card It is a form of loan and substitute for cash There are predefined Card LimitsHow it Works Card issuer (Issuing Bank) pays on customers behalf, And Customer repays the issuer within a given time frame Customer has to pay within the specified time frameCard holder benefits Substitute for Cash Interest free period Buy now, pay later Earn Reward pointsThe grace period or interest period is of generally 40-55 days, but there are annual maintenance fees for the sameIts a 2 in 1 banking product, a loan and a payment product

Above Third Party Processor MasterCard/Visa/Amex are also known as clearing housesIssuer banksCurrently top players volume wise ICICI, HDFC, SBI, CitibankPayee/MerchantsCommercial Establishment where the card is used. Eg:- Spencer StoreCard is swiped at Point of Sale (POS) terminalInterchange/Clearing houseThey are generally private players like VISA, AMEX, DINERS, MasterCardWhat data is passed in the above process flow ?1) 16 digit card number and CVV2) Amount3) Merchant IDON US transaction Vs OFF US transactionIf acquiring bank and issuing bank are same then its a ON US transaction else an OFF US transaction. In case of ON US transaction an interchange is not involved How much do everyone earns on it?Eg: for a 1000- rs transaction Mercahnt gets 975-985 Rs Balance of 15-25 gets divided between issuer and acquirer Interchange gets either an annual fee or a small flat fee per transaction or bothTransaction Settlement Now as the transaction gets over, the customer has following options1) Pay entire outstanding amount by due datea. Here no interest is charged on the amount2) Pay less than outstanding amounta. All banks minimum amount that need to be paid by due date, this is usually 5% of total outstanding. This is called Minimum Amount DueImplication of aboveThe remaining amount accrues interest, from date of transaction and any fresh transaction also starts accruing interest 3) Pay less than minimum amount duea. In this case apart from interest you are charged with late payment chargesFactors for Growth of Credit cards1) Acceptabilitya. Large number of Vendors/Merchants should accept the card2) Distribution Strengtha. It should be easily available for customers3) Strong Product Propositiona. Different type of schemes and limits of usage for different type of customers4) Customer Service5) Ease of Payments and collectionTypes of Cards Basic Cards Entry level No frill Low Credit limit 3.2 % - 3.45 % per month interest Average Transaction value 3000 Rs per monthPremium Cards Advanced user who wants additional facilities High credit limit 2.5% - 3.5 % per month interest Avg transaction value Rs. 9000 10000 per monthSecured Cards Card against Fixed Deposits Given to those who open Fixed deposit Outstanding is linked to FDCobranded Cards Tie ups with companies like Big BazaarFleet Cards Used to be given to drivers instead of cash for every outlet Issuer bills the fleet ownerPay Direct or Prepaid Cards Used by companies to facilitate disbursement of salariesInstruction Card Used by petrol pump owners for their daily fuel purchasesTravel Cards Prepaid card for international travel