Plastic Money By: Balaji D (P10012) Praveen S (P10052)
Yoghanand G M (P10078)
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Credit Card
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What are Credit Cards ? This card will permit the card holder
to withdraw cash from an ATM, and a credit card will allow the user
to purchase goods and services directly, but unlike a Cash Card the
money is basically a high interest loan to the card holder,
although the card holder can avoid any interest charges by paying
the balance off in full each month. 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.
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Minimum Payment Due Minimum payment due This is the smallest
amount of your balance you can pay by the due date and still meet
the terms of your card agreement. The minimum payment due is often
a specific fraction of the balance, such as 2%. Still You'll owe
interest on any portion of the balance that you don't pay. If a
customer spends Rs 5,000 and pays back exactly the 'Minimum Amount
Due' (subject to a minimum amount of Rs 100) every month, it will
take him up to 6 years and 6 months to pay back the total
amount.
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Parties involved Cardholder: The holder of the card used to
make a purchase; the consumer. Card-issuing bank: The financial
institution or other organization that issued the credit card to
the cardholder. Acquiring bank: The financial institution accepting
payment for the products or services on behalf of the merchant.
Merchant account: This could refer to the acquiring bank or the
independent sales organization, but in general is the organization
that the merchant deals with.
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Parties involved Credit Card association: An association of
card-issuing banks such as Discover, Visa, MasterCard, American
Express, etc. that set transaction terms for merchants,
card-issuing banks, and acquiring banks. Transaction network: The
system that implements the mechanics of the electronic
transactions. May be operated by an independent company, and one
company may operate multiple networks. Affinity partner: Some
institutions lend their names to an issuer to attract customers
that have a strong relationship with that institution, and get paid
a fee or a percentage of the balance for each card issued using
their name
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Interest Rates (ICICI Bank) Card NameTime Period (credit
period) Rate of interest (monthly) Platinum Card18 days to 48
days3.15% Gold card 18 days to 48 days3.40% Titanium Card 18 days
to 48 days3.15% Preferred Card 18 days to 48 days3.15%
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Costs Credit card issuers (banks) have several types of costs:
Operating costs Charge offs or Bad Debts Rewards Fraud
Promotion
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Revenues Offsetting the costs are the following revenues:
Interchange fee Interest on outstanding balances Fees charged to
customers Late payments or overdue payments Returned cheque fees or
payment processing fees (e.g. phone payment fee) Transactions in a
foreign currency. A few financial institutions do not charge a fee
for this. Membership fees (annual or monthly), sometimes a
percentage of the credit limit. Exchange rate loading fees.
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Pros and Cons to Customer Pros Convenience Allows a short term
credit to customer Many credit cards offer rewards and benefits
packages Cons High interest and bankruptcy Inflated pricing for all
consumers Weakens self regulation
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Debit Card
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What is Debit/ATM Card ? A debit card is a plastic card
account(known as a bank card or check card). that provides the
cardholder electronic access to his or her bank. Some cards have a
stored value with which a payment is made, while most relay a
message to the cardholder's bank to withdraw funds from a
designated account in favor of the payee's designated bank account.
The card can be used as an alternative payment method to cash when
making purchases. This type of card will directly debit money from
your bank account, and can directly be used to purchase goods
and
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Types of debit card systems Online Debit System (PIN debit )
:Online debit cards require electronic authorization of every
transaction and the debits are reflected in the users account
immediately. Offline Debit System : This type of debit card may be
subject to a daily limit or a maximum limit equal to the
current/checking account balance from which it draws funds.
Transaction would happen within 23 days. Electronic Purse Card
System : Smart-card-based electronic purse systems (in which value
is stored on the card chip, not in an externally recorded account,
so that machines doesnt require network connectivity)
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Pros Customer having poor credit worthiness can opt for debit
card. Instant finalization of accounts Less identification and
scrutiny, thereby making transactions quicker and less intrusive. A
debit card may be used to obtain cash from an ATM or a PIN-based
transaction at no extra charge
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Cons Limited to the existing funds in the account. Banks
charging over-limit fees or non-sufficient funds fees based upon
pre- authorizations. Payment is immediate. Many people prefer
having 20-25 days to pay their credit card bills. No right to
withhold payment. Because the money is immediately transferred,
consumers using debit cards don't have the right to withhold
payment in the event of a dispute with the merchant over the goods
or services purchased. Transaction fees. Some banks and merchants
charge transaction fees for using debit cards. High risks if
stolen. If your debit card number is stolen during an online
purchase, the thief may drain your bank account before the bank is
able to complete its investigation. This is why you should never
use a debit card when shopping online.
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Credit Card Vs Debit Card Credit Card Transactions are of
Credit Nature Risk of overspending Interest is charged to the
holder of card in case of overdrawing Source of additional funds
Debit Card Transactions are of Debit Nature No or less risk of over
spending Only Fees are charged on yearly basis for card usage
Eliminates need to carry hard cash
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In-Store Cards
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What are In-store cards ? These are used by the departmental
stores mainly as marketing tools to retain customers and increases
turnover. The main features of in-store cards are as below: Issued
by big department stores or retailers. Can be used only in
retailers outlet or for purchasing the companys products. Little or
no cost to retailers Usually developed by the traders in
partnership with banks or financing companies who undertake the
administration and sometimes the financing involved.
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Types on In-store card Budget Card: This card requires monthly
payment on behalf of the holders. The cost of goods purchased is
spread over a certain period. Option Card: Here, payment can be
either be made in full or at the cardholders discretion. However,
option available is subject to a minimum repayment and interest
charged on the balance outstanding amount. Monthly Card: The card
holder is required to make the payment every month. No extension of
credit is given beyond a month. This card differs for budget card,
where outstanding credit can be settled in 30 monthly
statements.
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Pre-paid Cash Cards
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As the name suggests the user will add credit to the card
themselves, and will not exceed that amount. These are usually
re-useable in that they can be 'topped up' however some cards,
usually marketed as Gift Cards are not re-useable and once the
credit has been spent they are disposed of. They provide some
specials benefits or discounts. Pre-paid Cash Cards Examples: DMRC
Smart Cards. Pantaloons Green card. Cards used in Food courts of
Malls.
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The Smart card carries a microchip with information on the
holder
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Why use smart cards? Can store currently up to 7000 times more
data than a magnetic stripe card. Information that is stored on the
card can be updated. Magnetic stripe cards are vulnerable to many
types of fraud. Lost/Stolen Cards Skimming Carding/ Phishing
Greatly enhances security. A single card can be used for multiple
applications (cash, identification, building access, etc.) Smart
cards provide a 3-fold approach to authentic identification: PIN
Smartcard Biometrics
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Applications Net surfing. Pan card. Passport. Payphones.
Electronic purse(Debit/Credit card). Banking(ATM card). Employee
attendance. Medical identification. Identity card, Driving
license.
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Pros Faster and smarter. Portability. Flexibility(no need to
carry separate ATM, Debit, Credit card or DL, pan card etc.).
Highly secured(deactivates on illegal use). Gives its own network
for internet surfing. Reliability (unaffected by electric and
magnetic field).
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Cons Expensive. Less Availability All readers can not read all
types of smart card(depends upon the smart card brand).