INTRODUCTION

Our society was once upon a time functioning without money; it is again likely to become

moneyless. While ancient society was confronted with the problems of adjusting mutually

satisfactory rates and basis of exchange, future society, with the help of computers, electronics and

telecommunications, credit cards, telephone and other modern means of communications, would

settle financial transactions instantly. Money as a medium of exchange will serve its function. The

difference will be that in future coins, currency notes, cheques, etc., will be dispensed with in

favour of records. India has entered the stage of credit card system and credit cards are gaining

increasing relevance to facilitate industrial, commercial and agricultural transactions.

Credit was first used in Assyria, Babylon and Egypt 3,000 years ago. The Bill of Exchange – the

forerunner of bank notes - was established in the 14th century. Debts settled by one-third cash and

two-thirds bill of exchange paper money followed only in the 17th century.

The first advertisement for credit was placed in 1730 by Christopher Thornton who offered

furniture that could be paid off weekly.

From the 18th century until the early part of the 20th, tallymen sold clothes in return for small

weekly payments; they were called “tallymen” because they kept a record of tally of what people

had brought on a wooden stick. One side of the stick was marked with notches to represent the

amount of debt and the other side was a record of payments. In the 1920s shopper’s plate – “buy

now, pay later” system – was introduced in USA. It could only be used in shops which issued it.

In 1950, Diners Club and American   Express  launched their charge   cards  in USA, the first ‘plastic

money’. In 1951, Diners Club issued the first credit card to 200 customers who could use it at 27

restaurants. With the magnetic strip in 1970, the credit card became a part of the information age.

Everyone carries a credit card these days. A credit card is basically a plastic card with a magnetic

strip invented with the intention to simplify the complicated banking process for an individual in

case he/she is short of cash, be it something casual like shopping or something severe like an

emergency situation.

Various banks and private financial organizations have now started providing credit card facility to

their clients to offer them better and simpler financial solutions to their problems.

A credit card generally works by giving its holder an immediate authority to purchase services and

goods such as travel and hotel reservations as well as shopping for merchandise in and outside

your own country.

All the credit card comes with a credit limit, a predetermined amount of money which its lender is

offering as credit to a credit card holder to spend wherever he wants to. Before issuing a credit card

to an individual, the bank or the financial institution has a look at his/her credit rating along side

verifying his/her credit history.

After receiving the needful information about the applicant, the lender company issues the credit

card to him. Now if the credit card holder goes shopping with his credit card, he pays the vendor

through the card which is actually reimbursed to the vendor through the bank or the lender

company.

And finally, the cardholder then repays the bank for the entire credit amount that he has used, by

paying it back through regular monthly payments.

In case the cardholder fails to payback the entire balance, the bank can lawfully charge him/her

with an interest fee on the unpaid amount.

This exactly why a thorough credit rating check is done by the lender company for the potential

cardholder. Such a measure guarantees them as a lender that an individual with a good credit rating

is likely to return back the credited amount.

That is why it is always better to have a good credit rating because the better your credit history,

the easier it is for any individual to apply for and receive a credit card.

Many credit card programs these days also include insurance coverage to secure the card holder in

cases like theft or fraud. There are very high chances of a credit card being stolen to be later used

illegally by the thief, but in case the card is insured and the matter immediately reported to the

lender company, the actual credit card holder would not be held accountable for the illicit charges.

However, a credit card holder can him/herself authorize any other person to use his card for

purchase of any goods or services willingly. In such cases, it is the primary cardholder who is

accountable for paying back all the transactions made through his or her account, eventually.Every

banking and other financial institution has its own company policies and conditions regarding the

credit limit as well as the time allowed to pay it back.While some might give more weightage to an

applicant’s credit rating, others might not be so stringent in those matters.

Both secured and unsecured types of credit cards are issued by the various lender companies and it

is your choice on which one you want to opt for. Sometimes, it also depends on your credit rating.

A very poor credit history might force you to opt for a secured credit card.

Whatever be the case, what needs to be remembered always is that credit card is not our money till

the time we do not repay it back. It is a loan that we take from the bank or the lender company.

This facility provides us to buy first and pay later, but paying it back later is a must or you may

never come to know when you get trapped in the vicious circle of credit card debts. 

Origin and History of Credit Cards

Credit cards got their start in the United States just before the beginning of World War I.

Department stores began the practice of issuing dog-tag style metal plates to their favorite

customers. By 1924 gas credit cards appeared on the scene, the first cards that could be used

at merchants all over the country. This was an important advance, because as automobiles

became more common so did traveling, and a gas card that was not accepted away from

home had limited value. Indeed, the increasing mobility of the average person is one very

important reason that credit cards have exploded with popularity. For example, a merchant in

California night not accept a personal check from a customer but would take an American

Express or MasterCard without hesitation.

Predictably, one of the man’s friends eventually failed to pay what had been charged, and the

enterprise which he had built collapsed, leaving McNamara with numerous uncollectible debts.

As the story goes, McNamara and his attorney were sitting around a table at lunch discussing

how he would recover his losses, when he came up with the idea of a credit card that could be

used at many different merchants’ locations. Since the idea came to him in a restaurant, he

decided to start with restaurants. This, of course, led to the establishment of the Diners Club.

McNamara issued a credit card (which was made from cardboard) with the holder’s name and

account number on the front and a list of the twenty-eight restaurants and Manhattan

nightspots which accepted it on the back. The annual fee for the card was five dollars. His

attorney, who helped him with the business, hired a publicity agent to draw together more

restaurants and cardholders for the network. From this, Diners Club grew into the first national

credit card not limited to just gas and oil.

In 1951 Franklin National Bank of New York created a credit card which could be used at many

different types of merchants (at this time Diners was limited to restaurants, hotels, and air

travel expenses). Other banks began their own programs, and then the very large Bank of

America in San Francisco started its own card, the BankAmericard, which has evolved into the

modern-dayVisa card. Other California banks implemented their own programs, which later

became theMasterCard of today.

In 1958 American Express noticed the profits of Diners Club and started its own credit card

program. Next, BankAmericard really began to grow and succeed. Other banks saw that there

was big money in credit cards and wanted to have their own. But they also recognized that in

order to have a credit card operation they had to have an abundance of customers. So toward

the end of the 1960s banks began mailing out cards to anyone with a name and an address,

dead or alive, good credit or bad.

Card use rose and, unsurprisingly, credit card fraud was rampant. Mail theft also became

widespread as unscrupulous individuals discovered that envelopes containing credit cards

were just like envelopes full of cash. And there was little to stop card companies from sending

out cards which customers had never asked for, were not expecting, and could not have known

had been stolen until the issuing company began demanding payment for the charges which

had been run up. These crimes and other problems stemming from the relentless card-pushing

by banks led directly to the passage of the Fair Credit Billing Act of 1974 as well as

many other laws designed to protect the consumer.

What is Credit?

Whenever you make a purchase today with the promise to pay for it tomorrow, you are using

credit. Having credit lets you make purchases when you don’t have cash available. Before a lender

will allow you to use credit, it must first believe that you can be trusted to repay the amount of

credit you use. This is considered financial trustworthiness.

Lenders use a number of factors to determine your financial trustworthiness. The most commonly

used factor is your credit history. How you have used credit in the past – your credit history – is

considered to be the best way to predict how you will use it in the future. Your credit history is

reported in your credit report and credit score.

When you are a new creditor and do not have a credit history, the lender might use other factors

such as employment and salary to gauge your financial trustworthiness. Or, the lender might

require that someone who does have favorable credit agree to repay your charges if you fail to do

so. In this case, the two of you share credit.

Concept of credit card

Progress in civilization in its turn has brought out radical changes in the manner of trading. The

need for something intrinsically useful and easily applicable in everyday dealing is clearly felt.

Cash in the form of currency notes and coins makes up just one form of the payment system.

Development in banking while also giving inputs to the further development of cash brought about

a second phase in payment namely paper instructions such as cheques and credit transfers. The

requirement for greater flexibility and convenience has led to electronic payments, and this is

where plastic cards have proved their worth. It allows the card issuers to limit the sum of money

the card-holders wish to spend. The spending of card-holders who have defaulted on payments or

who are over their credit   limit  can be restricted until the balances are cleared.

Definition of credit card

A credit card is a credit-token within the meaning of section 14(1), Consumer Credit Act 1974 of

the UK which defines a credit-token as a card, cheque, voucher, coupon, stamp, form booklet or

other document or thing given to an individual by a person carrying on a consumer credit business,

who undertakes:-

that on the production of it (whether or not some other action is also required), he will

supply, cash, goods and services (or any of them) on credit, or

that were, on the production of it to third party (whether or not any other action is also

required), the third party supplies cash, goods and services (whether or not deducting

any discount or commission), in return for payment to him by the individual.

In very simple words credit card can be termed as an unsecured   personal   loan  offered to customers

by the banks where the card-holder could purchase goods and services from authorised merchant

or merchant establishments (MEs) of the bank up to a fixed limit on credit. Such credit is normally

made available for a period of 30 to 45 days. This is turn helps earn income by way of commission

from its merchant establishments; the scheme provided large scope for sale and increased turnover

with assured and prompt payment.

Introduction to How Credit Cards Work

Have you ever stood behind someone in line at the store and watched him shuffle through a stack

of what must be at least 10 credit cards? Consumers with this many cards are still in the minority,

but experts say that the majority of U.S. citizens have at least one credit card -- and usually two or

three. It's true that credit cards have become important sources of identification -- if you want to

rent a car, for example, you really need a major credit card. And used wisely, a credit card can

provide convenience and allow you to make purchases with nearly a month to pay for them before

finance charges kick in.

That sounds good, in theory. But in reality, many consumers are unable to take advantage of these

benefits because they carry a balance on their credit card from month to month, paying finance

charges that can go up to a whopping 23 percent. Many find it hard to resist using the old "plastic"

for impulse purchases or buying things they really can't afford. The numbers are striking: In 1999,

American consumers charged about $1.2 trillion on their general-purpose credit cards.

Let's start at the beginning. A credit card is a thin plastic card, usually 3-1/8 inches by 2-1/8 inches

in size, that contains identification information such as a signature or picture, and authorizes the

person named on it to charge purchases or services to his account -- charges for which he will be

billed periodically. Today, the information on the card is read by automated teller machines

(ATMs), store readers, and bank and Internet computers.

According to Encyclopedia Britannica, the use of credit cards originated in the United States

during the 1920s, when individual companies, such as hotel chains and oil companies, began

issuing them to customers for purchases made at those businesses. This use increased significantly

after World War II.

The first universal credit card -- one that could be used at a variety of stores and businesses --

was introduced by Diners Club, Inc., in 1950. With this system, the credit-card company charged

cardholders an annual fee and billed them on a monthly or yearly basis. Another major universal

card -- "Don't leave home without it!" -- was established in 1958 by the American Express

company.

Later came the bank credit-card system. Under this plan, the bank credits the account of the

merchant as sales slips are received (this means merchants are paid quickly -- something they

love!) and assembles charges to be billed to the cardholder at the end of the billing period. The

cardholder, in turn, pays the bank either the entire balance or in monthly installments with interest

(sometimes called carrying charges).

The first national bank plan was BankAmericard, which was started on a statewide basis in 1959

by the Bank of America in California. This system was licensed in other states starting in 1966,

and was renamed Visa in 1976.

Other major bank cards followed, including MasterCard, formerly Master Charge. In order to offer

expanded services, such as meals and lodging, many smaller banks that earlier offered credit cards

on a local or regional basis formed relationships with large national or international banks..

Process of Credit Cards

When a person pays for products or services with a credit card, the card information is recorded-

either by manual entry, a card imprinter or a virtual terminal and verified so that the merchant can

receive payment for the transaction.

The process involves the following parties:

Cardholder: The owner of the card used to make a purchase.

Merchant: The business accepting credit card payments for products or services sold to the

cardholder.

Acquirer: The financial institution or other organization that provides card processing

services to the merchant.

Card Association: A network such as visa or master card and others that acts as a gateway

between the acquirer and issuer for authorizing and funding transaction.

Issuer: The financial institution or other organization that issued the credit card to the

cardholder.

After the transaction is authorized it is then stored in batch, which the merchant sends to the

acquirer later to receive payment valid, and then processes the transaction for the cardholder.

The acquirer sends the transaction in the batch through the card association, which debits the

issuers for the payment and credits the acquirer. In effect the issuers pay the acquirer for the

transactions.

Once the acquirer has been paid, the merchant receives payment. The amount the merchant

receives payment. The amount the merchant receives is equal to the transaction amount minus

the discount rate, which is the fee the merchant pays the acquirer for processing the transaction.

Credit cards in India

Credit cards have finally arrived in India. The card industry, which is growing at the rate of 20 per

cent per annum is flooded with cards ranging from gold, silver, global, smart to secure…the list is

endless. From just two payments in the early ‘80s, the industry now houses over 10 major players

vying for a major chunk of the card pie.

Currently, four major bishops are ruling the card empire - Citibank, Standard Chartered Bank,

HSBC and State Bank of India (SBI). The industry, which is catering to over 3.8 million 1 card

users, is expected to double by the fiscal 2003. According to a study conducted by State Bank of

India, Citibank is the dominant player, having issued 1.5 million cards so far. Standard Chartered

Bank follows way behind with 0.67 million, while Hongkong Bank has 0.3 million credit card

customers. Among the nationlaised banks, SBI tops the list with 0.28 million cards, followed by

Bank of Baroda at 0.22 million.

The credit card market in India, which started out in 1981, is on the verge of an unprecedented

boom. Between 1987 and 2000, the market has virtually grown to over 3.8 million cards with

almost 25-30 per cent growth in new card-holders.

India is generating more credit card spenders than spending places. While card-base and appends

are growing at a spiffy 25-30 per cent2 annually, the number of merchant establishments which

accept cards is growing selectively sluggish. The figure was put at 75,000–80,000 a couple of

years ago, and now stands at 100,000 on both the Visa and MasterCard loops. As opposed to that,

there are 2.5 million card-holders and 3.3 million cards (some, obviously, have more than one) and

the numbers are growing very strongly.

The seven million Indian credit card industry has been growing over 25 per cent3 annually and has

now more than 30 banks chasing customers with their cards. Still, credit cards in India have made

business sense only to a few.

“The annual growth rate is good, but it is only 20 per cent of the card base, that is generating

revenue,” says Roopan Asthana, manager, Card Products Division of HSBC. Nearly 45-50 per cent

of the card-holders are estimated to be inactive, while another 30 per cent use the card as a charge

card without using the revolving facility cards are expected to account for 33 per cent of all

purchases by 2000 and 43 per cent by 2005.

The credit card embodies two essential aspects of the basic banking function - the transmission of

payments and the granting of credit. Therefore, in its true sense, a ‘credit’ card must offer the

opinion of revolving credit. This is very akin to the overdraft facility offered by banks to their

account holders. A credit card holder does not necessarily have to settle his entire account at the

end of the month for he has the option to make partial payment in subsequent months. In fact,

when the card-holder makes the full payment at the end of the month he is said to be using his

credit card as a ‘charge card’. Incidentally, the interest paid by the card-holder on the ‘credit’

utilised by him is what makes the business of credit cards profitable from the point of view of the

bank issuing the card.

The State Bank of India, popularly known as SBI, is one of the leading banks in India. The bank

traces its origin to the first decade of the 19th century. Later on, it was merged with the Imperial

Bank. In the year 1955, the Government of India nationalized the Imperial Bank along with the

Reserve Bank of India. Ever since that time, the bank acquired its present name that is SBI.

The State Bank of India is India's largest commercial bank. The bank has been striving sincerely to

adhere to the efforts of providing utmost customer satisfaction to the best possible extent.

What Credit Card Numbers Mean

The front of your credit card has a lot of numbers -- here's an example of what they might mean.

Although phone companies, gas companies and department stores have their own numbering

systems, ANSI Standard X4.13-1983 is the system used by most national credit-card systems.

Here are what some of the numbers stand for:

The first digit in your credit-card number signifies the system:

← 3 - travel/entertainment cards (such as American Express and Diners Club)

← 4 - Visa

←5 - MasterCard

←6 - Discover Card

The structure of the card number varies by system. For example, American Express card numbers

start with 37; Carte Blanche and Diners Club with 38.

←American Express - Digits three and four are type and currency, digits five through 11 are the

account number, digits 12 through 14 are the card number within the account and digit 15 is a

check digit.

←Visa - Digits two through six are the bank number, digits seven through 12 or seven through 15 are

the account number and digit 13 or 16 is a check digit.

←MasterCard - Digits two and three, two through four, two through five or two through six are the

bank number (depending on whether digit two is a 1, 2, 3 or other). The digits after the bank

number up through digit 15 are the account number, and digit 16 is a check digit.

In the next section, we'll look at the stripe on the back of a credit card.

The Stripe on a Credit Card

Your card has a magstripe on the back and a place for your all-important signature.

The stripe on the back of a credit card is a magnetic stripe, often called a magstripe. The

magstripe is made up of tiny iron-based magnetic particles in a plastic-like film. Each particle is

really a tiny bar magnet about 20-millionths of an inch long.

The magstripe can be "written" because the tiny bar magnets can be magnetized in either a north

or south pole direction. The magstripe on the back of the card is very similar to a piece of cassette

tape (see How Cassette Tapes Work for details).

Your credit card typically uses only tracks one and two. Track three is a read/write track (which

includes an encrypted PIN, country code, currency units and amount authorized), but its usage is

not standardized among banks.

For more information on track format, see ISO Magnetic Stripe Card Standards.

There are three basic methods for determining whether your credit card will pay for what you're

charging:

Merchants with few transactions each month do voice authentication using a touch-tone

phone.

Electronic data capture (EDC) magstripe-card swipe terminals are becoming more common

-- so is swiping your own card at the checkout.

Virtual terminals on the Internet

This is how it works: After you or the cashier swipes your credit card through a reader, the EDC

software at the point-of-sale (POS) terminal dials a stored telephone number (using a modem) to

call an acquirer. An acquirer is an organization that collects credit-authentication requests from

merchants and provides the merchants with a payment guarantee.

When the acquirer company gets the credit-card authentication request, it checks the transaction

for validity and the record on the magstripe for:

Merchant ID

Valid card number

Expiration date

Credit-card limit

Card usage

Single dial-up transactions are processed at 1,200 to 2,400 bits per second (bps), while direct

Internet attachment uses much higher speeds via this protocol. In this system, the cardholder enters

a personal identification number (PIN) using a keypad.

The PIN is not on the card -- it is encrypted (hidden in code) in a database. (For example, before

you get cash from an ATM, the ATM encrypts the PIN and sends it to the database to see if there

is a match.) The PIN can be either in the bank's computers in an encrypted form (as a cipher) or

encrypted on the card itself. The transformation used in this type of cryptography is called one-

way. This means that it's easy to compute a cipher given the bank's key and the customer's PIN,

but not computationally feasible to obtain the plain-text PIN from the cipher, even if the key is

known. This feature was designed to protect the cardholder from being impersonated by someone

who has access to the bank's computer files.

Likewise, the communications between the ATM and the bank's central computer are encrypted to

prevent would-be thieves from tapping into the phone lines, recording the signals sent to the ATM

to authorize the dispensing of cash and then feeding the same signals to the ATM to trick it into

unauthorized dispensing of cash.

If this isn't enough protection to ease your mind, there are now cards that utilize even more

security measures than your conventional credit card: Smart Cards.

Smart Cards

The "smart" credit card is an innovative application that involves all aspects of cryptography

(secret codes), not just the authentication we described in the last section. A smart card has a

microprocessor built into the card itself. Cryptography is essential to the functioning of these cards

in several ways:

The user must corroborate his identity to the card each time a transaction is made, in much the

same way that a PIN is used with an ATM.

The card and the card reader execute a sequence of encrypted sign/countersign-like exchanges to

verify that each is dealing with a legitimate counterpart.

Once this has been established, the transaction itself is carried out in encrypted form to prevent

anyone, including the cardholder or the merchant whose card reader is involved, from

"eavesdropping" on the exchange and later impersonating either party to defraud the system.

This elaborate protocol is conducted in such a way that it is invisible to the user, except for the

necessity of entering a PIN to begin the transaction.

Smart cards first saw general use in France in 1984. They are now hot commodities that are

expected to replace the simple plastic cards most of us use now. Visa and MasterCard are leading

the way in the United States with their smart card technologies.

The chips in these cards are capable of many kinds of transactions. For example, you -could make

purchases from your credit account, debit account or from a stored account value that's reloadable.

The enhanced memory and processing capacity of the smart card is many times that of

traditional magnetic-stripe cards and can accommodate several different applications on a single

card. It can also hold identification information, keep track of your participation in an affinity

(loyalty) program or provide access to your office. This means no more shuffling through cards in

your wallet to find the right one -- the smart card will be the only one you need!

Experts say that internationally accepted smart cards will be increasingly available over the next

several years. Many parts of the world already use them, but their reach is limited. The smart card

will eventually be available to anyone who wants one, but for now, it's available mostly to those

participating in special programs.

Credit Card Safety

Although the numbers are increasing, consumers are still not using their credit cards on the

Internet nearly as much as e-tailers (electronic retailers) would like. That's why many cyber-

merchants continue to offer a toll-free order number so that shoppers have the choice of calling

their order in. Cyber-shopping may be convenient -- and some people do all of their shopping

online -- but credit-card fraud is always a threat, both on the Internet and out in the real world.

Hackers have found ways to steal credit-card numbers from Web sites.

While Internet companies have taken responsibility for security breaches and resulting losses to

credit-card users, there remains the growing problem of identity thieves who use stolen credit cards

to make purchases on the Internet. And while unfair or fraudulent practices by credit-card

companies are not commonplace, they do happen. The good news is that consumers are protected

by law -- in case of credit-card fraud online or off, you are only liable for a maximum of $50 of the

amount stolen.

And fortunately, the Federal Trade Commission (FTC) and the media are watching closely. In

1994, the FTC ordered TransUnion credit-reporting bureau to stop selling "sensitive" consumer

data -- data on 160 million Americans -- to junk-mail producers. The FTC charged that

TransUnion violated the Fair Credit Reporting Act by selling consumer information to target

marketers who lack any of the allowable purposes listed under the act. TransUnion denies that it

sold information that could affect customers' appealed the FTC's ruling, but lost.

If the mailing-list issue bothers you -- and it bothers most of us -- pay attention when you're

completing that credit-card application. Some application forms now provide a box that you can

check to allow or disallow the selling of your information to mailing lists. You can also protect

yourself by taking your name off the credit bureaus' mailing lists.

One way to do this is to visit The Consumer Credit Reporting Industry Opt-Out Prescreen Web

site. On this site you can fill out a form and opt-out of recieving pre-approved credit or insurance

offers in the mail. You can also call 888-5-OPT-OUT (888-567-8688). Alternatively, you can

write to the major credit card bureaus and request that your named be removed from their mailing

lists.

These tips are important and universal:

Sign your card -- as soon as you receive it! (Obviously, this is only as effective as the clerk

who's checking it.)

When you use your card at an ATM, enter your PIN in such a way that no one can easily

memorize your keystrokes.

Don't leave your receipt behind at the ATM.

Your PIN and account number from a discarded receipt could make you vulnerable to credit-card

fraud. Also, don't throw out your credit-card statement, receipts or carbons without first shredding

them!

Never give your credit-card number over the telephone unless you initiated the call.

Even when you place the call to a legitimate merchant (such as a mail-order company), never give

your card number out over a cordless phone. Radio scanners that eavesdrop on these conversations

are available for a few hundred dollars at any electronics store, and your voice can be received by

one from a far greater distance than the maximum useful range of your cordless phone. One

common scam is when someone calls you "back" right after you place an order, claims to be from

the merchant and tells you that there was a problem with your card number -- would you mind

giving it to them again? The best thing to do is ask for a contact name and call the merchant back

at the number you used originally.

Ignore any credit-card offer that requires you to spend money up-front or fails to

disclose the identity of the card issuer.

Make certain you get your card back after you make a purchase (one habit to

observe is to leave your wallet open in your hand until you have the card back). Also,

make sure that you personally rip up any voided or cancelled sales slips.

Always keep a list of your credit cards, credit-card numbers and toll-free numbers in

case your card is stolen or lost.

Check your monthly statement to make certain all charges are your own, and

immediately notify the card issuer of any errors or unauthorized charges. (More on this

later!)

Rapid Growth in Online Credit Card Services - Up 57%

The use of the internet for credit card account management has increased significantly,

with customers visiting card issuers’ sites 57% more often to service their accounts in

2006 than in 2005, according to a comScore study of online credit card services. That

increase follows a similar - 55% - rise in 2005 over 2004.

Strong growth in online servicing has continued in the first quarter of 2007, as the

number of customer visits to issuers’ sites jumped to more than one billion, an increase of

32% versus the same period a year ago, comScore reported.

As part of the study, comScore measured consumer attitudes toward online servicing of

credit cards:

63% of credit card users find online servicing important to their overall

experience with their credit card.

69% of all customers have logged into their credit card website at some point in

time.

58% of online customers log in more than once a month.

Among customers for whom online servicing is important, viewing online

statements, paying credit card bills, and disputing charges were cited as the most

important online services:

Also, according to comScore’s Credit Card Solutions Benchmarker, the number of online

credit card payments has grown significantly during the past two years: In 2006, 524

million credit card bills were paid online - a 73% increase versus 2004.

Regarding the enrolling of customers for paperless credit card statements  - big cost-

saving opportunities for issuers - the comScore survey found…

62% of credit card users are either already using the service or are willing to use

the service.

Issuers can expect paperless adoption to grow with rising adoption among

younger consumers, as those age 18-44 are 20% more likely to use the service

than consumers age 45 and older.

Incentives and appeals can boost further adoption of paperless statement service

among various customer segments, with 58% of them being enticed by a cash

incentive.

TYPE OF CREDIT CARDS

Credit Card

A credit card is plastic money that is used to pay for products and services at over 20 million

locations around the world. All you need to do is produce the card and sign a charge slip to pay for

your purchases. The institution which issues the card makes the payment to the outlet on your

behalf; you will pay this 'loan' back to the institution at a later date.

Charge Card 

A charge card carries all the features of credit cards. However, after using a charge card you will

have to pay off the entire amount billed, by the due date. If you fail to do so, you are likely to be

considered a defaulter and will usually have to pay up a steep late payment charge.

When you use a credit card you are not declared a defaulter even if you miss your due date. A 2.95

per cent late payment fees (this differs from one bank to another) is levied in your next billing

statement.

MasterCard and Visa

MasterCard and Visa are global non-profit organizations dedicated to promote the growth of the

card business across the world. They have built a vast network of merchant establishments so that

customers world-wide may use their respective credit cards to make various purchases.

Amex card

Amex stands for American Express and is one of the well-known charge cards. This card has its

own merchant establishment tie-ups and does not depend on the network of MasterCard or Visa.

This card is typically meant for high-income group categories and companies and may not be

acceptable at many outlets. There are a wide variety of special privileges offered to Amex

cardholders.

Smart Card

A smart card contains an electronic chip which is used to store cash. This is most useful when you

have to pay for small purchases, for example bus fares and coffee. No identification, signature or

payment authorization is required for using this card. 

The exact amount of purchase is deducted from the smart card during payment and is collected by

smart card reading machines. No change is given. Currently this product is available only in very

developed countries like the United States and is being used only sporadically in India.

Diners Club

Diners Club is a branded charge card. There are a wide variety of special privileges offered to the

Diners Club cardholder. For instance, as a cardholder you can set your own spending limit.

Besides, the card has its own merchant establishment tie-ups and does not depend on the network

of MasterCard or Visa.

However, since this card is typically meant for high-income group categories, it may not be

acceptable at many outlets. It would be a good idea to check whether a member establishment does

accept the card or not in advance.

Global Card

Global cards allow you the flexibility and convenience of using a credit card rather than cash or

travelers checks while traveling abroad for either business or personal reasons.

Co-branded Card

Co-branded cards are credit cards issued by card companies that have tied up with a popular brand

for the purpose of offering certain exclusive benefits to the consumer.

For example, the Citi-Times card gives you all the benefits of a Citibank credit card along with a

special discount on Times Music cassettes, free entry to Times Music events, etc.

Affinity Card

The card issuer ties up with popular organizations/ institutions which are often non-profit

organizations (Citi-WWF card or the Stanchart-Cricket cards) to offer an affinity card. When the

card is used, a certain percentage is contributed to the organization /institution by the card issuer.

Add-on card

An add-on card allows you to apply for an additional credit card within the overall credit limit. You

can apply for this card in the name of family members like your father/ mother/ spouse/ brother/

sister/ all children above 18 years of age. Your billing statement would reflect the details of

purchases made using the add-on card. You are liable to make good all the payments for the

purchases made using the add-on card(s).

Credit Card Applications

Before we get into shopping for a card, let's go over some important terms you'll encounter in

credit-card brochures or discussions with potential lenders:

Annual fee - A flat, yearly charge similar to a membership fee

← Many companies offer "no annual fee" cards today, and lenders who do charge annual fees are

often willing to waive them to keep your business.

Finance charge - The dollar amount you pay to use credit

← Besides interest costs, this may include other charges such as cash-advance fees, which are

charged against your card when you borrow cash from the lender. (You generally pay higher

interest on cash advances than on purchases -- check your latest bill to find out what you're paying

for this service!)

Grace period - A time period, usually about 25 days, during which you can pay your

credit-card bill without paying a finance charge

← Under almost all credit-card plans, the grace period only applies if you pay your balance in full

each month. It does not apply if you carry a balance forward. Also, the grace period does not

apply to cash advances.

Annual percentage rate (APR) - The yearly percentage rate of the finance charge

← Interest rates on credit-card plans change over time. Some of these adjustments are tied to

changes in other interest rates, such as the prime rate or the Treasury Bill rate, and are called

variable-rate plans. Others are not explicitly tied to changes in other interest rates and are called

fixed-rate plans.

Fixed rate - A fixed annual percentage rate of the finance charge

Variable rate - Prime rate (which varies) plus an added percentage (For example, your rate

may be PR + 3.9 percent.)

Introductory rate - A temporary, lower APR that usually lasts for about six months

before converting to the normal fixed or variable rate (This is a hot topic -- more about it

later.)

Experts say that if you're smart, you'll do the same kind of comparison shopping for a credit card

that you do when you're looking for a mortgage or a car loan. This is a good idea because the

choices you make can save you money. The process is not a simple one -- here are some tips that

should help you get started:

1.Do some research - There are plenty of places, both online and offline, where you can read

about credit-card offerings and even get credit-card ratings, but since rates and plans change so

often, it's a good idea to call the institutions you're interested in to confirm the information and to

see if there are other plans that might work for you.

2. Make a list - Make a list of credit-card features that fit your financial needs and rank the

features according to how you plan to use the card and pay your monthly bill.

3. Review the plans - Review all of the information you've gathered on different plans. Pay

special attention to the APR - - you want a low rate, but not necessarily the lowest. This is because,

depending on your lifestyle and payment habits, you might benefit more from a card that offers

cash rebates, discounts or frequent-flier miles.

4. Check out credit unions - Look into the possibility of joining a credit union. Credit unions

are non-profit, and they have lower overhead so they can charge lower interest rates. Credit unions

are newer to the credit industry so they are eager to generate credit-card loans. However, you'll

probably be required to open a share account or savings account to join.

Credit unions typically are limited to a particular employer and its employees, but that's changing.

Due to industry consolidations, credit unions are rapidly expanding their fields of membership. To

find out which credit union you may be eligible to join, contact the Credit Union National

Association (CUNA).

Compare plans - If you already have a credit card, be sure that you're making a good move before

you swap cards. If you are a current cardholder and have a good credit rating, see if the institution

that issued your card will lower your current rate. Don't be afraid to negotiate!

Credit Card Plans

Now we come to the core of the credit-card selection process -- which plan to choose. The costs

and terms of your credit-card plan can make a difference in how much you pay for the privilege of

borrowing (which is what you're doing when you use a credit card).

In the disclosure form from the credit-card issuer (usually a small, fine-print brochure), look

closely at the credit terms we discussed earlier. Don't forget about specifics like late charges

(usually $15 to $30) and over-the-limit fees (around $20 to $25). Consider these factors along

with how you pay your bills each month.

For example, if you always pay your monthly bill in full, the best type of card is one that has no

annual fee and offers a grace period for paying your bill before finance charges kick in. If you

don't always pay off your balance each month (and seven out of 10 American cardholders fall into

this category), be sure to look at the periodic rate that will be used to calculate the finance

charge.

One of the major factors to consider in a credit-card plan is whether it has a variable or fixed

interest rate. Whether the credit-card plan uses a variable or fixed rate in charging interest can

have a significant effect on what you pay to use your card.

Credit-card companies that issue variable-rate plans use indexes such as the prime rate, the one-,

three- or six-month Treasury Bill rate, or the federal funds or Federal Reserve discount rate.

(Most of this can be found in the money or business sections of major newspapers. See the list of

links at the end of this article for more information.)

Once the interest rate corresponding to the index has been identified, the credit-card issuer then

adds a number of percentage points -- called the margin -- to this index rate to come up with the

rate the consumer will be charged. In some cases, the issuer might choose to use another formula

to determine the rate to be charged. These issuers multiply the index or index plus the margin by

another number, the "multiple," to calculate the rate.

Take a good look at fixed-rate plans. They may be a couple of percentage points higher than a

variable rate, but you will have the advantage of knowing what your interest rate will be. Variable

rates are just that -- they change -- and can increase (usually the case) or decrease your finance

charges.

If your rate is fixed, the Truth in Lending Act requires the lender to provide at least 15 days

notice before raising the rate. In some states, there are laws that require more notice.

Monthly Payments and Finance Charges

Some credit cards, such as American Express, require you to pay off all of your charges each

month. As a benefit, they usually have no finance charge, and sometimes no maximum limit. Most

cards, including Visa, MasterCard, Discover and Optima, offer what is known as revolving credit.

This means they let you carry a balance, on which they charge interest (finance charges), and

they require you to make a minimum payment. The minimum payment is usually about 5 percent

of your current balance or $10 -- whichever is more.

Here are three of the ways used by financial institutions to calculate finance charges:

Adjusted balance - This system, which consumer experts say favors the cardholder, takes the

balance from your previous statement, adds new charges, subtracts the payment you made and then

multiplies this number by the monthly interest rate.

Average daily balance - This method, which is a pretty even-handed one and the most

commonly used, works like this: The company tracks your balance day-by-day, adding charges

and subtracting payments as they occur. At the end of the period, they compute the average of

these daily totals and then multiply this number by the monthly interest rate to find your finance

charge.

Previous balance - This method generally favors the card issuer, according to consumer

experts. The issuer multiplies your previous statement's balance by the monthly interest rate to find

the new finance charge. This means you're still being charged interest on your balance a whole

period after you've paid it down!

What you pay will vary depending on your balance, the interest rate and the way your finance

charge is calculated. Here's an example that shows how much difference the interest rate can make

in what you actually end up paying:

High-rate card - Suppose you charge $1,000 on a 23.99-percent credit card. After that, you

make no further charges and pay only the minimum each month. The payment will start at $51 and

slowly work its way down to $10. You'll make 77 payments over the next six years and five

months. By then, you will have paid $573.59 in interest for your credit privilege.

Low-rate card - If you charge that same $1,000 on a 9.9-percent fixed-rate card, the minimum

monthly payment will start at $50.41 and go down to $10. You'll make 17 fewer payments,

finishing in six years and paying $176 in interest. This saves you almost $400!

Late fees and over-the-limit fees are a couple of newer charges that are used by pretty much all

credit-card issuers now. And increasingly, issuers are drastically raising interest rates (to as high as

23.99 percent) after a set number of late payments (read the fine print and make sure you know

whether the payment is considered posted on its postmarked date or on the date the bank or credit-

card company gets it posted!). Unfortunately, once you have a couple of late payments, the credit-

card company can charge you the inflated interest rate for the remaining life of the account. Try to

avoid this -- all credit-card companies report your payment record to credit-reporting agencies and

even a few late payments could cause you problems when you try to buy a car or a house.

Advantages Of Credit Cards

Money from transactions credited into supplier’s account within 2-4 days..

No cash involved

Enable customer to buy expensive products immediately and make impulse purchases

Once transaction to make a payment to supplier guaranteed.

Credit card holders have additional protection if goods are faulty, provided each item cost

over a minimum amount..

Credit card holders can use card to obtain cash from a cash machine – although they pay

interest on with drawls from the moment they make the transaction.

Disadvantages Of Credit Cards

Cost of installing and paying for an electronic terminal.

Cost of processing the transaction.

Interest can be high if card is not paid-off in full each month and cash with drawls are

expensive.

Risk of fraud, through the use of stolen cards. However these are normally borne by

the credit card company, particularly if the owner has card protection insurance.

Because the method of calculating interest is complicated, people may find the

interest charges higher than they first thought.

SWOT ANALYSIS OF CREDIT CARD

Strengths

1. Diversity. The company has added different products and services over the years. This diversity

has made it able to spread financial risk over different channels.

2. Innovation. The company history is a study in innovation. It has pioneered many of the financial

products we take for granted today, and consistently found ways to improve delivery of its services.

Weaknesses

1. Credit and financial businesses are at the mercy of the credit market as well as consumer

confidence. If consumer spending is off, as it is right now, and credit is tight, profits will be down.

2. Size. The credit crunch has caused American Express to take measures to limit their default rate

and minimize losses. As one of the largest credit card companies, they receive a great deal of

attention in the press. This could end up hurting their corporate image many years after the economic

crisis has passed.

Opportunities

1. American Express remains a relatively stable financial service company in comparison to some of

its counterparts. This could be a tremendous plus for them when the economy begins to recover, and

customers have fewer choices in the industry.

2. Taking steps to limit risk, and becoming a leaner company could help the company to become

even stronger.

Threats

1. Tighter regulations and government intervention could make the financial services industry much

less profitable in the future.

2. As the US economy begins to affect the global economy, American Express may find itself a

victim of anger and backlash around the world.

STATE BANK OF INDIA

The origin of the State Bank of India goes back to the first decade of the nineteenth century with

the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three years later the bank

received its charter and was re-designed as the Bank of Bengal (2 January 1809). A unique

institution, it was the first joint-stock bank of British India sponsored by the Government of

Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843) followed the

Bank of Bengal. These three banks remained at the apex of modern banking in India till their

amalgamation as the Imperial Bank of India on 27 January 1921.

Primarily Anglo-Indian creations, the three presidency banks came into existence either as a result

of the compulsions of imperial finance or by the felt needs of local European commerce and were

not imposed from outside in an arbitrary manner to modernise India's economy. Their evolution

was, however, shaped by ideas culled from similar developments in Europe and England, and was

influenced by changes occurring in the structure of both the local trading environment and those in

the relations of the Indian economy to the economy of Europe and the global economic

framework.

Establishment

The establishment of the Bank of Bengal marked the advent of limited liability, joint-stock

banking in India. So was the associated innovation in banking, viz. the decision to allow the Bank

of Bengal to issue notes, which would be accepted for payment of public revenues within a

restricted geographical area. This right of note issue was very valuable not only for the Bank of

Bengal but also its two siblings, the Banks of Bombay and Madras. It meant an accretion to the

capital of the banks, a capital on which the proprietors did not have to pay any interest. The

concept of deposit banking was also an innovation because the practice of accepting money for

safekeeping (and in some cases, even investment on behalf of the clients) by the indigenous

bankers had not spread as a general habit in most parts of India. But, for a long time, and

especially upto the time that the three presidency banks had a right of note issue, bank notes and

government balances made up the bulk of the investible resources of the banks.

The three banks were governed by royal charters, which were revised from time to time. Each

charter provided for a share capital, four-fifth of which were privately subscribed and the rest

owned by the provincial government. The members of the board of directors, which managed the

affairs of each bank, were mostly proprietary directors representing the large European managing

agency houses in India. The rest were government nominees, invariably civil servants, one of

whom was elected as the president of the board. 

Business

The business of the banks was initially confined to discounting of bills of exchange or other

negotiable private securities, keeping cash accounts and receiving deposits and issuing and

circulating cash notes. Loans were restricted to Rs one lakh and the period of accommodation

confined to three months only. The security for such loans was public securities, commonly called

Company's Paper, bullion, treasure, plate, jewels, or goods 'not of a perishable nature' and no

interest could be charged beyond a rate of twelve per cent. Loans against goods like opium, indigo,

salt woollens, cotton, cotton piece goods, mule twist and silk goods were also granted but such

finance by way of cash credits gained momentum only from the third decade of the nineteenth

century. All commodities, including tea, sugar and jute, which began to be financed later, were

either pledged or hypothecated to the bank. Demand promissory notes were signed by the borrower

in favour of the guarantor, which was in turn endorsed to the bank. Lending against shares of the

banks or on the mortgage of houses, land or other real property was, however, forbidden.

Indians were the principal borrowers against deposit of Company's paper, while the business of

discounts on private as well as salary bills was almost the exclusive monopoly of individuals

Europeans and their partnership firms. But the main function of the three banks, as far as the

government was concerned, was to help the latter raise loans from time to time and also provide a

degree of stability to the prices of government securities.

Products of SBI

SBI maxigan

You can get your home loan as an overdraft facility. Here you can deposit

your surplus money and can withdraw it whenever required. The minimum

loan amount is Rs.5 lacs and maximum is Rs.1 Crore

.SBI Reality

If you are planning to purchase a plot of land then this loan is there to fulfill

your needs. It is available for a maximum amount of Rs.10 crore where the

repayment period is upto 15 years.

SBI Home Plus

It is for the home loans customers of the bank, who have savings/currents

accounts with the bank and have a satisfactory repayment track record of

atleast one year.

NRI Home Loans

This product is for Non Resident Indians and persons of indian origin, who

fulfill certain eligibility norms. The minimum loan amount is Rs. 3 lacs and

maximum amount variable. It is 30% for Net Annual Income (NAI) upto Rs.2

Lac, 50% for NAI above Rs.2 Lac and upto Rs.5 Lac, 55% for NAI above Rs.5

Lacs and upto Rs.10 Lacs, 65% for above Rs.10 Lacs.

SBI Tribal Plus

This loan specially caters to the residents of Hill/Tribal areas for helping them

financially. Maximum loan term and repayment term Rs.10 lacs and 15 years

respectively.

Gram Niwas

This product specially caters to the home loans needs of the farming and

poorest section of rural areas  

Sahyog Niwas

This product provides financial assistance to the self-help groups specially

in rural areas.

SBI Green Home Loan

This product comes under the initiatives took by SBI to contribute towards

fight against adverse climate changes by promoting Green Projects (which

reduce carbon emission and promote Renewable Energy). It is promoting

these projects by offering reduced interest rate and waiver of processing

fees, on the existing home loan products.

Earnest Money Deposit (EMD) Scheme

The EMD schemes are the schemes where allotments are made by draw

of lots and where loan applicants have to deposit a certain percentage of

the cost of plot/house.

SBI Yuva Home Loan

This product is designed for Salaried employees of Various Companies

like private sector, MNCs, PSUs, Government employees etc. The

maximum loan term is 300 months

SBI Home Loan PAL

Here the eligible loan amount is calculated before finalization of property

deal and you recieve a Pre-Approved Loan Arrangement Letter from the

bank. The minimum loan amount is Rs.10 Lacs.

State Bank of India provide different types of educational loan to the students. To extend

financial assistance to all eligible/ deserving/ meritorious students for pursuing higher

education in India as well Abroad. Here we discuss about the three different type of SBI

Study Loan - SBI Student Loan Scheme, SBI Career Loan Scheme and SBI Education

Plus Scheme. All three Education Loan offered by State Bank of India.

1. SBI Student Loan Scheme

Loan scheme by SBI (State Bank of India) is very flexible and allows the borrower to

take loan for all kind of courses offered by recognized colleges/ institutions, including

part- time and correspondence courses in India or abroad

Eligibility as per this Scheme 

All courses having employment prospectus are eligible.Graduation courses/ Post

Graduation courses/ professional courses.Other courses approved by UGC/ Government/

AICTE etc

Expenses Considered for Education Loan

Fees payable to college / school/ hostel

Examination/ Library/ Laboratory fees

Purchases of books/ Equipment/ Instrument/ Uniforms Caution Deposit/ Building

Fund/ Refundable deposit (maximum 10% tution fees for the entire course).

Travel Expenses/ Passage money for studies abroad 

Purchase of Computer considered necessary for completion of course

Cost of a Two- wheeler up to Rs.50,000/-

Any other expenses required to complete the course like study tours, Project

work. Etc

Amount of Loan : For studies in India, maximum Rs.10.00 lacs and Studies Abroad,

maximum Rs.20 lacs.

Interest Rate

For loan up to Rs.4 lac –0.50% below SBAR i.e 11.75% p.a

For loan above Rs.4 lac and up to 7.50 lacs 1.00% above SBAR 13.25% p.a. 

For loan above Rs.7.50 lacs –SBAR – 12.25% p.a 1% concession if interests is

serviced during the moratorium period.

Processing Fees

No processing fee/ upfront charges. A deposit of Rs.5000/- for education loan for studies

abroad which will be adjusted in the margin money.

).

Loan Security

Up to Rs. 4 lacs- No Security

Above Rs.4 lacs to RS.7.50 Lacs- Collateral security in the form of suitable third

party guarantee. The Bank may, at its discretion, in exceptional, cases weive third

party guarantee if satisfied with the net- worth/ means of parent/ s who would be

executing the documents as “joint borrower”

Above Rs.7.50 lacs- Tangible collateral security of suitable value, along with the

assignment of future income of the student for payment of installments.

All loans should be secured by parent(s)/ guardian of the student borrower. In case of

married person, co-obligation can be either spouse or the parent(s)/ parent-in-law

Loan Margin

For loans up to Rs.4.0 lacs : No margin

For loan above Rs.4.0 lacs

Studies in India: 5% and Studies abroad: 15%

2. SBI Career Loan Scheme

Eligibility as per this SBI Scheme 

Individuals who undertake a course for training/ skill development. Initially this scheme

will be restricted to person joining Commercial Pilot training courses in India and abroad,

from institutes recognized by the Ministry of Civil Aviation/ DGCA. Applicant Minimum

18 years old.

Nature of Facility: Term Loan with the applicant and parent/ guardians/ spouse as co-

borrowers.

Co-borrower: Maximum 60 years

Quantum of Loan : Maximum of Rs.20 lacs

Repayment

36 months in Equated Monthly Installments. Maximum moratorium period one year after

completion of course. No penal charges would be levied in case of early repayment of

loan by borrowers. Accrued interest during the moratorium to be added to the principal.

Interests 

Type of Security: Land/ Building Rate of Interest: 0.25% of the loan amount to be

recovered upfront

Security of Loan  

Equitable Mortgage of non-encumbered residential house/ flat, non-agricultural urban

immovable property, commercial or industrial property in the name and possession of the

borrower co-borrower, i.e Either Self-occupied or vacant. Where equitable mortgage is

not feasible and the customer and the customer is wiling to execute Registered mortgage

deed, it can also be accepted.

3. SBI Education Plus Scheme

Name of the Scheme

To finance employed persons to pursue Distance Education Programmes and Part Time

Courses (evening, etc) For career development in india.

Eligibility as per this Scheme

Permanent employees of State/ Central/ PSUs/ Reputed Private Sector Companies/

Reputed Institutions with a minimum service of 2 years and who have secured seat for

pursuing higher studies in the Distance Education and also Part Time Courses (evening

etc). A letter of Clearance/ cosent letter from the employer for pursuing the proposed

courses should be obtained.

Eligible Courses of SBI Education Plus Scheme 

Distance Education and Part Time Courses Leading to Diploma/ Degree Post Graduation

conduced by colleges/ universities approval by UGC/ Govt./ AICTE/ AIBMS/ ICMR.

IGNOU, etc , and other reputed institutions approved by GM(Network) falling with in his

area of operation.

Quantum Of Loan: 15 times net monthly income, Max: Rs.1,00,000 and Min:

Rs.25,000

Repayment of Loan

60 months in Equated Monthly Installments commencing from the month from the date

of disbursement. No penal charges will be levied in case of early repayment of loan by

borrowers.

HDFC BANK LIMITED

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to

receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in

the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994.

The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its

registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled

Commercial Bank in January 1995. 

HDFC is India's premier housing finance company and enjoys an impeccable track record in

India as well as in international markets. Since its inception in 1977, the Corporation has

maintained a consistent and healthy growth in its operations to remain the market leader in

mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has

developed significant expertise in retail mortgage loans to different market segments and also

has a large corporate client base for its housing related credit facilities. With its experience in

the financial markets, a strong market reputation, large shareholder base and unique

consumer franchise, HDFC was ideally positioned to promote a bank in the Indian

environment. 

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound

customer franchises across distinct businesses so as to be the preferred provider of banking

services for target retail and wholesale customer segments, and to achieve healthy growth in

profitability, consistent with the bank's risk appetite. The bank is committed to maintain the

highest level of ethical standards, professional integrity, corporate governance and

regulatory compliance. HDFC Bank's business philosophy is based on four core values -

Operational Excellence, Customer Focus, Product Leadership and People. 

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network

of 1,780 branches spread in 833 cities across India.All branches are linked on an online real-

time basis. Customers in over 500 locations are also serviced through Telephone Banking.

The Bank's expansion plans take into account the need to have a presence in all major

industrial and commercial centres where its corporate customers are located as well as the

need to build a strong retail customer base for both deposits and loan products. Being a

clearing/settlement bank to various leading stock exchanges, the Bank has branches in the

centres where the NSE/BSE have a strong and active member base. 

The Bank also has 5,318 networked ATMs across these cities. Moreover, HDFC Bank's ATM

network can be accessed by all domestic and international Visa/MasterCard, Visa

Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.

Mr. C.M. Vasudev has been appointed as the Chairman of the Bank with effect from 6th July

2010 subject to the approval of the Reserve Bank of India and the shareholders. Mr. Vasudev

has been a Director of the Bank since October 2006. A retired IAS officer, Mr. Vasudev has

had an illustrious career in the civil services and has held several key positions in India and

overseas, including Finance Secretary, Government of India, Executive Director, World Bank

and Government nominee on the Boards of many companies in the financial sector.

 

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years,

and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.

The Bank's Board of Directors is composed of eminent individuals with a wealth of

experience in public policy, administration, industry and commercial banking. Senior

executives representing HDFC are also on the Board. 

Senior banking professionals with substantial experience in India and abroad head various

businesses and functions and report to the Managing Director. Given the professional

expertise of the management team and the overall focus on recruiting and retaining the best

talent in the industry, the bank believes that its people are a significant competitive strength. 

HDFC Bank offers a wide range of commercial and transactional banking services and treasury

products to wholesale and retail customers. The bank has three key business segments:

- Wholesale Banking Services

- Retail Banking Services 

- Treasury

FEATURES OF CREDIT CARDS

Cash access across the World

With Credit Card instant access at millions ATMs worldwide including over thousands of ATMs

in India spread across more than 100 cities in India.

Convenience @ the Speed of Technology

Access your account on the net from the comfort of your office or home. Track your spends

through password protected PDF statements ; get special offers via SMS and e-mails.

E-statements

No postal delays or lost statements. Get your monthly statement directly in your e-mail

inbox. This gives you global access 24 by 7.

SMS Alerts

Stay informed wherever you are. Keep abreast with your credit card status, mini statements,

payment confirmations, credit and cash limit updates.

SBI Card Online

Manage your SBI Card account at the click of a mouse. Check your monthly statements online,

key in your change of address or find the State Bank ATM nearest to you. To get started, log on

to www.sbicard.com and register today.

Fuel Freedom

No Surcharge in any city on any pump.

Simply use your card to buy petrol, diesel and lubricants at any petrol pump in the World without

having to pay any transaction fee.

Easy Bill Pay Facility at Zero Charge

A FREE service that ensures your utility bills (electricity, mobile, insurance and telephone) are

paid on time. Earn Reward Points on payments made.

Start using your Easy Bill Pay Facility:Give us standing instructions to make payments on your

behalf every month OR Call the Card Helpline with instructions to make immediate payments.

Flexipay

Buy anything that catches your fancy and make your repayments in easy monthly

installments. Choose the plan that suits you best. Take advantage of a low interest rate. To

activate Flexipay, call the Card Helpline within 30 days of making your purchase.

Balance Transfer at Low Interest Rates

Your Card ensures you enjoy high savings with low interest rates. Just transfer the balances from

your other Bank Credit Card to your Card and enjoy Balance Transfer Plans as suited to your

financial needs.

Easy Money Facility

Just call the Card Helpline and order a bank draft anytime you wish. The draft amount will be

billed directly to your Card. The service is useful for payments of various bills, taxes, fees and a lot

else.

Credit Facility 

Your Card offers great flexibility of payment. With the extended credit option, you can plan your

payments against your outstanding. You can pay any amount from the minimum amount due to the

total amount due outstanding as shown in your Monthly Statement. You can then carry forward the

unpaid balance at one of the lowest finance charges available.

Online Railway Tickets Booking

Your Card offers you the convenience of booking your railway tickets online and getting them

delivered at your doorstep.

Global Card

Honoured in 2 million Visa outlets worldwide and 2,85,000 Visa outlets in India, your Card fulfils

your every wish at every turn. No matter where you are, privileges flow from your Card.

Add On Card

Enhanced power to your family!

You can share the power of your Card with your family, by applying for add-on cards for your

spouse, children, siblings over 18 years and parents.

Limitation of the Research

No study is complete in itself, however good it may be and every study has some limitations. Some

of the limitations which I had confronted are as follows:

The study was restricted to the city of Ludhiana only.

This is not an inclusive survey due to time and resource constraint.

There was limitation on part of the respondents as they sometimes shirked to give the related

information due to their busy schedules.

The convenient sampling technique adopted in the study may not be the representative of the

universe.

Since the sampling size was 50, so the findings and conclusions of the study are only suggestive

and not conclusive.

The respondents were likely to give wrong information regarding their personal issues in an

organization.

Scope

Due to time and response constraints, the scope of the study is limited to the geographical

boundaries of Ludhiana city

Significance of study

The study can be useful for determining consumer behavior regarding credit cards in perspective

of two Indian banks, one in public and another one in private sector i.e. State Bank of India and

HDFC Bank respectively. With this study Banks can take strategic decision regarding positioning

of the product, use for marketing decisions etc.

Research Methodology

Research is defined as human activity based on intellectual application in the investigation of

matter. Methodology obtained for this project is through fulfilling of questionnaires by different

organizations. Research methodology is a way to systematically solve the research problem. It is

the specific method of acquiring the information needed to structure or solve the problem at hand.

The research methodology enumerates the description of the sampling plan, research instruments

used for the collection of data, pre-testing of questionnaire, the use of statistical tools and

techniques for the analysis of the collected data.

Research Design

The research design is the conceptual structure within which the research is conducted; it consists

of the blue print for the collection, measurement and analysis of data. A design is used to structure

the research, to show how all of the major parts of the research project-the samples of groups,

measures, treatments and methods of assignment-work together to try to address the central

research questions.

Selection of Population

Due to time constraint, the study has been conducted in the city of Ludhiana. The population of

this study comprises of different organization in service and banking sector.

Selection of Sample

A sample of respondents belongs to different age groups. Satisfied sampling technique has been

used to selection of unit. A sample of 50 respondents was taken.

Construction of research instrument

The important factors to be studied were enlisted by the research after examining the related

researches. After having the background knowledge, a questionnaire was developed to obtain

responses relevant to objectives of research. While designing the questionnaire every attempt was

made to make it precise, so that the process of filling up the response does not consume too much

time. The questionnaire consists some of the question in the form of multiple choice question and

ranking questions.

Collection of Data

Project is based on certain data which are collected from data source. The sources are

1. Primary data

2. Secondary data

Primary Data:

Primary data are those which are collected for the first time. They are original in character. The

questionnaire method was used for the data relating to the study. The objectives of the research

were explained to the respondents, before getting the question filled.

Secondary Data:

Secondary data are those which are already collected by some person and which passed through

statistical machinery at least once. They are secondary on nature. Secondary data was selected

from magazines, related books, internet etc.

Data Analysis and Interpretation Technique:

For data analysis and interpretation, the data was processed with various tools such as frequencies

of responses and percentages. For interpretation, various tools such as tables, graphs, pie charts,

bar diagrams and rank score chart have been used.

Preface

The work is essentially the result of final year project which is mandatory to be undertaken on the

partial fulfillment of course BBA. The topic selected is Study of consumer behaviour regarding

credit cards in perspective of State bank of India and HDFC bank Selecting Ludhiana city the

project made after analyzing the response of various employees in organization. In spite of the best

endeavors, the report is not a work of excellence as it is students attempt to watch and understand

the business and practical aspects of business by applying theoretical knowledge and concepts.

Teacher’s Certificate

This is to certify that this project report entitled “Consumer Behaviour Regarding Credit Cards in

Perspective Of State bank of India and HDFC bank ”.Submitted in the partial fulfillment of

requirement for degree of Bachelor of Business Administration (BBA) at Khalsa Institute Of

Management And Technology, affiliated to Panjab Technical University is a bonfire research

work carried out by Pratibha Bhandari (MBA 4th sem) under my supervision. No part of thus

project report has been submitted for any other degree. The assistance and help received during

the course of investigation have been fully acknowledged.

Project guide

Ms.Aarti Khanna

Khalsa Institute Of Management And Techonolgy

Ldh

Acknowledgement

No great Endeavour in any field is possible in solitude. It needs inspiration,

guidance and help at every step. So I must preface my report by expressing

sincere and deep gratitude to those who made it possible for me to complete

my project work.

It is my pleasant duty to place on record my sincere thanks to the worthy

and honorable Principal of this institute “MRS.VARINDER KAUR

THIND” for encouraging and liberal facilities during the course of study.

It gives me immense pleasure my profound sense of gratitude and

indebtedness to my major advisor “Ms Aarti Khanna” for her valuable

guidance, support and cooperation extended to me during the course of

study.

I am thankful to other lecturers of my department too for giving

valuable suggestions from time to time the period of study.

Sincere thanks to my respondents who extended their cooperation

by providing the information for this study and for showing interest in my

reseach.

Pratibha Bhandari

Review of Literature

Details – A Survey of Recent Literature on Credit Card Networks

Credit card networks, such as MasterCard and Visa, play a prominent role in the U.S.

payments system. They link merchants that accept credit cards with the banks that issue

them. When a credit card transaction is initiated, it is by way of the network that the

transaction is authorized, processed, and ultimately settled.

Over the past few years, credit card networks have come under increased scrutiny from

regulators, legislators, and merchants worldwide. One concern of regulators and payment

system participants is the level and determination of a fee that credit card networks levy

each time a consumer uses a credit card to buy goods and services from a merchant. This

fee, commonly referred to as the "interchange," is typically calculated as a percentage of

the transaction's value. This fee is paid by the acquirer, the merchant’s financial

institution, to the card issuer and comprises a significant source of issuer revenue. A

second concern is merchants’ ability to impose surcharges on credit card purchases.

Some observers have argued that such rules prevent merchants from using price as a

signal to encourage use of less expensive instruments. A third concern is the competition

among payment instruments. Incentives such as frequent-use awards for credit card

purchases may distort incentives for consumers to use less expensive payment

instruments. Furthermore, the recently settled merchant case against MasterCard and

Visa, often referred to as the Wal-Mart case, questioned honor-all-cards rules that require

merchants that accept a network’s branded credit cards to also accept its branded debit

cards.

In the European Commission and Australia, government officials and central bankers

have recently negotiated or mandated a formula for calculating credit card networks to

lower interchange rates. In Australia, merchants are allowed to surcharge card-paying

customers. Australia joins the Netherlands, Sweden, and the United Kingdom in allowing

merchants to impose surcharges on credit card transactions. These policymakers argue

that the collective setting of interchange fees coupled with two networks comprising the

bulk of credit card transactions has resulted in interchange rates that are too high.

On February 28, 2003, Sujit Chakravorti of the Emerging Payments and Policy

Department at the Federal Reserve Bank of Chicago led a workshop discussion on recent

scrutiny of credit card networks around the world. Specifically, he focused on credit card

network competition and the efficacy of other countries' efforts to regulate interchange

rates. The presentation was based on Chakravorti's research for a forthcoming paper titled

"Theory of Credit Card Networks: A Survey of the Literature" in the  Review of Network

Economics. This paper will be available on the Payment Cards Center's web site as soon

as it is available.

During the workshop, Chakravorti reviewed recent academic research on credit card

networks. He explained the key assumptions that underlie the models presented in these

papers and highlighted the challenges in fully capturing the complexities of these network

relationships. He also discussed the arguments on both sides of the interchange debate

and the economic implications of particular regulatory strategies. Ultimately, Chakravorti

concluded, while existing models provide significant insight into the setting of fees and

network rules, policymakers need to determine their own market conditions before

implementing regulatory actions.

Extent of literature on personal debt and credit in Australia

The literature on personal debt in Australia is sourced from consumer bodies,

regulators and academia. This review has benefited from the input of consumer

organisations and hence brings together literature that is not always accessible. All

agree that more research is needed, particularly on financial decision-making. Our

literature survey shows the main gap lies in the study of the social and cultural

dimensions of debt, credit and decision-making. With the inclusion of the social and

cultural perspectives, financial decision-making no longer remains an individual,

economic issue. There is a further need to measure the impact of these cultural factors

so that they can be part of models of consumer behaviour that are beginning to

underlie strategies regarding financial literacy, provision of credit and regulation.

The different literatures agree there are limits to the rationality of the market and that

adequate disclosure of the terms of a loan is a necessary but not sufficient condition

for decisions that make for consumer well being. They agree there needs to be an

integrated approach keeping in mind the four prongs of financial literacy, credit

provision, regulation, and social, cultural and behavioural aspects of financial decision

making.

There remain differences in the emphasis that is placed on each of these three aspects.

Consumer advocates point out that debt and related decision-making by low-income

families is part of the wider story of the aspirations, and the needs of a group that is at

present at the “margins”. Credit is a means of “inclusion”, rather than a matter only of

financial literacy. Hence they stress the supply of low-cost or no-cost credit; a

combination of savings and community credit plans; financial literacy; together with

plugging the holes in the legislation and its implementation. They welcome the

increased cooperation between consumer and financial organisations but stress that

steps have to be taken to ensure that exploitative industry practices are curtailed.

Credit Cards Canada is a Canadian credit card directory listing credit cards offered by

major Canadian banks and financial institutions, as well as the best credit card deals

offered by Canadian stores. 

We have categorized all credit cards into several categories for credit card comparison.

You can browse our credit card listings by bank or by credit card type (Visa, American

Express and MasterCard). You can also browse the card listings by popular credit card

categories like Rewards Credit Cards, Airlines Credit Cards,Student Credit Cards, No

Interest Credit Cards, Cash Back Credit Cards, No-Fee Credit Cards, 0 Interest Credit

Cards, Secured Credit Cards, Personal Credit Cards and Small Business Credit Cards.

Abstract

Credit cards provide benefits to consumers and merchants not provided by other payment

instruments as evidenced by their explosive growth in the number and value of

transactions over the last 20 years. Recently, credit card networks have come under

scrutiny from regulators and antitrust authorities around the world. The costs and benefits

of credit cards to network participants are discussed. Focusing on interrelated bilateral

transactions, several theoretical models have been constructed to study the implications

of several business practices of credit card networks. The results and implications of

these economic models along with future research topics are discussed.

Objectives

1. To study the awareness level regarding credit cards.

2. To know the consumer behavior towards various credit card schemes of HDFC

bank and SBI bank.

3. To study the comparison of credit card between HDFC and SBI.

QUESTIONNAIRE

Name : _______________________

Age : _______________________

Gender: _______________________

Marital status : ________________________

Occupation: ________________________

Q-1 Do you own credit card?

a) Yes b) No

Q-2 How many credit cards do you have?

a) One b) Two c) Three d) More than three

Q-3 Which one do you think is more reliable and secured?

a) Paper money b) Plastic money

c) Both d) Can’t say

Q-4 Reasons of choosing credit card.

a) Higher credit limit b) Low interest rate

c) Payment terms d) Customer service offered

e) Brand image f) Easy to carry

g) Anytime access

Q-5 Which bank’s credit card you use?

a) HDFC Bank b) SBI Bank

c) Any other _____________(Please specify)

Q-6 Why have you chosen your bank?

a) Past relationship b) Better image

c) Better schemes d) Better acceptability

e) Good services

Q-7 What is your credit limit on your card?

a) Up to Rs40,000 b) Up to Rs70,000

c) Up to Rs1,00,000 c) Up to Rs1,50,000

e) More than Rs1,50,000

Q-8 For how long you have been using credit card?

a) Less than 6 months c) 6 months to 1 year

b) 1 year to 3 years d) For more than 3 years

Q-9 For what purpose you use your credit card?

a) Online payments b) Shopping

c) Cash back offers d) Status symbol

Q-10 According to you which is the convenient way to pay?

a) Cash b) Credit Card c) Both

Q-11 What prompts you to use credit card instead of using cash?

a) Convenience b) Free credit availability

c) Cash handling not required d) Status symbol

e) Emergency f) Easy book keeping

Q-12 How often do you use credit card services in a month?

a) Once in a month b) Twice in a month

c) More than twice in a month

Q-13 How often do you use credit card for following?

Never Regular Often

a) Utilities bills

b) Purchase of Household Products

c) Luxury and Durables

d) Hotels and Restaurant

e) Petrol filing

Q-14 How intensive is your use of credit card?

a) Purchasing up to Rs.5,000 per month

b) Purchasing up to Rs.20,000 per month

c) Purchasing up to Rs.30,000 per month

d) Purchasing up to Rs.50,000 per month

e) Purchasing more than Rs.50,000 per month

Q-15 Which credit card preference do you have? (Specify bank credit card)

SBI HDFC

Platinum Card Platinum Card

International Card International Gold Card

Gold Master Card International Silver Credit Cards

Silver card Corporate card

Employee Card Health Plus Credit Card

lifestyle Credit Card Woman’s Gold Credit Card

Railway Card Titanium Credit Card 

Advantage Card Gold Business Credit Card

Q-16 Rate the following parameters according to your satisfaction level.

SBI Bank HDFC Bank

Parameters Highly

Satisfied

Satisfied Neutral Dissatisfied Highly

Dissatisfied

Highly

Satisfied

Satisfied Neutral Dissatisfied Highly

Dissatisfied

Credibilty

Services

Beneficial

Promises

Interest rate

Schemes

Q-17 Why you opted for credit card of particular bank instead of any of private/public sector

bank?

HDFC SBI

a) Reliability of being of Government affiliation

b) Felt secured

c) No apprehension of exorbitant charges

d) Online operation services

e) Efficient service

f) Excess to other allied services/products

g) Personal service by relationship officers of bank

h) Worldwide acceptance

i) Attractive Reward Points

Q-18 Where do you see the future of credit card?

a) Rapid growth b) Steady growth c) Stagnant

d) Declining e) Can’t predict

Any suggestion for your credit card

_____________________________________________

Thanking You

Pratibha (K.I.M.T)

Bibliography

Internet

www,yahoo.com

www.answer.com

www.wikipedia .com

www.Google.com