PROJECT ON CREDIT CARD SPECIAL

PREFERENCE TO HDFC BANK

- By Shweta. N. Bhosle

1

Project Report OnCREDIT CARD WITH SPECIAL PREFERENCE HDFC BANK

Submitted to

University of Mumbai, under the partial fulfilment of degree of B. Com (Banking and Insurance)

Submitted By

SHWETA. N. BHOSLERoll No: 1582303

Under the Guidance of

Prof: MRS. SHRUTI SHOUCHE

VPM’S R.Z Shah College of Arts, Science &Commerce, Mumbai UniversityAcademic Year2015-16

2

Declaration

I am Shweta. N. Bhosle Student Of T.Y.B.Com (Banking & Insurance) Semester V (2015-16) hereby declares that I have completed the project on credit card special preference to hdfc bank.

The information submitted is true and original to best of my knowledge.

Signature of student

Shweta. N. Bhosle

Roll no. 1582303

3

ACKNOWLEDGEMENT

I owe many to the great people my parents, sister and friends who supported me

during the writing of the book.

My deepest thanks to my guide. PROF.MRS. SHRUTI SHOUCHE for guiding

and correcting with attention and care. She made me confident to choose this

project and made necessary correction as and when needed.

I express my thanks to the principal of my college MRS KAVITA SHARMA

For extending her support. My deep sense of gratitude towards to course co-

coordinator. PROF . MR. OM DEWANI for support and guidance.

My deep sense of gratitude to the branch manager of HDFC bank. I thank her for

her support and permission for survey.

I would also thank my institute and my faculty members without whom this project

would have been a distance reality. I also extend my heartfelt thanks to my family

and well-wishers.

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INDEXCONTENTS Pg no.

Chapter 1 1.1 History 11-121.2 Global View 131.3 Indian View 14-16

Chapter 2 2.1 Meaning Of Credit Card 172.2 Specification Of Credit Cards 17-182.3 Classification Of Credit Cards 19-222.4 Characteristics Of Credit Cards 23-242.5 Features Of Credit Cards 25-29

Chapter 3 3.1 Types Of Credit Cards 30-333.2 Types Of Hdfc Credit Cards 34-493.3 Benefits / Demerits Of Credit Cards 50-56

3.4 Advantages / Disadvantages Of Credit Cards 57-58

Chapter 4 Primary Data4.1 Introduction Of Hdfc Bank 594.2 How Credit Card Works 60-654.3 Problems Of Credit Cards 664.4 Marketing And Promotional Strategies 67-72

4.5 Credit Card Management System 73Chapter 5 5.1 Case Study

74-76Webliography 77

Bibliography 78

Questionnaire 79Conclusion 80

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INTRODUCTION

HDFC is an Indian banking and finance Services Company headquartered in

Mumbai Maharashtra Incorporated in 1994, it is the fifth largest bank (private

sector) in India. (Housing Development Finance Corporation) a premier housing

finance company of India promoted the bank. HDFC was ranked 45th on the list of

top 50 banks in the world in terms of their market capitalization.

Credit cards are fundamentally different from the others payment methods in that

they involve extending credit rather than drawing on an existing store funds. Banks

in conjunction with credit card association such as Visa and Master card, issue

general purpose credit cards department stores also issues credit card to be used for

purchases at that particular store. Like Electronic Fund Transfer, payment by credit

card is not anonymous. Since paying with a credit card does not involve a store of

Funds, deposit insurance and reserve requirements are not directly relevant. The

bank that issues the card is label and thus merchants paid if the cardholders

default .If the issuing bank fails, the credit card association guarantees payment to

merchants with outstanding transaction.

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OBJECTIVES

To Study The Classification And Features Of Credit Card

To Study The Types Of Credit Card With Special Preference to HDFC

To Study Credit Card Payment Processing And How It Works

To Study Problems and prospects Of Credit Card With Special To HDFC

To Understand The Marketing And Promotional Strategies

To Study Credit Card Management System

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SCOPE

This project work cover’s one private sector bank HDFC (Housing Development

Finance Corporation). It focuses on the credit cards services provided by

commercial bank. It also highlights the credit card facilities offered to customers.

This study is done with the help of a questionnaire, which contains questions,

which probe into the details to find the reason of their choice. The study will help

to know the features. The study helps to know about the usage pattern of credit

card users. The study also helps to find the best possible way of reaching the

customers. The study will also helps in choosing a best credit card bank. All these

results will help the consumer to know the features, functions and to create

awareness of using credit card.

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LIMITATIONS

Limited time for acquisition of primary data

Limited primary data

Co-operation of the personnel in the bank was limited

The sample size is small due to the specified reasons

Findings are based on survey through questionnaire.

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RESEARCH METHODOLOGY

The present study, which considered both data primary and secondary data.

Research methodology is a method of collecting all sorts of information and data

pertaining to the subject in question. The primary data has been collected with the

help of questionnaire as well as personal observation, book, magazine, journals etc.

It covers the overview of the credit cards special preference to HDFC bank

customers and performance of credit card awareness and usage of plastic money.

Research Methodology

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Primary data Interviews Questionnaire

Secondary data

Books Internet websites Magazines Newspaper

CHAPTER 1

1.1 HISTORY

In 1994, HDFC was incorporated as a private sector with the approval of RBI with

certificate of commencement of Business was received on 10 October 1994 from

RBI. Hereby Credit card concept was introduced by Edward Bellamy in his

utopian novel “Looking Backward”. The early charge cards were issued by

Western Union to its frequent customers in 1921. The charge cards from this time

were printed on paper card stock. In 1938, several companies started to accept each

other’s card. In the 1940’s, oil companies in USA used to sell them fuel and other

oils for growing number of automobile owner. Later there were many types of

credit card for different services. Which are as Follows:-

Year Type of card Uses

1928 Charga – plate Purchasing goods from

particular store.

1934 Air travel card For transportation.

1958 Master card Transaction

In India according to Manas Ratha (1997), the credit card model studied usage of

credit card and its conceptualization of credit card system and stock flow in the

credit card. James in 2008 in the article Growth of Plastic Money had discussed the

problems, prospects of economic, and business, which involved in the plastic

money market. In 2009, Ram lingam in his paper usage pattern of credit card

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holders had analyzed the purpose and use of credit card behavioral changes of

credit card holders. In 2010 Swati Anand in their article they discussed the current

I.T tools applicabilities in the banking such as Electronic Clearing and Clearing

system , Credit Clearing , Plastic Money. The study has focused the service of

credit card throughout the worldwide history.

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1.2 Global View

The HDFC bank was incorporated on 30th august 1994. A new private sector bank

promoted by Housing Development Corporation Ltd. HDFC a premier housing

finance company. The Bank has set up 100 new electronic data capture (EDC)

terminals in Mumbai-HDFC bank launched its first B2C payment gateway which

allows Visa/Master card .The company has introduced a new scheme whereby it

will provide loans. The foreign Investment Promotion Board has cleared the

proposal of the HDFC Group to enter into a joint venture with Singapore.

Telecom’s e-commerce company for providing a comprehensive range of B2B. As

HDFC launched the Master Card for easy payment for customer. Credit Card is

used not only in India but also in other country. As the concept of using, Edward

Bellamy described a card for purchase in 1887. Bellamy used the term credit card

eleven times in Looking Backward novel; although this referred to a card for

spending a citizen’s dividend from the government, rather than borrowing.

In September 1958, Bank of America launched bankamericard in Fresno,

California, which become the first successful recognizably modern credit card. It is

eventually licensed to other banks around the United States. The MasterCard

secure code/ verified by visa is an easy and secure online payment service from

hdfc bank that enhances the security of any online purchase that you make. With

this service, you are protected against any authorized purchases from credit card. It

has to do it confirm identity with a unique password for every online purchase.

Also can be reassured of the authenticity of the online store with the help of a

personal assurance message. As the cards plays vital role in banking sector for

online purchases.

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1.3 Indian View

The first credit card to enter India was the diner’s club card in the year 1964. The

first Indian banks to launch credit cards were Andhra bank was VISA classic in the

year 1981, followed by central bank of India’s credit card in collaboration with

Master Card Corporation in the same year. Gradually introduced their credit cards

in India only later. Apart from these Indian banks, many foreign banks such as citi

bank, standard chartered bank, and ANZ Grind lays bank, bank of America and

American express bank have also introduced their proprietary and other franchised

cards through their Indian branches. The Reserve Bank of India is taking special

measures to promote the use of alternate payment systems like credit cards, debit

cards, etc. to ease the pressure on currency printing and the use of cheques. On the

legal front too, the developments in India are becoming favorable to the card

industry. Banks can now file summary suits against defaulters for quicker recovery

of credit card dues. This has made an increasing number of Indian banks realize the

credit card potential and spurred them to enter the ever-expanding card business.

Prepaid/stored value cards are also gaining popularity in the Indian market. For

instance, oil companies issue “petrocards” for easier payment at the company’s

petrol stations. Similarly, the Mahanagar Telephone Nigam Limited (MTNL) has

already introduced its “virtual calling card “and has recently launched a co-branded

telecom credit card to facilitate payment of telephone bills. Credit card lending has

surged to such an extent that average loan amounts ($32,400 in2004) made to

small businesses with revenues greater than $1 million were actually smaller than

average loan amounts ($42,600) made to the smallest businesses with revenues

under $1 million12. The larger small businesses are receiving a greater portion of

credit card loans than the smallest small businesses. Some Indian banks have made

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an entry into the smart card business too. Here hdfc bank credit card facility to

customers like a app which would be convenient to customers for credit card

transaction the app name “pay app” it consist pre-loaded wallets which are good

alternatives , they may not be the best long term solution . As Indian customers are

happy with the schemes and discounts. The best long-term solution would be for

banks to provide digital wallet services. For 2014-15, hdfc noticed that 63% of all

their transactions were conducted. As there various credit cards are been used by

people in India.

• RBI - 17.4%(2012 – up to Apr) 16.2 %(2011)

15

• State Bank of India & Punjab National Bank Contributes More for

the Growth.

• Card base of public sector banks expanded 7.4 % to 3.09mn.

• Private and foreign banks declined 1.5 % to 14.7 million.

• New Entrance - IndusInd Bank acquired Deutsche Bank’s Standard

Chartered Bank bought Barclays’ card business in India Credit

Cards in India - 17.77 million

• In private sector ICICI bank and HDFC bank contributes more for

the growth

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CHAPTER 2

2.1 Meaning

Any card plate or coupon book that may be used to borrow the money or product

and service on credit is called credit card.

Definition of a credit card

Credit is a method of selling goods or services without the buyer having cash in

hand. A credit card is only an automatic way of offering credit to a consumer.

Today, every credit card carries an identifying number that speeds shopping

transactions.

2.2 SPECIFICATION OF CREDIT CARDS

The size of most credit cards is 3 3⁄8 × 2 1⁄8 in (85.7 × 54.0 mm), conforming to the

ISO/IEC7810 ID-1 standard. Credit cards have a printed] or embossed bank

credit card number complying with the ISO/IEC 7812numbering standard. Both of

these standards are maintained and further developed by ISO/IEC JTC 1/SC

17/WG 1. Before magnetic stripe readers came into widespread use, plastic credit

cards issued by many department stores were produced on stock ("Princess" or

"CR-50") slightly longer and narrower than 7810. Many modern credit cards have

a computer chip embedded in them for security reasons.

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An example of the front in a typical credit card:

1. Issuing Bank Logo

2. EMV chip (only on "smart cards")

3. Hologram

4. Card number

5. Card Network Logo

6. Expiration Date

7. Card Holder Name

8. Contactless Chip

An example of the reverse side of a typical credit card:

1. Magnetic Stripe

2. Signature Strip

3. Card Security Code

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Credit Card Number Structuring

• 1ST – 6 No’s – Bank of Credit Card.

• Next – 9 No’s – Individual A/c No.

• Final Digit – Validity Check Code.

• Extra Codes - Will be Issue & Security Codes.

Role of Payment –Networking Organizations

Cardholders travel and use card anywhere. It is not feasible for each player

(banker) to establish worldwide clearing network for payments to merchants and

to get billing information for cardholders. It’s cheaper to be member of big

clearing systems. Visa and MasterCard are the most popular ones. They offer

following advantages:

1. Brand image: customers prefer these brands and hence sale of cards is more.

2. Worldwide acceptance by merchants

3. Payment transactions clearing network worldwide.

4. Assistance in risk management and dispute management.

Discover and diners club are other popular networks

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2.3 CLASSIFICATION OF CREDIT CARD

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CLASSIFICATION OF CREDIT

CARDSBased on mode of

credit recovery

Based on status of

credit card

Based on geograph

ical validity

Based on

franchise/ Tie-

up

Based on

issuer Categor

y

Charge Card

Revolving credit

card

Standard Card

Domestic

card

Internation-

al Card

Individ-ual

Cards

Corpor-ate

Cards

Proprie-

tary card

Business Card

Gold Card

Master

Card

VISACard

Domestic

Tie-up Card

1. BASED ON MODE OF CREDIT RECOVERY Charge Card

A card that charges no interest but requires the user to pay his/her balance in

full upon receipt of the statement, usually on a monthly basis. While it is similar

to a credit card, the major benefit offered by a charge card is that it has much

higher, often unlimited, spending limits.

Revolving credit cardA line of credit where the customer pays a commitment fee and is then

allowed to use the funds when they are needed. It is usually used for

operating purposes, fluctuating each month depending on

the customer's current cash flow needs

2. BASED ON STATUS OF CREDIT CARD Standard Card

It is a generally issued credit card

Business Card(Executive cards) it is issued to small partnership firms, solicitors, tax-

consultants, for use by executives on their business trips.

Gold CardA credit card issued by credit-card companies to favoured clients, entitling

them to high unsecured overdrafts, some insurance cover, etc

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3. BASED ON GEOGRAPHICAL VALIDITY Domestic card

Cards that are valid only in India and Nepal are called domestic cards.

International CardCredit Cards that are valid internationally are called international cards.

4. BASED ON FRANCHISE/ TIE-UP Proprietary card

A bank issues such cards under its own brands. E.g., SBI card can card of

canara bank

Master CardThis card is issued under the umbrella of “MasterCard International”

Visa CardIt is issued by any bank having tie up with “VISA international”

Domestic Tie-up CardIt is issued by any bank having tie up with domestic credit card brands such

as Can Card and IndCard.

5. BASED ON ISSUER CATEGORY

Individual Cards

Non-corporate cards that are issued to individuals

Corporate Cards

Issued to corporate and business firms.

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2.4 CHARACTERISTICS OF CREDIT CARD

1. Credit LimitAll banks have different limits set for customers depending upon the types of

cards in their possession. Even within a particular type of card, limits may vary

depending upon the credit worthiness of the individual. This depends on the

gross income of the individual and the period for which the person is using the

card. However, some banks have a card, which has no set credit limit.

2. Interest Charges

This is the biggest source of revenue for the issuing banks. The interest rates

generally range from 1.99% - 3%per month. This is equivalent to around 24% -

35% per year. The interest charges are also applicable on accrued interest.

Therefore, a customer can end paying up heavily for the credit taken

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Characteristics Of Credit Card

Credit Limit

Interest Charges

Annual Charges

Grace Period

Value Added

Benefits

3. Annual Charge

This is a fixed amount, which has to be paid every year irrespective of the extent of

usage. Over the past few years, with increase in competition a general decline in

these charges can be observed

4. Grace PeriodThis is the extra period, which is offered to the consumer for repaying the

credit. In the Indian scenario, the first warning is given at the end of three

months, and a black mark is put against the customer in case of non-payment

for more than seven months. Further grace period is decided on a case to case

basis .

5. Value Added Benefits

These include airline ticket booking and insurance benefits on lost luggage and

accidental deaths for e.g.: offers discounts of 3.5% on domestic airfares and 6.5%

on international ones if tickets are charged to their cards. The latest in line of value

added features are the rewards programs. Here a cardholder earns a certain number

of points by spending a particular sum of money from their credit cards.

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2.5 FINANCIAL FEATURES OF CREDIT CARDS

1. Annual membership

Most members are expected to pay annual membership fee to issuing authority.

This is towards maintenance of the card account by the bank or ‘service charges’.

These waived off to some customers who transact significant value through their

credit card. Bankers’ earnings is by interest income on credit cards. More the usage

of card , more the income to the bank .

2. Minimum payment

All the issuers insist upon minimum payment by the cardholder for every billing

cycle. This is usually 5% merchant transaction bills. Full amount is to be paid for

EMI’s of the loan. It is payable within 20 days of billing. This is a tree credit

period i.e. no interest is payable. Amount unpaid and rolled over to the next billing

cycle attracts interest rates as decided by bank.

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Financial Features Of Creditcards

Annual Membership

Minimum Payment

Rate Of Interest

EMI's conversations

Balance Transfer

Personal Loan

Insurance

3. Rate of interest ( annual percentage rate)

Rate of interest for the amount rolled over to the next billing cycle is usually high.

In India, it is around 2.5% to 3% per month. Hence its very costly to rollover such

amount. For the cardholder, it is much cheaper to pay on time.

4. EMI’s Conversations

When outstanding amount on the card is high or when purchase is for high value

( for e.g. TV set , laptop etc) then it is not possible to pay full amount within one

billing cycle. Carrying forward is expensive as interest rate is prohibitive. Banks

offer to convert such purchase / outstanding to equated monthly installment

(EMIs). Rate of interest to these schemes is relatively lower (around 16% p.a) but

still high in absolute terms.

5. Balance transfer

Bankers encourage cardholders to transfer their outstanding dues to other issuers’

cards to their bankcard. This transfer is again at a concession rate of interest.

6. Personal loan

Issuers extend personal loan facility to the cardholders. it may be noted that EMI or

balance transfer or personal loan are all in the form of loan only . A cheque

favoring the cardholder or nominated beneficiary is issued by the bank in all these

cases. EMI payable is charged to the card in monthly billing statements.

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7. Insurance

Most bankers (issuers) insure the life of cardholders at concessional rate and assign

insurance proceeds towards outstanding bills on card. In case of eventuality,

insurance proceeds meet banker’s outstanding dues and remainder amount is paid

to the heirs of the cardholders.

BENEFITS

Issuers provide some add on benefits to their card members such as:

Privileged access to airport vip lounges

Discount at select outfits for purchases or dining bills.

Discount offer for purchase of exclusive items from big brands

Reward points for each spending on the card. These points can be cashed for

discounts in select purchases as indicated by the issuer.

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FEATURES OF MODERN CREDIT CARD

1. Wide Coverage

• Bank credit is most widely used payment device issued by bank

• It is based on system of revolving credit

• The credit cardholder can use card at merchant establishments to buy

goods and services.

2. Technology dependent• The dependence on technology is inevitable to keep the operating cost to the

minimum.

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Features Of Modern Credit Card

Wide Coverage Technology Dependent

Owner Identification Credit Limit

3. Owner Identification

• A credit card identifies its owner and the one who is entitled to purchase

goods and services without the physical money and is eligible for credit

from merchant establishments.

4. Credit Limit• The issuer for the purpose of convenience and security sets a credit limit for

a cardholder and a floor limit for a merchant establishment

• It is convenient medium of exchange which enables the cardholder to buy

goods and services without using money

• Bank bears the risk of default on the part of the cardholder

• Credit card helps the holder to buy when and pay he can, i.e., bank pays to

the seller immediately but collects from the card holder from 30-45days

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CHAPTER 3

3.1 TYPES OF CREDIT CARD

Credit card products come in a wide assortment these days. Some credit card

programs will ease their terms and conditions and offer perks for people with

stellar credit, such as travel insurance, concierge service and free entertainment.

Other credit card program may help a person re-establish their credit.

Not all cards are for everyone. The ability to get a credit card will depend on

whether you qualify. This is determined by whether you have a history of

establishing credit and your ability to pay bills on time. Credit card issuers learn

about your credit history by pulling your credit report from one of the three

major credit bureaus - Equifax, Experian and TransUnion. Before you even begin

applying for a credit card, check the status of your credit report and make sure it

does not have any errors that could prevent you from getting the card you want.

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Types Of Credit Card

Standard Credit Cards

Reward Cards

Airline/Frequent

Flier Miles

Cash BackPoints Cards

Premium Credit Cards

Specialty Credit Cards

Here are the most common types of credit cards:

1. Standard Credit CardsStandard credit cards are the general-purpose cards that have revolving credit

lines. They are marketed to people above the age of 18 who meet or exceed the

financial institution's minimum credit criteria. No deposits are needed and the

credit limit is established by the credit card issuer.

2. Reward CardsMany credit cards have reward programs that can influence your spending. The

perks may come in the form of cash, points or discounts. Points that accumulate,

for instance, can be traded off for free hotel stays, merchandise, air travel car

rentals and certificates. However, these credit cards can come with complex

rules, limits and restrictions. The key is to try to make sure that annual fees don't

end up eliminating all the benefits. Rewards cards are typically best for people

who pay their balances off every month

3. Airline/Frequent Flier MilesUsing these cards can earn airline miles. The miles accumulate and can be put

toward future flights. Some programs partner with hotels, car rentals and other

travel services. However, you don't want to hold on to the tickets for too long.

You will need to stay aware of the expiration date on the miles offered.

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4. Cash BackCash back cards literally give some of the money you have spent back to you in

cash. Credits range from 1-5%. However, this is usually capped at $500 of

spending in "appropriate" categories, depending on the card. When you collect

a minimum amount of cash or credit, such as $20 to $50, you can ask to receive

it through a check or use the money for a purchase at a designated store. Some

cards give a flat amount of money based on all your purchases regardless of

how much you spend, while other have tiers with different levels of rewards

depending on how much you spend and where the money is spent.

5. Points Cards

These cards let you earn reward points that can be redeemed for merchandise,

entertainment and gift cards. These include points that can be put toward gas,

hotel stays and home improvement purchases.

6. Premium Credit Cards

These are the "gold" and "platinum cards". They are generally referred to as

"upscale". They are offered to consumers with excellent credit, which means

they've retained this standing for few years, and can afford high credit limits of at

least $10,000. These consumers typically have huge salaries and are heavy spenders

and travelers. Some cards are offered by invitation only. The interest and annual

fees, however, tend to be high. The cards' perks may include 24-hour concierge

services or a personal assistant, access to exclusive airline lounges, and worldwide

travel and auto assistance. 

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7. Secured Credit Cards 

Secured credit cards are known as pay-as-you-go cards. Upon opening the account,

the cardholder deposits a few hundred to a couple of thousand dollars. This

determines the cardholder’s credit line. This limit is often based on a percent of the

deposit, which is usually 50-100% of what you put into the account. The cards have

an annual fee and higher annual interest rates. Most often, these cards are used to

reestablish credit. A person can use the card to make small purchases that they can

easily repay. Getting a card with a conversion option makes it easier to switch to a

standard credit card, which should be possible after several months of good

payment history

8. Specialty Credit Cards Specialty cards typically are offered through affiliations, partnerships, major brand

retailers or service providers. Many specialty credit cards share a partnership

between organizations that support a social cause, professional organization or an

alumni association. A small portion of the purchase goes 

toward the intended organization.

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3.2 TYPES OF HDFC CARDS

1. Featured carda. Jetprivilege Hdfc Bank World

The best airline co-brand exclusive travel privileges

Benefit of up to 10,000 Bonus JPMiles and one way base fare waived Jet Airways

ticket 6 JPMiles for every Rs. 150 spent and 18 JPMiles on every flight booked on

www.jetairways.comDedicated Check-in with 10 kg additional baggage allowance

35

Types Of Hdfc Credit Cards

Featured card

super premium

co-brand

professional

premium travel

premium women

premium regular commercial cashback

b. Titanium Times Card

Great entertainment card with flat 25% off on movie tickets and up to 15% off on

dining, 365 days of the year. 25% off on movies and up to 15% off on dining. (At

participating outlets)Bouquet of discount vouchers as welcome gift 2 Reward

Points (RP) on Rs. 150 spent. 5 RP on dining spends on weekdays (Mon-Fri)

c. Platinum Times Card

Great entertainment card with flat 25% off on movie tickets and up to 15% off on

dining, 365 days of the year. 25% off on movies and up to 15% off on dining. (at

participating outlets)Bouquet of discount vouchers as welcome gift 2 Reward

Points (RP) on Rs. 150 spent. 5 RP on dining spends on weekdays (Mon-Fri)

36

d. Diners Club Black

Best International Credit Card with exclusive life style benefits.

Gain access to select Golf Clubs in India as Green Fee player. Earn Rs 750 Travel

Vouchers for every 1000 Reward Points earned. Redeem for Airline Tickets,

Hotels at our Travel and Entertainment portal

2. Super Premium

a. Infinia

Powered by exclusivity. Pampered with exquisiteness. Experience the Infinite now.

Infinia Card with the No Pre Set Spend Limit*five Reward Points for every Rs.150

spends. Complimentary Priority Pass and Taj Epicure Inner Circle Gold

Membership

37

b. Regalia

Best Super Premium Credit Card with travel and luxury benefits. Welcome Benefit

- 2500 Reward Points*4 Reward Points for every Rs.150 spends. Complimentary

Priority Pass and Taj Epicure Inner Circle Gold Membership

c. Diners Club Black

Best International Credit Card with exclusive life style benefits.

Gain access to select Golf Clubs in India as Green Fee player. Earn Rs 750 Travel

Vouchers for every 1000 Reward Points earned. Redeem for Airline Tickets,

Hotels at our Travel and Entertainment portal

38

d. Jetprivilege Hdfc Bank Diners Club Credit Card

Fly faster to finer experiences

Avail Welcome Benefit of up to 30,000 Bonus JPMiles and 15 Jetprivilege Tier

points within first 90 days*. Earn 8 JPMiles for every Rs. 150 spent and 3X

JPMiles on every flight booked on www.jetairways.com. Unlimited

Complimentary Lounge access to over 600+ airport lounges globally.

3. Co- Brand

a. Jetprivilege Hdfc Bank World

The best airline co-brand offering exclusive travel privileges. Welcome Benefit of

up to 10,000 Bonus JPMiles and one way base fare waived Jet Airways ticket.

Earn 6 JPMiles for every Rs. 150 spent and 18 JPMiles on every flight booked on

www.jetairways.com. Dedicated Check-in with 10 kg additional baggage

allowance

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b. Maruti Suzuki Nexa Hdfc Bank AllMiles

One Card. Multiple Destinations. Best in class travel co-brand card with exclusive

benefits for NEXA Car owners. Welcome Benefit of 1000 Reward Points. Earn 6

RP per Rs.150 all spends made on MyNEXA section of www.nexaexperience.com.

3RP per Rs.150 on retail purchases. Complimentary priority passes membership.

c. Titanium Times Card

Great entertainment card with flat 25% off on movie tickets and up to 15% off on

dining, 365 days of the year. 25% off on movies and up to 15% off on dining. (At

participating outlets). Bouquet of discount vouchers as welcome gift. Two Reward

Points (RP) on Rs. 150 spent. 5 RP on dining spends on weekdays (Mon-Fri)

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d. Snapdeal HDFC Bank Card

Shop Free Faster with Snapdeal HDFC Bank Card - India's first co-brand Credit

Card with an online partner. Welcome Benefit of 500 Reward Points. Earn 6 RP

per Rs.150 on all spends made on www.snapdeal.com. 4 RP per Rs.150 on any 1

category of your choice. 2 Reward Points per Rs.150 spent on all purchases.

Exciting offers from Cleartrip, Freecharge & Ola

4. Professional

b. Doctor's Superia

HDFC Bank's doctor's Superia credit card has been exclusively designed for

doctors offering exclusive travel benefits

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b. Teacher's Platinum

HDFC Teachers platinum card is exclusively designed for teachers and

proffers. The card offers 500 bonus reward points on teacher's day each year

while giving the users freedom to fill fuel across any fuel station.

5. Premium Travel

a. Superia

Premium Credit Card that allows you to redeem your reward points as air miles.

Welcome Benefit of 1000 Reward Points.3 Reward Points (RP) on Rs 150 spent.

50% more RP on dining spends

Complimentary Priority Pass Membership and VISA/MasterCard Lounge program

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b. Allmiles

Premium Card that offers Double reward points on ALLMILES. Welcome Benefit

of 1000 Reward Points.3 Reward Points (RP) on Rs 150 spent.Complimentary

Priority Pass Membership and VISA/MasterCard Lounge program

c. Maruti Suzuki Nexa Hdfc Bank All Miles

One Card. Multiple Destinations. Best in class travel co-brand card with exclusive

benefits for NEXA Car owners. Welcome Benefit of 1000 Reward Points Earn 6

RP per Rs.150 all spends made on MyNEXA section of 3RP per Rs.150 on retail

purchases. Complimentary priority passes membership

6. Women Premium

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a. Solitaire

Only exclusive premium Solitaire Credit Card for women rewarding spends with

Shoppers Stop gift vouchers. Get Rs. 1,000/- Shoppers Stop vouchers on Rs.

75,000/- spends every 6 months. 50% more Reward Points on dining and grocery

spends. 3 Reward Points on Rs. 150 spent.

7. Premium

a. World master card

Enjoy the privileges of both worlds, waiver of fuel surcharge at all fuel stations and

access to premium airport lounges. 2 Reward Points on Rs. 150 spent . Fuel

Surcharge Waiver capped at Rs. 250 every billing cycle (ST applicable). Get

complimentary Airport lounge access under Master Card lounge program.

44

b. Diners club premium

Best Premium Lifestyle Card with unlimited domestic lounge access.4 Reward

Points for every Rs. 150 spends. Unlimited Golf Lessons

Earn Rs 600 E Vouchers for every 1000 Reward Points earned. Redeem for Airline

Tickets, Hotels and Movies at our Travel and Entertainment portal

c. Diners Club Rewardz

The card with maximum travel rewards.3 Reward Points for every Rs. 150 spends.

Exclusive 24/7 Concierge to make airline reservations, books a hotel room,

schedule a dinner reservation or send a gift. Get double the Reward Points on our

Travel and Entertainment portal

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d. Visa Signature

Enjoy the privileges of both worlds, waiver of fuel surcharge at all fuel stations and

access to premium airport lounges.2 Reward Points on Rs. 150 spent. Fuel

Surcharge Waiver capped at Rs. 250 every billing cycle (ST applicable). Get

Complimentary airport lounge access under VISA Lounge program - signature

8. Regular

a. Platinum plus

HDFC bank Platinum Plus Credit Card is a regular credit card offering 50

day interest free credit window along with revolving credit facility and zero

liability on lost card

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9. Commercial

a. Business money back

Your Business spends are now 3 times more rewarding with Business MoneyBack

Credit Card. 2 Reward Points (RP) on Rs 150 spent. 3 X Reward Points on

business related spends. Redeem Reward points as CashBack on your Business

MoneyBack Credit Card (100 Reward Points = Rs 40). Zero Lost Card liability

post reporting of the loss of card

b. Business Regalia

Best Super Premium Business Credit Card with travel & luxury benefits. Now with

every Rs. 150 that you spend, you get:8 Reward Points on all purchases. 6 Reward

Points on all your dining spends. 4 Reward Points on all other spends

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c. Corporate Platinum

Enjoy the privilege of access to domestic airport lounge and freedom to fill fuel

across all fuel station. 2 Reward Points for every Rs. 150 spends. Petrol surcharge

waiver. Lounge access at select airports across Indi

d. Corporate Card

A Premium Corporate Card with unparalleled travel and entertainment benefits.

24x7 online MIS availability. Helps integrate with existing accounting systems.

Helps minimize paperwork and simplify reconciliation and compliance tasks.

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10. CashBack

a. Platinum Edge

Enjoy CashBack on everyday spends only with Platinum Edge Credit Card.2

Reward Points for every Rs. 150 spends and 50% additional Reward Points on

dining spends. Redeem Reward Points as CashBack against outstanding amount on

your Credit Card. Zero fuel surcharge

b. Titanium Edge

Enjoy CashBack on everyday spends only with Titanium Edge Credit Card. 2

Reward Points for every Rs. 150 spends and 50% additional Reward Points on

dining spends. Redeem Reward Points as CashBack against outstanding amount on

your Credit Card. Zero fuel surcharge

c. MoneyBack49

Enjoy CashBack on everyday spends only with MoneyBack Credit Card. 2 Reward

Points for every Rs. 150 spends. 3 X Reward Points on online spends. Redeem

Reward points as CashBack on your MoneyBack Credit Card (100 Reward Points

= Rs 40. Zero fuel surcharge

3.3 Benefits/ Demerits Of Credit Cards Benefits

50

Benefits to cardholders, issuers and payment networks are as follows:

To Cardholders:

1. ConvenienceIt is very convenient to carry a card as compared to cash. Its acceptance is better

than cheques. Risk of theft is less and if stolen, stoppage and recovery is better

than cash and cheque. It is even more convenient for unplanned purchases and

needs as one may not carry enough cash every time.

2. Spot CreditAs and when needed, credit is available. It’s pre- negotiated (decided) credit limit,

which can be availed of whenever desired. Credit is free of interest till first

immediate billing cycle. This improves purchasing power.

3. Easy Payments

51

Benefits Of Credit Card

To Cardholder

convenience

Spot Credit

Easy Payments

ATM cash Rewards Points And

Discounts

Privileges

Other Loans

Minimum balance payment for each bill is a must. Over and above this, it is

cardholder’s ability and willingness to pay for each card bill.

4. ATM CashCash can be withdrawn from ATMs as and when required. This is very important

feature in countries like India where cash usage is more as compared to other

modes of payments. Thus, card improves liquidity and credibility of the

cardholder.

5. Reward Points And DiscountsThese are additional benefits provided by issuer for usage of card. Reward points

can be converted to discounts and gifts as per the catalogue of the issuer.

6. PrivilegesAccess to VIP lounges at the airport and star hotels is an additional privilege for

the cardholders.

7. Other LoansBankers provide personal loans, car loans, etc. with some priority and ease if

cardholders’ payment history is good.

TO ISSUERS

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1. ProfitAPR is high on credit cards as these are high-risk unsecured loans. If cards are

issued with proper due diligence then defaults is less and bankers; profits in the

card business are high.

2. New CustomersNew customers get hooked to bankers as cardholders. It is easy to sell them other

products such as housing loans, auto loans, and bancassurance products later on.

3. Brand ImageCard issuing bank creates better brand image in the minds of its customers as

compared to other banks.

4. ATM sharing fees

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Benefits Of Credit Cards To Issuers

Profit New Customers

Brand Image

ATM sharing fees

Bankers who establish their own ATMs get sharing fees from other banks if other

banks customers use their ATM. This is additional income for them.

To Payment Networks (Visa/ MasterCard)

1. ProfitThese networks charge fees for their usage of name and network. Hence, it is a

profit for them.

2. Brand ImageWith every new user, brand grows. With every new merchant establishment-

accepting brand, global image scores some points

Demerits of Credit Cards

54

To Cardholders

1. CostCost of card is high. Annual fee, APR, penalties, ATM usage charges, lost card

replacement charges is significant.

2. OverspendingAs purchasing power is not limited to cash, people tend to spend more. It’s a

machine to provoke consumerism in the society. It’s in favor of capitalism and

against socialism.

3. Habitual Borrowing

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Demerits Of Credit Cards

To Cardholders

Cost

Overspending

Habitual Borrowings

With popularity of cards, stigma on loans as negative feature of life has vanished.

Borrowing and enjoying life is no longer looked down upon. Unknowingly

everyone has become a habitual borrower.

To Issuers

1. RiskCards are unsecured loans. Recovery mechanism does not have any recourse on

assets. Legal backup thus is limited. Establishing a recovery system within these

limitations is a high cost affair.

2. Servicing costCards are technology oriented. Cards are costly. Issuance process, billing and

payment processing is laborious and costly affair.

3. Utilization dependency

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Demerits Of Credit Card To Issuers

Risk

Servicing Cost

Utilization Dependency

Payment Habits

Bank earns well on cards if the holders use cards frequently. Indian psyche is not

very tuned to careless use. Cards, which are not used much, are in fact cost burden

on the banks.

4. Payment habitsAPR Interest earnings are significant provided part of billed amount is rolled over

to the next billing. If many customers pay full bill every time, there is no APR

earnings for banks.

To Payment Networks

Payments networks do share some responsibility and risks. Even if member bank defaults or delays, these networks have to own up timely payments to merchant establishments so as to maintain their brand image.

57

3.4 ADVANTAGES/ DISADVANTAGES OF A

CREDIT CARD

Advantages

• Flexible spending limit

• Most features of a debit card such as withdrawal of cash are available on

credit cards as well.

• Wider acceptance and recognition, especially in online transactions.

• Greater security measures and checks than debit card.

• Credit cards allow for cash back and bonus points schemes that a debit card

is not eligible.

• A credit card can be used as a convenient way to check and record your

spending.

• There is a fixed credit limit; a cardholder cannot overstretch his purchases.

Disadvantages

58

• Hidden costs.

• A debt trap for the cardholder.

• Cases of fraud are extremely common today.

• Credit cards can be used at ATM cards, but considerable processing fee

required.

• Credit cards provide access to ready money in a more convenient and less

invasive form than cheques, and allow for a faster withdrawal of cash.

• Debit card users who are not qualify for a credit card, the advantage is spent

on money he/she possesses in their accounts.

Security Problems and Solutions

59

• Credit card security relies on the physical security of the plastic card as well

as the privacy of the credit card number.

• Whenever a person other than the card owner has access to the card or its

number, security is potentially compromised.

• Merchants would often accept credit card numbers without additional

verification for mail order purchases.

• Many require the card and also requires signature for security purpose.

• A lost or stolen card can be cancelled, if this is done quickly, will greatly

limit the fraud that can take place in this way.

• Code 10 calls are made when merchants are suspicious about accepting a

credit card.

• The operator then asks the merchant a series of YES or NO questions to find

out whether the merchant is suspicious of the card or the cardholder.

CHAPTER 4

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PRIMARY DATA

Introduction of Hdfc Bank

HDFC Bank Limited is an Indian financial services company based

in Mumbai, Maharashtra that was incorporated in August 1994.The first

largest bank by Market Capitalization as of November 1, 2012.As on May

2013, HDFC Bank has 3,062 branches and 10,743 ATMs, in 1,568 cities in

India. It was among the first companies to receive an 'in principle' approval

from the Reserve Bank of India (RBI) to set up a bank in the private sector.

Times Bank Limited (owned by Bennett, Coleman & Co. The Times Group)

was merged with HDFC Bank Ltd., on February 26, 2000. This was the first

merger of two private banks in India. On May 23, 2008, HDFC Bank

acquired Centurion Bank of Punjab taking its total branches to more than

1,000.HDFC Bank was the first bank in India to launch an International

Debit Card in association with VISA (Visa Electron) and issues the Master

Card Maestro debit card as well.

4.1 How credit card works?

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Credit cards are issued by a credit card issuer, such as a bank or credit union,

after an account has been approved by the credit provider, after which

cardholders can use it to make purchases at merchants accepting that card.

When a purchase is made, the credit card user agrees to pay the card issuer.

The cardholder indicates consent to pay by signing a receipt with a record of

the card details and indicating the amount to be paid or by entering

a personal identification number (PIN).

Many merchants now accept verbal authorizations via telephone and

electronic authorization using the Internet, known as a card not present

transaction (CNP). For card not present transactions where the card is not

shown (e.g., e-commerce, mail order, and telephone sales), merchants

additionally verify that the customer is in physical possession of the card and

is the authorized user by asking for additional information such as

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the security code printed on the back of the card, date of expiry, and billing

address.

Each month, the credit card user is sent a statement indicating the purchases

undertaken with the card, any outstanding fees, and the total amount owed.

After receiving the statement, the cardholder may dispute any charges that

he or she thinks are incorrect. Otherwise, the cardholder must pay a defined

minimum proportion of the bill by a due date, or may choose to pay a higher

amount up to the entire amount owed.

The credit issuer charges interest on the amount owed if the balance is not

paid in full (typically at a much higher rate than most other forms of debt).

In addition, if the credit card user fails to make at least the minimum

payment by the due date, the issuer may impose a "late fee" and/or other

penalties on the user.

To help mitigate this, some financial institutions can arrange for automatic

payments to be deducted from the user's bank accounts, thus avoiding such

penalties altogether as long as the cardholder has sufficient funds.

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Parties Involved

1. Cardholder: The holder of the card used to make a purchase;

the consumer.

2. Card-issuing bank: The financial institution or other organization that

issued the credit card to the cardholder. This bank bills the consumer for

repayment and bears the risk that the card is used fraudulently. American

Express and Discover were previously the only card-issuing banks for

their respective brands, but as of 2007, this is no longer the case. Cards

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issued by banks to cardholders in a different country are known

as offshore credit cards.

3. Merchant: The individual or business accepting credit card payments for

products or services sold to the cardholder.

4. Acquiring bank: The financial institution accepting payment for the

products or services on behalf of the merchant.

5. . Independent sales organization: Resellers (to merchants) of the

services of the acquiring bank.

6. 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.

7. 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.

8. 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.

Examples of typical affinity partners are sports teams, universities,

charities, professional organizations, and major retailers.

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Card Transaction Process

When paying for purchases with a card, the transaction appears to happen almost

instantaneously after the PIN is entered. However, there is a complex payments

infrastructure behind the scenes making sure that the transaction is processed

correctly. The following diagram sets out the steps, numbered from 1 to 8, in a

card transaction’s payments cycle for a typical face–to–face or card present

transaction; there are five stakeholders in the process.

1. Cardholder

This is a person with a debit, credit or charge card issued to them by a financial

institution. The cardholder may be asked to place their card into the chip and PIN

reader (PIN pad or terminal) himself or herself, or hand the card to the merchant

66

who will do this for them. Alternatively, if the card does not have a chip (only a

magnetic stripe) or the merchant does not have a chip and PIN terminal, the

merchant will swipe the card through the terminal or use a paper voucher. The

customer will then key in their PIN, or sign, to indicate their agreement to proceed

with the transaction. An authorization code will be given to the merchant for the

transaction by the cardholder’s card issuer that will appear on the terminal receipt

that is handed to the cardholder. The card issuer will debit the transaction to the

cardholder’s account.

2. Retailer / Merchant

A merchant sells goods or services to their customer (the cardholder). This can be

face-to-face in a shop on the high street, where both the cardholder and their card

are present, or when taking orders remotely e.g. over the phone for a restaurant

take away, a mail order from a catalogue, or a purchase over the internet. In this

example, it is a card not present transaction. The card transaction’s details are

entered into the merchant’s terminal, usually, sent via the telephone line to their

acquiring bank who will process the transaction and send it on to the relevant card

issuer for authorization and settlement.

3. Acquirer

A merchant, will have negotiated a Merchant Service Agreement with their

acquiring bank to process payment card transactions on their behalf. Typically, this

agreement will also include the acquiring bank providing one of its own terminals,

known as a bank owned terminal. An acquiring bank is responsible for receiving

the card transaction details from the merchant’s terminal, passing these through to

the card issuer (the cardholder’s bank or building society) via the card scheme for

authorization and completing the processing of the transaction. An acquiring bank

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will arrange the card transaction’s settlement and will, typically, credit the

merchant’s nominated bank account with the funds within four working days. An

acquiring bank will also deal with any chargeback or requests for information

(RFI) that they may receive from card issuers on any of their merchant’s

transaction

4. Card Scheme

Card Schemes are organisations who manage and control the operation and

clearing of card payment transactions according to card scheme rules. The Card

Schemes are responsible for passing card transaction details from the acquiring

bank to the issuer and for passing payment back to the acquiring bank who in turn

pays this to the merchant. American Express, Diners Club, JCB, Maestro,

MasterCard and Visa (including Electron or Debit) are the card schemes that

operate in the UK.

5. Issuer

The issuer is the bank, building society or financial organization that provides a

payment card (debit, credit, pre-paid or charge card) to their customer or

cardholder. The issuer has responsibility for transactions made on cards that they

have issued, and will be responsible for debiting funds from the relevant

cardholder's account.

Note: For American Express and Diners Club - the transaction process is slightly

different as they act as card scheme, issuer and acquiring bank at the same time.

An acquiring bank will be able to explain more about accepting these card types.

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4. 2 Problems of Credit CardCredit cards have changed the way people look at money. Gone are the

days when only the rich sported them at limited counters in select cities.

Today, they are a way of life for the middle class too, even in smaller

locations across the country. However, this boom has brought in a lot of

complications like credit card fraud, payment defaulting, unsolicited card,

uncontrolled spending etc. Rapid credit card growth has increased

transaction efficiency. Till recently, the Indian consumer was using the

credit card during the crunch season, but things have changed in the recent

past with the consumers using it for as small a sum as Rs.100 to over one

lakh rupees. The most common feature among the credit card holders is

that they carry forward their payment. Postponing payments multiplies

bills that too at a whopping rate of 50 to 60 per cent per year, pushing the

card holders into a debt trap. The utility of cards varies from person to

person depending on their profile. In the initial years, the consumers deem

it a privilege to hold credit cards. However, there is a feeling among card

holders that the banks are charging hefty interest and other fees. Credit

card issuers charge interest which works out to roughly 42 per cent per

annum. Delays or defaults result in payment of penal interest on all

incremental usage of the card till the payments are made. Once the

outstanding piles up, it can be a serious hazard to one‟s financial security.

Today, competition among credit card players is intense. Offering benefits

like reward points is just another way of luring customers into debt trap.

The biggest problems arise when one gets into what is called revolver

mode of repayment.

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4.3 Marketing and Promotional strategies of Credit

Cards

"It plans to send personalized mailers about various products to all those HDFC

come in contact with during these mass promotions." The bank has also tied up

with Business Today, to sponsor 10,000 copies of the magazine in each metro. The

cover of the sponsored copies would be the December issue of Business Today,

which rated HDFC Bank as the best bank in the country. On the opposite side,

would be an advertorial, which would talk about HDFC as a `one-stop financial

supermarket'. Gold Credit card:

For providing the better services to the customers and promoting their business,

HDFC has launched the Gold Credit Cards. It's overloaded with travel benefits -

discounts, cash back offers, air miles redemption.

Gold Credit Card Features & Benefits

Attractive Reward Points

Earn 1 reward point per Rs 150 spent on the Gold Credit Card.

Rewards points redemption

70

After earning all those reward points on your HDFC Bank Gold Credit Card,

redeem them for exciting gifts and services! You could even convert them to

airline miles with India's leading airlines through the My Rewards programme.

Worldwide acceptance

Accepted at over 23 million Merchant Establishments around the world,

including 110,000 Merchant Establishments in India.

Revolving credit facility

Pay a minimum amount, which is 5% (subject to a minimum amount of Rs.200)

of your total bill amount or any higher amount whichever is convenient and

carry forward the balance to a better financial month. For this facility, you pay a

nominal charge of just 3.25% per month (39.0% annually).

Free Add-on card

You can share these wonderful features with your loved ones too - we offer the

facility of an add-on card for your spouse, children or parents. Allow us to offer

add-on cards to you FREE OF COST with our compliments.

Interest free credit facility

Avail of up to 50 days of interest free period from the date of purchase (subject

to the submission of the charge by the Merchant).

Zero liability on lost card

If you happen to lose your Card, report it immediately to our 24-hour call

centre. After reporting the loss, you carry zero liability on any fraudulent

71

transactions on your card

Platinum Cards Get Additional Benefits

HDFC Bank Platinum Card Customers Get Additional Benefits compared to Gold /

silver or other entry level cards. For instance, consider this; HDFC Cards has a Co-

Branded Online Shop with Surat Diamonds. By virtue of being HDFC Bank

Customer, you are already getting big discount. Now add any item to your cart and

enter 558818 [6 Starting Digits of Platinum Card], you get additional discount.

This is just one such instance. You also get Petrol Surcharge Waiver, IRCTC

Charges Waived, etc.

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Times Hdfc Launched Credit Card

Times Internet, the digital arm of The Times of India Group, has partnered 

with HDFC Bank to launch  Times Card, a cobranded  card that provides special 

offers such as 25% discount  on movie tickets and 20% off  on dining.

"The Times Group has created an entertainment universe through our supplements

like Bombay  Times, Delhi Times and  times city .com and these are 

all platforms for fun, food  and films. The Times Card gives a unique opportunity 

to create a product that  leverages this breadth in the 

entertainment space. The card will make entertainment easy on the wallet in the di

ning and movie category," said Vineet Jain, MD, Times Group.

The features of the card include a welcome benefit comprising a bouquet of gift vo

uchers for shopping and dining. In addition, there will be round the year discounts

at movie and dining outlets. Cardholders will not have to pay any surcharge 

on purchase of fuel for  amounts ranging between Rs  400 and Rs 5,000. Aditya

Puri, MD, HDFC

73

Bank, said, "Our association with the Times Group extends from the time Times

Bank merged with HDFC Bank. The way we see India moving today is that we ha

ve  a very young demographic,  50% of population will be 

below 25 and 60% will be  below 35. According to a

'Here's India's first entertainment card'

study done by our bank, the youth segment has a strong work

life balance association and they define entertainment as life, friends and fun. So

we both want to catch them young and give them a product that will

help them lead a good life. This card is India's first entertainment

credit card." It will  be available in two variants,  Platinum and Titanium, 

which will be offered exclusively on the MasterCard  platform. The Platinum card 

comes for an annual fee of  Rs 1,500 plus taxes while  Titanium card

for Rs 500 and  taxes.

Balance Transfer and Promotional Rate Marketing

Promotional rate marketing attracts new customers and/or induces new and

existing customers to transfer balances by offering a reduced interest rate for a

limited time on certain charges and transactions. The reduced rate is also often

subject to other material limitations. Without adequate controls, promotional rates

may disguise a borrower’s repayment capacity when qualification is based on the

reduced rate rather than the re-set rate. In addition, higher attrition may occur

when promotional rates expire. Like “up to” marketing, promotional rate

marketing in and of itself is not contrary to law, but, if not administered properly,

can warrant criticism. For example, the lack of full and prominent disclosure of

material limitations or applicable fees may be problematic. Examiners should

74

closely review promotional rate marketing programs and consult with their

compliance counterparts if concerns are identified.

Banks often offer a balance transfer option as part of a pre-approved or application

strategy and often in conjunction with promotional rate marketing. With a balance

transfer, a consumer transfers all or a portion of their credit card debt with other

entities onto the credit card extended by the bank. The consumer is often enticed

to transfer the balances by receiving a lower interest rate than what they might

have on their existing accounts. The characteristics of the debt transferred can

vary depending on the bank’s program. For example, some banks offer to take

transfers of bad debt. Balance transfer strategies can result in rapid growth of

receivables, and as such, should be carefully monitored and managed. For

example, rapid growth could exceed the level of available funding capacity.

Furthermore, the immediate booking of relatively large balances can distort

performance ratios. Profitability can also be easily impacted depending on

consumer behavior. For example, some consumers pay off the balance or move

the balance to yet another card before or at the time the promotional rate on the

existing card expires. The cycle may occur over and over, with the consumer able

to take advantage of extremely low interest rates for an extended period of time.

Promotional rate and balance transfer marketing are responsible for some degree of

customer loyalty erosion that has occurred in the industry.

75

4.4 Credit Card Management System

HDFC SELECTS NEUTRAL TECHNOLOGY

HDFC bank, one of India's premier banks, today announced that it is using neural predictive models from Neural Technologies for risk management in its Credit Cards and other Retail Assets portfolios.

HDFC bank selected Neural Technologies following a comprehensive proof of concept study, aimed at finding a supplier who could provide them with a superior analytical and scientific approach to reduce the delinquency rates in their credit card and retail assets portfolio.

Following selection, Neural Technologies worked alongside HDFC bank's personnel to develop models for Credit Card Collections, Credit Card Recovery and Retail Assets (Personal Loans) Collections.

The models are proving to be very successful.  Rajesh Kumar, Sr Vice President of HDFC bank said "We selected Neural Technologies based upon the performance of their models and the predicted return on investment, and we are extremely satisfied with the results achieved so far."

HDFC bank has plans to expand its relationship with Neural Technologies and explore new areas in their business where they might benefit from NT’s expertise.

Arinjay Jain, Director of Neural Technologies' Indian operation said, "Neutral predictive analytics is an ideal risk management tool, providing valuable decision-support to businesses looking to manage and reduce credit risk and fraud losses. A pioneer in this field among the Indian banks, HDFC bank has enthusiastically embraced the concept and is now starting to reap the benefits. We look forward to a long and mutually beneficial relationship between our two companies".

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CHAPTER 55.1 Case study

HDFC bank has launched a corporate credit card for the small and medium

enterprises (SME), jointly with mastercard.The card, named HDFC bank

Powerplus Business Card can be used to pay for business expenses, and is linked to

thecash credit account of the company . Since the card is used solely for business

purposes, any finance charges incurred would be tax – deductible. The monthly

statements will clearly show the businessexpenses and helpcompanies claim tax

exemptions. The creditlimit for the card has been set at Rs. 25 lakh per company.

Each company will get five individual cardsfor their employees. Each individual

card has a maximum limit of Rs.5 lakh and minimum limit Rs. 2 lakh. The anuual

fee is Rs. 25000 and joining fee isrs. 500. The interest rate on the card is 1.5 per

cent per month. Other benefits include 50 per cent discount on 10,000 hotels

worldwise, and an insurance cover of up to Rs.1 lakh in the case oflost or stolen

cards . for this card,the bank is looking at spending andpenetration, both absolute

numbers.

HDFC has identified three three kinds o SME customers in terms of the size and

the nature of their business – The small traders or businessmen; Idustria; entitles

with an annual turn over of upto Rs.200 crore; and Supply chain management

companies which deal wiyh most the large corporate portfolio. While the corporate

portfolio is expected to grow at 50 percent. Therefore, the SME segments presents

immense potential for HDFC.

77

Q1. What are SME’s and why are theysaid to be the key drivers in organisational

buying market ?

Basically, (SME) means small and medium enterprises The market for

international payments services is rapidly expanding as SME’s search for a

reliable platform that can serve their international payments needs.

Innovative payment solutions such as beneficiary management are not

currently supported by any global or regional banks , there are three kinds of

business It aims at delivering quality, innovative and efficient products and

services to the SME customers through its professional teams.The bank

develops flexible lending policies that meet the market needs. It also

continues to streamline the approval procedures to improve SME lending

efficiency.It aims to become a first-class domestic bank with leading

performance in retail banking, credit card and SME, etc. as well as advanced

international standard management.The Bank provides its SME customers

with an extensive service platform in helping them solving financial

problems and improving efficiency of their capital utilization through

integration of service platforms of outlets, Internet banking and phone

banking,etc the small traders or businessmen , industrial entities with an

annual turnover of upto Rs.200 crore & supply chain management

companies which deal with the most large coporate nowadays the banks

SME is growing fast 12% is the running portfolio of all corporate bank, they

are now expecting to grow upto 20-25% on a year. Therefore SME drives in

organisational buying market segment is likely to grow upto 50%.

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Q2. What is strategy used by hdfc bank to promote powerplus business

card?

This is highly effective if it is marketed to consumers, but can also be used business to business. How about placing them with a graphic artist if you are a sign company or a realtor if you are a mortgage broker? Keep your eyes open for opportunities to get your business cards in front of your target audience. The single most important thing you can do as part of your marketing strategy is add value to your business cards. Augment the typical boilerplate name, title and contact information with something that your target audience will appreciate, enjoy, and reference time and again. You can use the back of your mini business cards to make mini calendars, athletic or event schedules, and handy conversion charts (such as a dining out tip chart) that align with the interests, hobbies and professions of your targeted prospects. Adding value in this manner puts your brand in front of customers repeatedly, builds trust and credibility in your methods, and proves to prospects that you “get them.” The back of your business cards represents valuable real estate – do not waste it on a simple logo or other graphic. Put it to work to motivate customers into action. The card, named HDFC bank Powerplus Business Card can be used to pay for business expenses, and is linked to thecash credit account of the company . Since the card is used solely for business purposes, any finance charges incurred would be tax – deductible. The monthly statements will clearly show the businessexpenses and helpcompanies claim tax exemptions. The creditlimit for the card has been set at Rs. 25 lakh per company. Each company will get five individual cardsfor their employees. Each individual card has a maximum limit of Rs.5 lakh and minimum limit Rs. 2 lakh. The anuual fee is Rs. 25000 and joining fee isrs. 500. The interest rate on the card is 1.5 per cent per month. Other benefits include 50 per cent discount on 10,000 hotels worldwise, and an insurance cover of up to Rs.1 lakh in the case oflost or stolen cards . for this card,the bank is looking at spending andpenetration, both absolute numbers.

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WEBLIOGRAPHY

http://en.wikipedia.org/wiki/credit_card

www.capitalmind.in

“plasticcards–specifications“customplasticcard.com

http://www.hdfcbank.com

www.investopedia.com/creditcards

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BIBLOGRAPHY

Financial Service Management , Author; Dipak Abhyankar (Vipul

Prakashan) Pg No: 175-190

Know your banking -2 credit cards by indian institute of banking & finance (

author)

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QUESTIONNAIRE

6. What type of credit card you issue the most to the customers ?

7. What are charges for credit card ?

8. Will customer get an additional card in case of joint a/c ?

9. What should customer do on the receipt of credit card?

10.What is PIN ?

11.What Is Mode Of Payment ?

12.How credit card works in your bank ?

13.Procedure in case loss of credit card?

14.Is there any problems faced during and after transaction of credit card ?

15.How is credit card management system in hdfc ?

16.Is there apps which would be convinent for payments?

17.How credit card & cash payments received from your customers , for

every receipts , the number of payments received through card?

18.Do you take every measure possible to prevent duplicate transactions?

19.How credit cards & cash payments received from your customers the

percentage of transaction (value) through credit cards?

20.Do you store cardholder info ( hard copy /electronic)?

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CONCLUSION

HDFC develops various plans for credit cards which would be convenient

according to the requirements of its targeted market or customer and is thus

beneficial to its customer in various ways. It provides various technology

which increases the satisfaction level of its customers. Therefore the HDFC

is one of the top 300 banks in the world. It is the 3rd bank amongst 17 banks

of india.

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