What are Credit Cards? Pre-approved credit which can be used
for the purchase of items now and payment of them later.
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Credit cards It is a plastic card having a magnetic strip,
issued by a bank or business authorizing the holder to buy goods or
services on credit. Also called charge cards The concept of using a
card for was first described in 1887 by Edward Bellamy in his
utopian novel Looking Backward. The size of most credit cards is
85.60 53.98 mm
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Eligibility For Getting The Card Person should have a savings
current account in the bank. His assets and liabilities on a
particular date are reported to bank. A statement of annual or
monthly income. He is considered credit worthy up to certain limit
depending upon his income, assets and expenditure.
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Particulars Displayed On Credit Cards Name of the customer
16-digit card number Validity date The VISA hologram and the VISA
logo Name of the issuing bank Signature period Magnetic strip
PIN
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What does 16 digit means
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CLASSIFICATION OF CREDIT CARDS Based on mode of credit recovery
Based on status of credit card Based on geographical validity Based
on franchise/ Tie-up Based on issuer Category 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 VISA Card Domestic Tie-up Card
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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 card- A 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
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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 Card-a credit card issued
by credit-card companies to favoured clients, entitling them to
high unsecured overdrafts, some insurance cover, etc
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Based on geographical validity Domestic card- Cards that are
valid only in India and Nepal are called domestic cards.
International Card- credit Cards that are valid internationally are
called international cards.
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Based on franchise/ Tie-up Proprietary card- A bank issues such
cards under its own brands. Eg. SBI card Cancard of canara bank
Master Card- this card is issued under the umbrella of MasterCard
International VISA Card it is issued by any abnk having tie up with
VISA international Domestic Tie-up Card- it is issued by any abnk
having tie up with domestic credit card brands such as CanCard and
IndCard.
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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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Innovative Cards ATM Cards Debit Crds- debits designated saving
bank a/c. Private label Card- issued by retailers and can be used
only in that retailers store. Affinity Group Cards- it can be used
by collection of people with some form of common interest or
relation ( professional,alumni,retired persons org. )
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Credit card cycle A card holder makes purchase, and present it
to the merchant instead of cash. The retailer will check the number
on the card, and he will tally signature of voucher and credit
card. Vouchers are send to banks, which in turn reimburses it for
the customers purchase.
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Credit card cycle Credit purchase Purchase of goods and service
on card Credit card processing marchant delivers goods after taking
an authenticated credit card and noting the number and taking
signature on certain forms. Bill raising Marchant raises the bill
for the purchase and sends it to the credit card issuing bank for
payment payment Issuing bank pays amount to the merchant
establishment Bill to card holder Issuing bank raises bill on the
credit cardholder and sends it for payment Card payment Credit card
holder makes the payment to the issuing bank
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Mechanics of Credit Card Operation Contract for credit card (1)
Issue of credit card (2) Payment of credit card(3) Clearing and
settlements (7) Charging of credit card Purchase of and raising
bills (4) goods and services (3) Submission of bill for collection
(5) Payment for bills (6) Card Issuing Bank Card User / Customer
Marchants bank Merchant establishment
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Advantages To Cardholders : Simple, convenient and can be
substituted for cash Convenient method of payment He need not
approach a bank for taking credit Credit cards issued by leading
banks are acceptable in many countries Holders can withdraw cash
from any branch of major banks worldwide. Issuer of card provides
24 hrs customer helpline available across the world in case of any
emergency.
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To Merchants/ Shopkeepers : Guaranteed payment Lessens the
security risk of holding the cash Overseas visitors may purchase
more, providing new market for retailer
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To credit card companies/ Banks : Source of revenue - Joining
fee - card renew fee - services charges from retailers - Interest
charged to customer
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Disadvantages To cardholders : Loss or stealing of card To
Merchants/ Shopkeepers : Retailers are required to pay a certain
fee and service charges at an agreed percentage of their credit
card sales. To credit card companies : Risk of bad debt Risk of
fraud
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Safety Tips Sign card with signature Do not leave cards lying
around Close unused accounts in writing and by phone, then cut up
the card Do not give out account number unless making purchases
Keep a list of all cards, account numbers, and phone numbers
separate from cards Report lost or stolen cards promptly