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 cent 3 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
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• 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
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• Add On Card

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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 Neutral Dissatisfied Highly Highly Satisfied Neutral Dissatisfied Highly
Satisfied Dissatisfied Satisfied 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