A PROJECT ON
"A STUDY ON CREDIT CARD" (THE PLASTIC MONEY)
Submitted in partial fulfillment of the requirement of Bachelor Of International Business & Finance, Jamia Millia Islamia, University, New Delhi-110025
Submitted by: ZOFAIL HASSAN
SESSION :- 2009-2011
Submitted to:
DEPARTMENT OF COMMERCE AND BUSINESS STUDIES
JAMIA MILLIA ISLIMIA UNIVERSITY NEW DELHI-110025
ACKNOWLEDGEMENT A project gains a lot of relevance as it on time activity serving a definite object. Practical experience in undertaking a project teaches many things which would otherwise elude observations. I am very indebted and obliged to have Ms. VARDHA SAGHIR (lecturer) project guide and whose scholarly guidance and sustained interest in the progress of my project have been the major contributing factor in preparation of this project report. I am also placed my sincere thanks to all respondents and concerned people to this project.
CONTENTS EXECUTIVE SUMMARY OF CREDIT CARD INDUSTRY INTRODUCTION TYPES OF CARDS SALIENT FEATURES OBJECTIVES & SCOPE OF THE STUDY RESEARCH METHODOLOGY INDIAN CREDIT CARD SCENARIO
DECIDING ON THE RIGHT CREDIT CARD ANALYSIS COMPARISON OF CREDIT CARDS SUGGESTIONS OF THE STUDY LIMITATIONS OF THE STUDY CONCLUSION RECOMMENDATION BIBLIOGRAPHY QUESTIONNAIRE
INTRODUCTION ORIGIN The credit card had its beginning in an embarrassing incident that took place in the early 1950’s in America. The story goes that Mr. McNamara; a New York businessman took his friends out to dinner. At the end of meal he discovered that he had forgotten his wallet at home, the proprietor was kind enough to allow him a later settlement of bill. As McNamara stepped out of the restaurant he had the brainwave for the introduction of credit cards - system of availing instant credit upon confirming the identity of cardholder. Thus was born the Diners Club Cards, the pioneer of today’s multibillion-dollar plastic money business. Diners Club adopted a promising approach by recruiting various hotels and restaurants to act as member establishments for accepting the cards. Not only did these establishments pay a commission on member’s purchases but the members also paid an annual subscription fee. Diners Club vetted its members for credit
worthiness and guaranteed payment to participating establishment. Thus was born the first ‘Travel and Entertainment Card’. It was followed by American Express, which is now a dominant force in the Travel and Entertainment cards industry, and by 1959 by Carte Blanche, after many vicissitudes is now a part of Citi Bank Empire Together With Diners Club. In the present time American Express leads the travel and entertainment (T&E) card industry. The next great leap-forward came from Bank of America, which in other banks. Such cardholders could use their card 1966 offered to license its successful blue, white and gold Bank America card to at any accepting merchant establishments around the globe. Later in 1977 all the national and international Bank America licenses were pulled together under the single name of Visa. Not to be outdone, a rival group of American Banks came together in 1966 under the name of Interbank, later renamed Master Charge and later still Master Card. Ever since Master Card and Visa and their affiliates have carved the world credit card market.
In the 1980s credit card concept was launched in India through the Diners Club card, and soon, within a couple of months both Visa and Master card entered into the Indian market. What is a Credit Card? “Credit Cards - It's credit to you!” A Credit Card is referred to as 'plastic money'. Carrying a lot of cash on you can be cumbersome, risky and sometimes, you run short of it, just when you most need it. (Remember the SALE at your favorite ready-mades store?). A Credit card is the smart solution to these problems. It is a convenient and safe alternative for cash. Besides, it says things about you. Most people associate a credit card with a prestige, which it most certainly bestows on you, but more importantly, it says that you have taken the onus of being responsible - to be extended credit! So, when you get yourself a card, remember that, because your bank does!
Before i go any further, why not become familiar with the various terms and jargons used by the credit card industry. Credit Card – A credit card is a financial instrument, which can be used more than once to borrow money or buy products and services on credit. Banks, retail stores and other businesses generally issue these. Credit limit – The maximum amount of charges a cardholder may apply to the account. Annual fee – A bank charge for use of a credit card levied each year, which ranges depending upon the type of card one possesses. Banks usually take an initial fixed amount in the first year and then a lower amount as yearly renewal fees. Revolving Line Of Credit - An agreement to lend a specific amount to a borrower and to allow that amount to be borrowed again once it has been repaid. Most credit cards offer revolving credit.
Personal Identification Number (PIN) - As a security measure, some cards require a number to be punched into a keypad before a transaction can be completed. The cardholder can usually change the number. Teaser Rate - Often called the introductory rate, it is the belowmarket interest rate offered to entice customers to switch credit cards. Joint Credit - Issued to a couple based on both of their assets, incomes and credit reports. It generally results in a higher credit limit, but makes both parties responsible for repaying the debt.
TYPES OF CARDS MasterCard – MasterCard is a product of MasterCard
International and along with VISA are distributed by financial institutions around the world. Cardholders borrow money against a line of credit and pay it back with interest if the balance is carried over from month to month. 23,000 financial institutions in 220 countries and territories issue its products. In 1998, it had almost 700 million cards in circulation, whose users spent $650 billion in more than 16.2 million locations.
VISA Card – VISA cards are financial institutions around the world distribute a product of VISA USA and along with MasterCard. A VISA cardholder borrows money against a credit line and repays the money with interest if the balance is carried over from month to month in a revolving line of credit. Nearly 600 million cards carry one of the VISA brands and more than 14 million locations accept VISA cards.
Affinity Cards - A card offered by two organizations, one a lending institution, the other a non-financial group. Schools,
non-profit groups, pro wrestlers, popular singers and airlines are among those featured on affinity cards. Usually, use of the card entitles holders to special discounts or deals from the non-financial group.
Standard Card – It is the most basic card (sans all frills) offered by issuers.
Classic Card – Brand name for the standard card issued by VISA.
Gold Card/Executive Card – A credit card that offers a higher line of credit than a standard card. Income eligibility is also higher. In addition, issuers provide extra perks or incentives to cardholders.
Platinum Card – A credit card with a higher limit and additional perks than a gold card.
Titanium Card – A card with an even higher limit than a platinum card.
Secured Card – A credit card that a cardholder secures with a savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. It is used by people new to credit, or people trying to rebuild their poor credit ratings.
Smart Card – Smart cards, sometimes called chip cards, contain a computer chip embedded in the plastic. Where a typical credit card's magnetic stripe can hold only a few dozen characters, smart cards are now available with 16K of memory. When read by a special terminal, the cards can perform a number of functions or access data stored in the chip. These cards can be used as cash cards or as credit cards with a preset credit limit, or used as ID cards with stored-in passwords.
Charge Card – fall between a debit and credit card. Works like the latter and you don't have to be an accountholder. Just pay up in full when the bill arrives with the mail. No
outstanding are allowed, in other words, no revolving credit facility either. American Express and Diners are providers.
Rebate Card – This is a card that allows the customer to accumulate cash, merchandise or services based on card usage.
Co-Branded Card – This is a marriage of convenience between two service providers who want a trade-off with the other's strengths. Specific facilities are made to members through these tie-ups. So, Times Bank and Citibank have a co-branded card that allows concessional rates for add-on cards or telephone banking. Stan chart and Hindustan Lever Limited have a co-branded card to sell Aviance beauty products. SBI-GE Capital has a co-branded card for retail loans.
Cash Card – Cash cards, similar to pre-paid phone cards, contain a set amount of value, which can be read by a special cash card reader. Participating retailers will use the reader to debit the card in increments until the value is gone. The cards
are like cash -- they have no built-in security, so if lost or stolen, they can be used by anyone.
Travel Card – these works mostly as debit cards for the limited purpose of travel. Citibank Dollar Card, American Express, Bob card Global and Hong bank Thomas Cook International Card are among the players in this section.
Debit Card – It is the accountholder's mobile ATM. Open an account with a bank that offers a debit card, and payments for purchases are deducted from your bank account. The retailer swipes the card over an electronic terminal at his outlet, you enter the personal identification number on a PIN pad and the money is immediately debited at the bank. Citibank and a few domestic banks like Times Bank offer this.
SALIENT FEATURES Annual Fee: All credit card issuers charge an annual fee which is payable at the start of the year. The start of the year, of course, is your membership year, and not the calendar year. So, if you got yourself a card in March, you can expect to be billed the annual fee every March until you cancel your card. As a privilege, this fee is sometimes waived the first time. When the time comes for renewal of your card, you can even use the reward points you have accumulated from using the credit card over the year to settle your annual fee. Forwarding Balance (or Revolving): The most attractive feature of a credit card is that you need not pay off your dues in whole. You can opt to pay 5% of the total amount on or before the due date, every month, the rest is carried forward. But there's a price to pay for this extended credit - interest! Normally, interest varies between 2.5% and 3% per month.
APR or Annual percentage Rate: The interest rate that reflects the yearly cost of the interest the outstanding on your card is called the annual percentage rate. This rate is charged to the cardholder on the amounts carried forward beyond the due date for the payment of balances. Most card issuers will tell you their monthly rate of interest. It might sound low at 3%, but when you look at the interest rate over the year, it turns out to be as high as 43%. Cash Advance: An important feature - lets you withdraw cash from designated ATMs using your credit card. Use discretion when withdrawing cash on your credit card because the charges for this facility are high, around 2.5% to 3% per transaction! BENEFITS: Credit:
When you use a Credit card to pay for anything, you get an interest-free period of 45 days. Billing cycles are structured in such a way that you definitely get at least 30 days out of these as clean credit time, which is especially beneficial to salaried people. Better still, you can opt to pay your bill in full when you receive it or you can carry forward your payments by paying as little as 5% of the total amount on or before the due date, every month. You can spend now , pay later. Convenience: With a credit card on you, you don't need to run the risk of carrying a lot of cash. Cash Advance: Another advantage of a Credit card is that you can use it as an ATM card too! But remember, there's a fee to it. It typically starts with a flat fee going up to a percentage-based fee on the amount of the withdrawal.
DRAWBACKS: Greed! Just because you have credit being extended to you doesn't mean that you should go on a rampage! Use your card with discretion and caution. Remember, it is an extremely expensive way to borrow money! View it as a convenient and safe way to carry cash, a timely help in an emergency or taking advantage of an opportunity that you would have otherwise lost out on, like an investment!
Do's & Dont's Do not leave your Credit Card lying around the house or on your desk at work. If your card is lost or stolen, or you suspect it is being used fraudulently, report it immediately to your bank. Hold on to receipts from your transactions. In fact, keep your receipts filed or in one place - you'll find them easily, should the need arise. And when you want to throw them away, don't just thrash into the bin, shred or tear them before you do. Never give your Credit Card number over the phone, unless you've made the call, and it is to your bank or someone you trust, and you really, really need to!
EXECUTIVE SUMMARY OF CREDIT CARD INDUSTRY The credit card industry in India has registered an encouraging growth in recent times, but the usage pattern of credit cards remains a point of conc0ern, those in the industry say. There has been a seven-fold increase, with the number of cardholders touching over 38 lakh. These figures point towards the fact that the credit card industry in India is growing at a brisk annual rate of 30 per cent and is expected to grow at a similar rate in the coming years. While issuing the cards may seem to be easy, the challenge for the banks lies in being able to manage their portfolios by keeping the delinquency levels at the lowest and customer satisfaction levels at the highest. Customer satisfaction is the key to success. You want customers to be happy with the products and services you provide. If they feel they have received good value for their money, your business will prosper. Getting your customers to tell you what’s good about your business, and where you need improvement, helps you to be sure that your business measures up to their expectations.
Apart from attracting potential card users, customer retention is also one of the most important factors influencing a card issuer’s success. ----. With the influx of new financial institutions in the card market, people have started using cards on a more regular basis. The level of services provided by these organizations is increasing day by day. In order to ensure that the existing customers stay loyal, Organization has to ascertain whether its existing customers are satisfied with its current service offerings. This research has tried to study the satisfaction levels of a sample of 100 credit card holders. These respondents each hold credit cards, which may be of different kinds.
INDIAN CREDIT CARD SCENARIO The credit card industry in India has registered an encouraging growth in recent times, but the usage pattern of credit cards remains a point of concern, those in the industry say. Seven years back, India had a base of around five lakh credit cards. There has been a seven-fold increase, with the number of cardholders touching over 38 lakh. These figures point towards the fact that the credit card industry in India is growing at a brisk annual rate of 30 per cent and is expected to grow at a similar rate in the coming years. This fortifies the view that conservative purchasing ideas are giving way to the big in-thing. But it is the usability that raises doubts. According to a survey by the Credit Card & Management Consultancy (CCMC), 71 per cent of first time credit card applicants in the country have expressed the need for advice on appropriate card selection despite the plethora of cards available in the market. Through this survey it has come to realize a long felt need of potential and existing cardholders for advice on suitable selection of a credit cards. The whole idea behind the introduction
of the credit cards was to increase the purchasing capacity of the cardholder. With this in mind, the foreign banks launched a credit card blitzkrieg on the Indian customer. The innovations have already begun to show their effect. The Standard Chartered Bank has seen its credit card base shoot up after the launch of its Global Rupee Card in March last year. It has seen the fresh issuance of global card increase by more than one lakh, and the bank now has a base of more than half a billion. But the real challenge for the banks is to make the holder spend more on the card. Going by estimates, India has a long way to be anywhere near the matured markets. The markets like the United States and England have an average annual card spend of 1,300 and 3,600 dollars respectively. The credit card players will have to think about simplifying the foreign exchange transactions. When one uses the card, it is entirely his responsibility to make sure that exchange controls have been complied with. The banks that issue the cards have made it abundantly clear that one has to look out for him. It is upon him to
find out the facts of regulatory life. The real point of worry is the spending on the credit cards. According to estimates, the average card spending in India is even less than that in Indonesia. Those in the credit card business say that per capita credit card spending in India is about five hundred dollars (Rs 21,500), whereas in Indonesia, it is about 678 dollars (Rs 29,154). At present there are over a dozen players in the credit card market in India, and the fact is the foreign banks are clearly the leaders. The leaders will surely be identified by the innovations for the card users. But the alarm has been raised for the banks by the figures that show that while the average usage in Malaysia is 27 times annually, in India it is only 11 times. Some of the key factors impacting the cards business in India are limited credit, wide geographical spread, limited telecommunication infrastructure and emerging regulatory controls. The other players feel that the card acceptance base in India has to be widened. Suggestions include credit card usage at petrol pumps and railway bookings.
They also point out that though the cards business has been in the country for long, but even today the insurance premium cannot be paid by card. Though LIC is talking about the introduction of this facility to customers, but its turning into reality may take time. There is talk of widening the card business with new features, but the present scenario does not paint a positive picture, with many loopholes remaining to be plugged. Of the twenty million taxpayers in India, more than ten per cent of them are cardholders. Those in the industry point out that this figure is not bad, considering the fact that; the cards business is still in its initial stages. However, the players feel that the business has not reached an optimum level to say that they are making money. Even the largest player in the Indian market does not still have the economies to make the card business really profitable in India, despite the fact that it has more than one million credit card holders. Less than two per cent of private consumption spending in India is done on cards.
While issuing the cards may seem to be easy, the challenge for the banks lies in being able to manage their portfolios by keeping the delinquency levels at the lowest. Huge investments in systems and infrastructure are, therefore, a necessity. The increase is being attributed to new ideas such as round-the-clock functioning of card issuing banks and pulling out all stops even at a loss, to grab a sizeable share of the expanding pie. Not to be left behind in this race, even the big brother, the State Bank of India in association with GE Capital entered the card business. The spurt in the card business has gathered momentum during the past couple of years. For instance, the Hong Kong & Shanghai Banking Corporation (HSBC), was in the credit cards business since seven years, but from 50,000 card holders in 1997, it has about three lakh card holders now. India’s fastest growing credit card company - SBI Cards 2.5 lakh credit cards…25 cities…16 months. The joint venture between India’s largest bank – State Bank of India and one of the world’s leading financial services companies – GE Capital, SBI Cards &
Payment Services (SBI Cards) has issued 2.5 lakh credit cards across 25 cities (the largest distribution network in the payment card industry) within 16 months. Thereby achieving the target in the fastest period seen in India’s payment card industry. SBI Cards & Payments Services attributed this success to SBI’s enormous brand equity, and unparalleled retail branch network coupled with GE Capital’s payment card process and technology expertise. He also highlighted Speed, Simplicity and Service as the key drivers of growth for the SBI Card. Speed Unique and exclusive 14-day average turnaround time, coupled with availability of the SBI Card in 25 cities in just 16 months. Simplicity Simple application process with minimum documentation. Service 24 hours a day/7 days a week local call access to the SBI Card Help line across 25 cities. As a result of the focus on the Speed, Simplicity and Service growth platform, SBI Cards today offers the largest distribution and widest cash advance network for India’s middle class customers. SBI Cardholders can access cash for emergency purposes from over 158 SBI branches across 68 locations in India.
INTERMEDIARIES: In their attempt to increase their market share, credit card companies are opting for Direct Sales Agents. These DSAs are paid a flat rate against the approved applications. The DSA team comprises aggressive salesmen who visit different organizations and professionals. They collect filled forms and produce them to the bank for approval. After cards are issued they also deliver the same to the individuals. DECIDING ON THE RIGHT CREDIT CARD How much is the joining fee and the annual fee? Generally, a card with a higher annual fee enjoys more benefits like higher credit limit, higher accident insurance cover, accessibility to airport lounges, travel discounts etc. OF at least the used to be the case. With cutthroat competition between the card issuing banks, players are ready to waive joining fees and also one-year membership fees for anyone. Grab these offers, or negotiate this for yourself.
How much is the Add-on card fee? If you are interested in buying add-on cards for your children, spouse or friend, ask for the add-on card fee. Remember that you will be settling the bills on the add-on card that you so touchingly gift to someone dear to you - the statement will come to you, and the responsibility for payment is yours (as far as the credit card company is concerned) What is the interest rate? This is actually a question that you should be asking fairly soon in the discussion. Remember, while the up front one off fees are bread and butter for the credit card Company, this is the jam! If you are the sort who forgets to pay on time, or likes to live it up and live off credit, the interest rate would be of paramount importance. Most credit card companies charge anywhere between 2% to 3 % per month. (Read a whopping 35% to 43% per year). That's where they make their gravy, and that's where you pay! It is always advisable to pay off the entire amount on due date, or, if you have a large bank balance, look for card companies that provide the transfer
balance facility. The balance transfer rate is lower for a certain period (say six months) and then the normal rates apply. But again this is a temporary solution to a chronic problem. 4. What is the reach? Not an important question - most outlets in India accept both the Master card and the Visa card, and most credit card companies provide Visa or Master cards. So its fairly simple, and doesn’t need much head scratching - they're all more or less the same. One thing you could do is to check out for the Automated Teller Machines nearest to your house or work place (ATMs - almost all credit card companies now provide you the facility of withdrawing cash from machines - I guess for things that cards just cant buy. These machines are called ATMs, and are helpfully scattered all over the city/country/world). Having more ATM outlets in Thailand wouldn’t be of any relevance to a person who rarely travels abroad, though it may certainly be a goal to work towards after buying the card. Please also remember that Amex credit cards are not part of
the Visa/ Master chain, and have a separate chain of outlets where it’s accepted. 5.Is it a Global card? Now this could be useful to you if you are an overseas traveler. A Global card can be used for paying expenses in foreign currency just like you use a credit card to pay in rupees. Nowadays, a Global card is being issued at the same cost as for a similar domestic one. It is better to have a global card, especially if there is no premium attached. 6.How useful are branded or affinity cards? A partnership between a card issuer and the non-profit, social or lifestyle association is what results in an affinity card. This is for providing financial rewards to the group or association. E.g. Citibank Women’s card, Citibank WWF cards. Citibank WWF Visa card donates a percentage of the transaction value made through the card to the WWF fund for its environmental conservation activities.
A subscription to such cards helps ease the conscience though it provides no monetary value. A partnership between a bank card issuer and a commercial partner result in a co-branded card. This entitles the cardholder to lots of freebies, prizes, discounts on co-branded products. Logic: If a customer is loyal to one brand, he will want to purchase the other. So if you were loyal to a particular brand, it would make sense going for those co-branded cards. e.g. Citibank and IOC, Bank of India and Taj group of hotels etc. 7. What’s the lost card liability? Most Card issuers mention in the brochures that lost card liability is Rs 1000. Be careful, that is actually AFTER it is reported to the Bank. The liability is actually unlimited before reporting (in cases like this, you would actually thank the credit limit because though the liability is unlimited, the ceiling should logically be your credit limit, and the outlets accepting your stolen card should actually check that you (or the person who stole your card) haven’t exceeded
your credit limit). Avoid banks that make you liable for card misuse for a single minute after reporting it. 8. Are there any freebies? Citibank gives a Pond’s gift hamper free on subscription to its Citibank Women card. Personal accident insurance for Air, Road or Otherwise is packaged along with the subscription. Also Baggage cover, Purchase Protection cover and credit shield is bundled free of cost along with the card. If you feel one these parameters are important, and then settle for the one that gives a higher cover. 9. Is immediate cash withdrawal possible? Check out if the Bank has any ATMs near your house or workplace. This surely helps in times of emergency. The cost component for a cash withdrawal could be classified as follows: Service fee (transaction fee) each time you pull out money, and Interest rate for the period for which you have used the money - until settlement date. If you are going to withdraw cash frequently, better watch out for this cost.
10. How long is the free credit period? The days of credit one gets depends on the statement date and the date of transaction. On an average, you could assume you'd get around 20 days of free credit. However, if you buy just after the statement date, you could end up getting unto 50 days of credit. Look for cards that give you the highest free credit period! 11. Is a Helpline available? A 24-hour Helpline service from the Card Company helps the cardholders during the non-banking hours. Reporting of theft, checking of available credit limit and other enquiries can be made by the cardholder round-the-clock. In the end, like everything else in life, the card you want is really up to you - what matters the most to you - credit, reach, the freebees, international reach or a combination of parameters. Use our card category on the left bar to simply list out the names of the cards, or choose by bank name and see the cards they offer. Or look for cards offering the lowest interest rate. Of the lowest charges on cash withdrawal (believe me, it gets to be a serious consideration as one goes along). Go to our
shortlist card section, and search for cards based on any criteria that you want. Happy hunting, and stay careful - you may like to use our section on how to use the card carefully to minimize the chance of its misuse by someone else.
OBJECTIVES OF THE STUDY
Study is the one of the important parts of any study. Following are the objectives of the study: •
To find the scope of the credit cards industry in India.
•
To know the customer awareness regarding credit cards.
•
To analysis the benefits of credit cards.
•
To know how it is beneficial to manage the cash risk.
•
To understand the market potential of credit card in Delhi.
SCOPE OF THE STUDY The study on Credit card- increase the volume of profit of this industry. We have considered geographical Unit of Delhi. It in we analysis the comparison of different credit cards and their detail reports their branches and values.
RESEARCH METHODOLOGY Confining our study to the geographical limits of Delhi, we chose a sample of 100 people - 50 cardholders and 50 non-card users, using the probability sampling technique where every individual fulfilling the above criteria had an equal chance of being selected for the survey. Following are some of the facts that were revealed through the survey.
Sources and Method of Data Collection The data on the present study will be collected by the investigator himself. It's customary to distinguish data between primary and secondary.
Collection of Primary Data: The collection of primary data done with the help of personal meet with the Managing Director and Supervisory and Official Staff after Securitization of records maintained. A personal survey and surprise check are prompt to be carried out to ascertain the fact on the basis of survey of credit card at personal interest.
Collection of Secondary Data: •
News papers,
•
Press Media
•
Magazines
•
Telecommunication
Research Tools: •
Research design
:
Exploratory
•
Sampling Unit
:
Area of Delhi
•
Sampling Size
:
100 people- 50 Cash holder, 50 non- cash user
•
Sampling technique :
Probability Sampling
ANALYSIS It was found that for the frequent travelers acceptability was the most important criteria and was given the highest weightage Following attributes have been analyzed as per the consumer survey conducted The attributes are as follows: ACCEPTIBILITY CREDIT LIMIT CREDIT PERIOD MEDICAL AND HOSPITAL SERVICES OTHERS PROMOTION STRATEGIES The changing trends in the payment systems are global and even in India revolve around the change in customer needs and the
evolution of financial markets. Traditionally Indians like to pay in cash or at the most avail the services of a bank. As a result credit card companies had to educate the consumers and spread awareness of the uses of its products. The companies have tried to address this issue through promotional campaigns: Placing of take away firms of credit card at more than a thousand merchant establishments. Appointing of DSAs Using business magazines and newspapers for advertisement. Mailing of forms along with contests to professionals and middle management executives etc. Tapping the get member route Reducing their minimum eligibility criteria and changing income documentation structure. Introduction of photo cards. Tying up with durable consumer goods manufacturer ( e.g. Onida, 0Philips ) to sell their products. Providing ATM facility to their card holders
Travel assistance via tele-banking.
COMPARISON OF CREDIT CARDS Card Issuers
Brand
Card Type
Acceptance
Citibank NA
Gold/Preferred
Master
International
Citibank NA
Gold/Preferred
Visa
International
Citibank NA
Indian Oil
Master
Domestic
Citibank NA
Silver/Classic
Master
International
Citibank NA
Silver/Classic
Visa
International
Citibank NA
Women
Visa
Domestic
Citibank NA
WWF
Visa
Domestic
ICICI
Solid Gold
Visa
International
ICICI
Sterling Silver
Visa
Domestic
ICICI
True Blue
Visa
Domestic
SBI
Classic
Visa
Domestic Standard Chartered Classic
Master
International Standard Chartered
Gold
Visa
International
With the credit card truly becoming an international citizen, issuers have begun highlighting the value-added features offered along with the basic product. While some of them are offering attractive interest rates, others are luring customers by their reward schemes. With a plethora of choices on offer it is not easy to come to a decision on any particular card.
TIP’S FROM CITIBANK TO SAVE CHARGES Fee-heavy foreign transactions Many major credit card issuers charge a fee for card transactions in foreign countries. The cost of cash advances is particularly onerous. When traveling abroad, carry a mix of plastic, cash, debit cards and traveler's checks. Want a better rate? Just ask for Acquiring new credit card customers is expensive and time-consuming, so issuers don't want to lose creditworthy individuals. If you've had a year of on-time payments, call your credit card issuer and ask for a cut on your interest rate. Cut credit card costs Make payments on time, avoid cash advances and don't exceed your credit limit. Cash advances are more costly as there's no grace period, so you pay interest from the day you take the money.
Identity theft The No. 1 identity theft is credit card fraud. New card accounts are opened or existing accounts are taken over. The Federal Trade Commission offers a hotline and Web site for advice and tips. Save stress with less debt The stress of credit card debt has been directly linked to physical problems like heart attacks, insomnia, explosive emotions, smoking, overeating and lack of concentration. Shop online without the worry Credit card companies are switching to zero liability. If your credit card is misused on the Internet, you won't be liable for online transactions charged by an unauthorized user. But zero liability doesn't mean zero responsibility -- you'll have to meet certain requirements.
Fraud alert Placing a fraud alert on your credit files prevents an imposter opening credit in your name. The downside is that you give up the convenience of "instant credit." You can't sign up for a new credit card and go shopping with it three minutes later. Teen consumers Credit card companies are targeting the increasingly powerful teen consumer. Teens get the credit card and the bill, but parents are legally responsible. Nonprofit organizations caution that teens lack personal finance teaching, and aren't ready for plastic. Be careful when you do the card hop Changing credit cards for a better deal may net attractive teaser rates, but many cards now deter balance transfers with tough terms and high costs. Read the fine print carefully.
Silencing phone solicitors: You can pull the plug on telemarketers calling your home. The Telephone Consumer Protection Act requires telemarketers to record your 'do-not-call' request and refrain from dialing you for 10 years. Credit score During and after a divorce, you need to make a clean financial break to keep your credit report accurate. A first step is to cancel credit card accounts, even if you were only an authorized user, and reapply for new accounts. Digital wallets Digital wallets, or e-wallets, are extensions of a consumer's credit cards. Basic e-wallets store cardholder information, filling in account and personal information at cyber stores. They are convenient, secure solution to shopping online.
Don't fill up on gasoline credit cards Gas company cards offering rebates on purchases can be worthwhile when gas prices are high. But the annual percentage rate and the annual fee charged are higher than normal cards. People who carry a revolving balance will find these cards much less rewarding. Credit union cards Credit unions usually have lower interest rates and fees than banks, though they tend to have fewer choices than bankcards. Student credit card choices Students and their families looking for the best student credit card need to focus primarily on annual fees and interest rates. Generally, students with a work and credit history will find a regular credit card is the best deal.
Variable-rate cards The cost of using credit cards has increased. Variable-rate cards, the most common type in the nation, tend to rise in step with the prime rate. The prime rate has gone in the Fed's efforts to cool the red-hot economy, but spending hasn't been significantly reduced. Financing vacations Most people finance vacations with their credit cards. Even the average credit card interest rate can turn your vacation into a financial strain if you spend above your means and take up to a year to pay it off. Emerging credit Tweeners – people with emerging credit or recovering credit -- can find good credit card deals. To get the best deal they need to compare annual percentage rates, grace periods, credit limits, and fees, and avoid credit cards with hefty application and processing fees.
Affinity credit cards Affinity credit cards (aka "charity" cards) may give you a sense of purpose to your spending, but can cost more than your actual donation. Affinity cards carry high interest rates and annual fees. They have more value if you don't carry a card balance. Paying for vacations You can enjoy that vacation even after it's over by limiting your credit card use. Consider planning ahead, setting a budget and saving for your vacation. If you're still shortfunded, a home-equity loan offers a better interest rate than a credit card. Student loan debt Graduating college students face an average loan debt of more than $35,000, and it needs to be attacked aggressively. First, concentrate on paying down credit card debt, and then tackle your student loan debt.
Citibank ‘s credit cards debt elimination strategies In addition to encouraging credit card competition through promoting the most attractive cards in the country, Citibank help consumers cope with credit card debt by teaching various debt reduction strategies. We hope that you find the following tips beneficial. Interest Rate Awareness: We cannot stress enough the importance of being aware of interest rates when using your card(s). Please utilize the lists above!!! High rate cards can be put a BIG dent in your pocketbook. To illustrate our point again, a cardholder with an average balance of $2,500 and a 19.99% purchase rate will pay $1000.00 in interest alone in just two years! The same cardholder would pay only $400.00 in interest if the rate were lowered to 8.00%, a difference of $600.00! Also, be aware of cash advance rates. Cash advance rates are typically much higher than purchase rates and usually there is no grace period for
cash advances (not to mention cash advance fees). Therefore, avoid cash advances if at all possible. Taking Advantage of Promo Rates While introductory or "teaser rates" are generally short lived and are intended strictly to entice consumers, savvy consumers can benefit a great deal from promotional rates. Look for cards that offer longer term introductory rates and longer term promotional rates on balance transfers (6-12 months). Some cards even offer very attractive long term promotional rates on balance transfers...rates that are good until the dollar amount transferred is entirely paid off! Consumers that have more than one card with available credit can transfer balances between cards in order to take advantage of promo. Transfer rates (a ploy known as "card dumping"). Finally, when the promo. rate period ends (for transfers), it is a good idea to call the card company and request an extension of the rate. Consumers with a good payment history often get extensions. You must be aggressive when dealing with credit card companies! You can also negotiate to have your regular interest rate lowered. Threatening to pay off a given
card often puts consumers in a bargaining position when dealing with credit card cos. Avoiding the Minimum Payment Pitfall: One of the greatest card pitfalls is making only the minimum payment each month. Make every effort to pay over the minimum each month, even if it is only a few dollars over. The long-term impact of making "just the minimum payment" is devastating. According to Consumer Credit Counseling Services, paying the $60 minimum payment on a $3,000 credit card balance would take eight years to pay off and would translate into $2,780 in interest! By paying only $50 more a month, however, the debt would be paid off in three years and result in a savings of $1,800 in interest charges! Graceless Grace Period: Avoid cards that begin computing their grace period at the time of purchases, rather than billing. Only a few cards still use this method of interest computing, but there are still some out there. Keep your eyes peeled!
CONCLUSION Whenever Internet transactions are discussed, immediately the thought of credit card comes to everybody’s mind. This is because in US the payments by credit a card is quite common. Even before online purchases have become popular, normally purchases are made through credit cards only. Therefore in US there was no problem in making people to switch over to online purchases as this mode of payment is already in vogue. Even in US, much discussion is going on as to how to avoid frauds, misappropriation, etc of credit cards once the card number is given online to a merchant. Encryption technologies. Secure socket layers, etc are being introduced to avoid such things In spite of all these measures, still reports keep coming regarding credit card frauds here and there. In other words, there is no 100% foolproof to make credit card payment a safe mode of payment. In other countries, where credit cards payment system is not as popular as US, online shopping through credit cards resulted in great failures. At least in Singapore, a mega shop had experienced
a fraud of huge magnitude and decided to suspend immediately their online business. Similar stories are not uncommon in other countries too. Scenario in India In India the situation is far from satisfactory to use the credit cards as a means of making payments for online purchases for the following reasons; 1.Use of credit cards is popular to only a few thousands of executives, businessmen, etc from big cities. 2.That any person using credit card is liable to declare IT made many people surrendering their cards. In other words if credit card is made the payment mechanism, only IT payers will be eligible to buy goods online. 3.Still many leading credit card companies are yet to install their infrastructure to process the online payments. 4.Then there is the question of sales tax laws Each State has its own rate of tax structure for each and every commodity. How to charge
tax when a transaction takes place online and at what rate will pose problems of billing. 5.Many establishments do not like to offer credit card facility due to the service charges to be paid to cr card companies. They get the payment only after a certain period of time once the goods are sold. Both of them make the profit margin less. As mentioned earlier, the fraud element is applicable to India also. In view of all these factors, in India; Use of credit cards cannot be expected to boost the sales of online sales, particularly business to customer Then what is the way out? There are other methods of payments for Indian online business, which are given below: Payments by electronic cash/ cheque may be made legally valid including electronic signature .I believe once the cyber laws are passed by GOI, this is possible.
Each merchant/shopper can allot a secret code number to the existing clients (customers). On receipt of this code number, the goods can be dispatched by VPP and other modes of dispatch, which will ensure collection of payment against delivery. However, this facility can be extended only to existing customers. Banks should be asked to immediately create necessary facilities for any of the a/c holders to operate the a/c through online. Once a purchase is made, the a/c holder can transfer the required amount to the merchant A/C online. The MERCHANT BANK CAN INTIMATE the shopper about the transaction. All these activities
can
be
carried
out
instantly
though
proper
programming. Activity can be made part of the ordering activity. Large organizations can issue authorization letters to each of their employee who wants to avail the online purchasing facility and device a mechanism through which the company itself pays the merchant his dues. This would require installation of
transaction servers in the companies or can be integrated with their online business activity. Similarly all government establishments can device a mechanism to enable their employees make online purchases. These are all some of the ideas to making the online purchases easier and smoother without affecting the payment due to the shoppers. They may look difficult to achieve but with proper programming techniques and the use of appropriate servers, they can be easily achieved. In conclusion, payment through credit cards will not result in increasing the online shopping as generally believed. We need to device different mechanisms taking into account Indian laws, shopper’s requirements, banking practices prevalent in our country.
RECOMMENDATIONS HOW TO PROTECT The following are my recommendations. There may be other options available as well. 1. Never give your credit card to the company. Make payment by cheque
instead.
2. Monitor your credit card statements. 3. If there is an unauthorized charge, report it to Micro Forecasts immediately and demand a charge reversal. Wait several days and then check with your credit card company to see if you received the credit. Do not wait for your next statement to see if the credit appears. 4. If the refund is not there, call Micro Forecasts again. Most importantly, deny the charge immediately with your credit card company.
For this to be effective, it must be done in writing, and must be done within 60 days from the date you received the statement on which the disputed charge appeared. This time frame is as per federal law. I believe you are much more likely to get your money back if the credit card company is involved. 5. Report your credit card as lost/stolen so that no further charges can occur. You will get a new card within a couple of week. Many people have done this, including myself. 6. Report the problem to authorities as per the next section is? Very likely Somewhat likely Not sure Somewhat unlikely Very unlikely To what extent does credit card service exceed your expectations? Very great extent
Great extent Some extent Little extent Very little extent Which of the following statements, according to you most representative of your credit card service provider? They are Helpful and Friendly. They are polite, cheerful and are knowledgeable operators In tune with the needs of its clients Prompt in dealing with customer complaints Unwilling to go the extra mile for its customers Poor customer phone support You are often put on hold for a long time How satisfied are you with the efficiency of call handling when placing calls to credit card service provider?
Very satisfied Somewhat satisfied Neutral Somewhat dissatisfied Very dissatisfied
Credit card service provider understands my service needs. Strongly agree Agree Neutral/Not sure Disagree Strongly disagree. What are the added benefits you wish to acquire from the card? Acceptability
Longer credit period Higher credit limit Lesser charges Better offers Please rank the services of the following card issuers in order of your preference. Citibank HSBC Bank of Baroda Bank Of India Standard Chartered ANZ Grindlays Times card ICICI
SBI Personal details: Age: Profession Income:
15,000-25,000
25,000-40,000
40,000-60,000
Above 60,000
Thank you for taking the time to complete this survey
BIBLIOGRAPHY Marketing management: Philip Kotler Financial Management: Khan & jain Business Statistics: K.K.Khanna & Jagjit Singh Annual report SBI Annual report ICICI Annual report Citibank Annual report FICCI PhD. House library
JAMIA MILLIA ISLIMIA library
Google search Yahoo search AltaVista search
MSN search India infoline.com MAMA search Citibank.com Sbi.com Icici.com Indiatimes.com A&m.com Business today Business week Times of India Business world Business India
Outlook India today A&m magazine Strategic marketing magazine Economic times Financial times Times of India Hindustan times Indian express The Hindu Home trade search Strategic management: P.K.Ghosh Brand management: Y.R.Morthi
SUGGESTIONS OF THE STUDY The banks battle today is more with cash than with other banks. Considering the huge potential of the Indian market, it is in the interest of the issuers to educate the consumers about the benefits of holding credit card. The campaigns must also be convincing enough to clear the myth that credit cards increase spending. Focus should be on changing non-card related spending to card related spending. The issuers must focus on service and pricing and must recognize the importance of the billing and payment process to retain credit card holders. The credit cards schemes would be successful only if they meet the customer’s requirement of wider acceptability rather than fringe benefits like non-crisis credit or prestige proposition. Emphasis should be on offering a wider basket of services through credit cards enabling purchases for a wide variety of products along with ATM usage, backed by much more comprehensive merchant establishment network. The banks must also increase the number of cardholders by reducing the initial-one time subscription fee.
The banks should step up advertising that will help to build a brand image and create a higher brand recall like that of Citibank. With more and more people willing to adopt to credit cards, banks should undertake
innovative
strategies
to
increase
card
spends.
Simultaneously, to cater to high net worth customers and those with niche needs, banks should provide more of premium plastic and CO-cards that piggyback on the existing infrastructure, but provide holders with exclusive add-ons. Future promotions could include: Telemarketing, direct sales, direct mail, promotional advertising through media, common ATM services between banks (to reduce cost of operations), schemes like card carnival and sales executives contests and a plethora of augmented services should be introduced to induce greater number of people to adopt to plastic money.
LIMITATIONS OF THE STUDY •
The study is confined to NCR only.
• Most of the information is subjective data collected through personal interaction with people transacting in the plastic money market. As a result the personal biases of individuals could affect the study. However, to counter this the data has been verified from a number of different sources to give it a measure of authenticity. • Study was constrained by limited availability of data. Not all banks could reveal their confidential marketing strategies and statistical information.
INTRODUCTION
TYPES OF CARDS
SALIENT FEATURES
OBJECTIVES & SCOPE OF THE STUDY
RESEARCH METHODOLOGY
EXECUTIVE SUMMARY OF CREDIT CARD INDUSTRY
INDIAN CREDIT CARD SCENARIO
DECIDING ON THE RIGHT CREDIT CARD
ANALYSIS
COMPARISON OF CREDIT CARDS
LIMITATIONS OF THE STUDY
SUGGESTIONS OF THE STUDY
CONCLUSION
RECOMMENDATION
BIBLIOGRAPHY
QUESTIONNAIR E
