Plastic Money Full Project 11u3h
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Ch.1 Introduction
Plastic money or polymer money, made out of plastic, is a new and easier way of paying for goods and services. Plastic money was introduced in the 1950s and is now an essential form of ready money which reduces the risk of handling a huge amount of cash. It includes debit cards, ATMs, smart cards, etc. Credit cards, variants of plastic money, are used as substitutes for currency. This book on plastic money is divided into two sections titled Concepts and Experiences. The former covers articles on the the emergence of plastic money, different types of plastic cards and their growth in India and other related issues. An experience discusses the experiences of banks like Standard Chartered, Citibank, which deal with plastic money and their growth in the market.
Meaning Plastic money refers to credit cards, you use them whenever you want and pay later (with interest, of course). It makes it too easy for people to buy things they normally could not afford, which makes it easier to get into debt.
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Definition A slang phrase for credit cards, especially when such cards used to make purchases. The "plastic" portion of this term refers to the plastic construction of credit cards, as opposed to paper and metal of currency. The "money" portion is an erroneous reference to credit cards as a form of money, which they are not. Although credit cards do facilitate transactions, because they are a liability rather than an asset, they are not money and not part of the economy's money supply.
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Ch.2 The History Of Credit Cards and Debit Cards In Plastic Money
Credit cards have evolved into a safe and secure manner to purchase goods and services. The Internet has given credit card s additional purchasing power. Banks have options like cash-back rewards, savings plans and other incentives to entice people to use their cards. Debit cards allow people the convenience of cards without the worry of racking up debt. The convenience, security and rewards offered by credit and debit cards keep shoppers using their cards as opposed to checks or cash.
Credit Card Origins
The first credit cards were issued by individual stores and merchants. These cards were issued in limited locations and only accepted by the businesses that issued them. While the cards were convenient for the customers, they also provided a customer loyalty and customer service benefit, which was good for both customer and merchant. It was not until 1950 that the Dinner's Club card was created by a restaurant patron who forgot his wallet and realized there needed to be an alternative to cash only. This started the first credit card specifically for widespread use, even though it was primarily used for entertainment and travel expenses.
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Plastic Becomes the Standard
The first Diner's Club cards were made out of cardboard or celluloid. In 1959 American Express changed all that with the first card made of plastic. American Express created a system of making an impression of the card presented at the for payment. Then that impression was billed to the customer and due in full each month. Several American Express cards still operate like this as of 2010. It was not until the late 1980s that American Express began allowing people to pay their balance over time with additional card options.
Bank Card Associations
In 1966, Bank of America created a card that was a general purpose card or "open loop" card. These "closed loop" agreements limited cards like Diners Club and American Express to certain merchants, unlike the new "open loop" cards. The new general purpose system required interbank cooperation and additional regulations. This created additional safety features and began building the credit card system of today. Two systems emerged as the leaders--Visa and Master Card. However, today there is little difference between the two and most merchants accept both card associations.
Debit Cards Emerge
The Visa association of cards took credit cards to a new level in 1989 when they introduced debit cards. These cards linked consumers to their 4
checking s. Money was now drawn from a checking at the point of sale with these new cards and replaced check writing. This helped the merchants check that money was available and made it easier to track the customer if the funds could not be obtained. Consumers liked the convenience of not having to write checks at the point of sale, which made debit cards a safe alternative to cash and checks.
The Future
There were almost 29 million debit card s as of 2006, with a projected 34.4 million s by 2016. However, online services like PayPal are emerging as a way for people to pay their debts in new, secure and convenient ways. Technology also exists to have devices implanted into phones, keys and other everyday devices so that the ability to pay at the point of sale is even more convenient.
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Ch.3 TYPES OF PLASTIC MONEY Different types:-
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.
Debit card • Debit cards are substitutes for cash or check payments, much the same way that credit cards are. However, banks only issue them to you if you hold an with them. When a debit card is used to make a payment, the total amount charged is instantly reduced from your bank balance. 6
• Don't borrow on your credit card! Here's why • A debit card is only accepted at outlets with electronic swipemachines that can check and deduct amounts from your bank balance online.
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.
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•
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.
•
Credit cards: these dos and don'ts.
•
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.
Dinner club card • 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.
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Global card • Global cards allow you the flexibility and convenience of using a credit card rather than cash or travelers cheque 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. • A debit card with a difference
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• 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.
Master card & 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 worldwide may use their respective credit cards to make various purchases.
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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.
Photo card •
If your photograph is imprinted on a card, then you have what is known as a photo card. Doing this helps identify the of the credit card and is therefore considered safer. Besides, in many cases, your photo card can function as your identity card as well.
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Ch.4 CREDIT CARD INTRODUCTION A credit card is a small plastic card issued to s as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card grants a line of credit to the consumer or the ) from which the can borrow money for payment to a merchant or as a cash advance to the . Usage of the term "credit card" to imply a credit card is a metonym. When a purchase is made the would indicate consent to pay by g a receipt with a record of the card details and indicating the amount to be paid. Issuer agrees to pay the merchant and the credit card agrees to pay the card issuer.
DEFINITION:The credit card can be defined as “A small plastic card that allows its holder to buy goods and services on credit and to pay at fixed intervals through the card issuing agency.
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MEANING:A credit card is a card or mechanism which enables card holder to purchase goods, travels and dine in a hotel without making immediate payments. The holders can use the cards to get credit from banks up to 45 days. The credit card relieves the consumers from the botheration of carrying cash and ensures safety. It is a convenience of extended credit without formality. Thus credit card is a port to, “safety, convenience, prestige and credit.
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ADVANTAGES & DISADVANTAGES OF CREDIT CARD
ADVANTAGES OF CREDIT CARD
The benefits of credit card can be grouped as follows:
(A) BENEFITS TO THE BANK
a) A credit card is an integral part of banks major services these days. The credit card provides the following advantages to the bank:
the system
provides an opportunity to the bank to attract new potential costumers. b) To get new customers the bank has to employee special trained staff. This gives the bank an opportunity to find the latent talent from among existing staff that would have been otherwise wasted. c) The more important function of a credit card, however, is simply to yield direct profit for the bank. There is a scope and a potential for a better profitability out of income / commission earned from the traders turn over.
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d) This also provides additional customer services to the existing clients. It enhances the customer satisfaction. e) More use by the car holder and consequently the growth of banking habits in general. f) Better network of card holders and increased use of cards means higher popularity and image of the bank g) Savings of expense on cash holdings, i.e. stationery, printing and man power to handle clearing transactions while considerably is reduced. It increases (B) BENEFITS TO CARD HOLDER
The principal benefits to a card holder are: a) He can purchase goods and services at a large number of outlets without cash or cheque. The card is useful in emergency, and can save embarrassment. b) The risk factor of carrying and storing cash is avoided. It is convenient for him to carry credit card and he has trouble free travel and may purchase his without carrying cash or cheque.
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c) Months purchases can be settled with a single remittance, thus, tending to reduce bank and handling charges. d) The card holder has the period of free credit usually between 30-50 days of purchase e) Cash can usually be obtained with the card, either on card or by using it as identification when encasings a cheque at the bank. f) Availing credit with minimum formality. g) The credit card saves trouble and paper work to traveling business man.
(C) BENEFITS TO THE MERCHANT ESTABLISHMENT The principal benefits offer credit card to the retailer is a) This will carry prestigious weight to the outlets. b) Increases in sale because of increased purchasing power of the cardholder due to unbilled credit available to the card holder. c) The retailers gain from the impulse buying and trading up the tendency to buy the bigger or better article d) Credit card ensures timely and certainly of payments. 16
e) Suppliers/sellers no longer have to send reminders of outstanding debits. f) Systematic ing since sales receipts are routed through banking channels. g) Advertising and promotional on national scale. h) Development of prestigious clientele base.
DISADVANTAGES OF CREDIT CARD The following are the common disadvantages of the credit card:
a) Some credit card transactions take longer time than cash transactions because of various formalities. b) The customer tends to overspend out of immerse happiness. c) Discounts and rebates can rarely be obtained.
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d) The cardholder is responsible for charges due to loss or theft of the card and the bank may not be party for loss due to fraud or collusion of staff, etc
e) Customers may be denied cash discount for payment through card. f) It might lead to spending habits and cardholders may end up in big debts
i) Avoid the entire cost and security problem involved in handling cash.
j) Losses to bad debts and reduced an additional liquidity is k) It also allows him to delegate spending power to add on
l) Credit card is considered as a status symbol.
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MARKETING STRATEGIES American companies spend billions of dollars each year on marketing. As a matter of fact, in 2001, U.S. advertising expenditures alone topped $230 billion, more than doubling the $105.97 billion spent in 1980. (Source: “Advertising: Exposure and Statistics” November 2003 newsletter of the Media Education Foundation)
Now, these figures may seem staggering to the independent professional on a budget, but don’t panic; there are lots of effective strategies you can utilize that will help you grow your business fast. Here are some of my favorites:
Identify your niche. One of the easiest ways to attract customers is to figure out which group of prospective customers you get your very best results for and go after them exclusively. Many professionals are afraid to do this claiming that they’ll be leaving someone out, but many marketing experts agree that niche marketing as the easiest and fastest way to get business.
Position yourself as an expert. Why? Experts make more money and get more media attention and that’s free advertising! Let’s face it; it’s easier to trust a specialist than a
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generalist who’s trying to be everything to everyone. Once you’ve identified your niche, let the world know about how you can help. Provide free information products, write articles and white papers about the problems your clients face and how they can solve them.
Conduct workshops, seminars and tele-classes specifically geared towards helping your prospective customers and before long you’ll be regarded as an expert in your field. And, while you’re at it don’t forget to, collect names, emails and addresses of prospects to keep filling your pipeline.
Develop
ongoing
relationships
with
complementary
professionals and build your referral team. These are other professionals who sell non-competing services or products to the same niche customers you are targeting. For instance, my clients often need the services of bookkeepers, ants and business attorneys. Likewise, they refer business to me. Here are a couple of other examples: • Residential realtor, mortgage broker, real estate attorney, home improvement contractor, architect and interior designer. 000000000 • Commercial printer, copywriter, graphic designer.
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Institute a system to keep track of all of the people who are interested in your product or services, and find creative ways of keeping in touch with them on a regular basis. To start, go through your notes. Put together a list of all of the people you’ve spoken to in the last 6-9 months who’ve showed interest in you but haven’t become paying customers. Follow up with them in a variety of ways: call them to touch base, use email, ask them to subscribe to a newsletter, send them interesting articles, or invite them to you at events. It takes numerous impressions to make the sale; that’s why you see commercials on TV over and over again for the same products. By Keeping track of all of the people who’ve showed interest and keeping your business on their radar screen you’ll turn more of them into paying customers.
Let your satisfied customers help you sell your products or services. Here are a couple of ways to do this: 00000000000000000000000000
• Ask them for referrals - right away (if you were a car salesman you wouldn’t wait for the new car to get dirty and dented!)000000000000 • Ask them to write testimonials for you, (also right away) and compile a list of testimonials to use in your all of your marketing collateral. 21
Create a marketing calendar and keep to it consistently. Scheduling marketing activities that take place weekly, bi monthly, monthly and quarterly will help you to avoid the feast or famine syndrome that most independent professionals fall prey to. And, by doing so, marketing will become easier since it becomes a regular part of your business life. Identify innovative ways to get more business from existing customers. It’s much easier to get business from customers who are already happy with your services or products. So develop additional services or products to keep customers coming back for more.
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STEPS FOLOWED TRANSACTION
IN
CREDIT
CARD
1. AUTHORIZATION • For Internet Merchants, the shopping card is connected to or integrated with a Payment Gateway. For Retail Merchants, the card is swiped through a magnetic reader on the point of sale terminal the authorization is transmitted to the appropriate card issuer for approval. The issuing bank of card issuer authenticates the card holder and approves or declines the transaction amount. • It is important to note that no money changes hands during the authorization. Merchants must re-present the transaction to receive payment.
2. Merchant balancing •
This is also known as batching out. Most pos terminals and all payment gateway per firm an auto close functions at the and of the day and batch out automatically.
3. Capture • The front end processor matches the authorization data to the settlement data and transmits the card capture file to a back end processor for V/MC transactions or to the appropriate card issuer for other card types.
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4. Clearing • During this stage the back end processor performs compliance checks and risk management procedures and transmits the transaction to V/MC or to the appropriate card issuer for other card types.
5. Interchange (VS/MC Only) • During this stage the V/MC Association sort the transactions by issuing bank and transmit them to the appropriate issuing banks for settlement. 6. Settlement • During this stage the Issuing Bank calculates fees and deductions and routs the net funds to the appropriate Card Issuer which determines the daily deposits for the merchants. 7. Merchant ACH •
During this stage the acquiring bank or card issuer transmits the
merchant deposit to the merchant’s checking .
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Different Types of Credit Cards
Credit cars are of various types, every one has to select credit cards on the basis of the pros and cons of each type of credit card and at the same time the nature of use. This article gives an insight into the several types of credit cards available in the market Today, credit card customers enjoy more options and choices than ever before. To gain new customers, credit card companies compete by offering new services and cards to customers. No matter what your needs, chances are good that there is a card out there that would be ideal for you. If you are looking for the right card, you can begin by considering the many types of cards available to you:
Low Interest Credit Cards These types of credit cards offer very low interest. In some cases, these cards just charge a few percent interests. The reasons for this are numerous. In most cases, the low interest rate is for a limited time only. After a set number of months, you will begin paying higher interest rates. In some cases, low interest credit cards are not really credit cards at all - they are debit cards linked to a low-interest loan such as a line of credit. Check your agreement to find out what type of card you have. If you need to consolidate debts or if you like the idea of having low interest for a while, this type of credit card can be perfect for you.
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Instant Approval Credit Cards These cards are really a product of our fast-paced society. The idea behind this type of credit card is that once you fill out your application, you will be told whether you are approved or not right away. The approval process only takes a few minutes. Instant approval credit cards are very popular online and applicants can apply via the internet or over the phone. If you are very impatient or need credit right away, these types of cards can be for you. However, you should be aware that these cards do not guarantee that you will be approved right away - sometimes, more time is needed to process your application. Another drawback to these cards is that they rely heavily on your credit score. If you have poor credit or any extenuating financial circumstances, these types of cards may not be for you. Balance Transfer Cards Balance transfer cards are a type of temporary low-interest card that is meant to help you consolidate your debt. They work this way: if you have several credit cards with a balance, you can get a balance transfer card. You then transfer all your credit card debt onto the new card and work to pay it off. Since the new card has a low interest rate, you can quickly repay your bills. If you are in debt, a balance transfer card can be a great way to get out of debt. It offers the convenience of one bill and low rates. However, some
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cards have high fees. Also, if you run up your other cards after consolidating your debts or if you are unable to pay off your new card in the limited time before the low interest rate increases, you may find yourself even more in debt than before.
Rewards Credit Cards Rewards credit cards offer you points, rewards, or bonuses for every cash purchase made with your credit card over time. As you accumulate rewards or points, you can redeem your bonus for entertainment events, purchases, travel, and other fun prizes. Some cards even offer customers extra automatic-enter sweepstakes and draws. Each time you use your card, you are entered into a draw to win specific prizes. These types of cards are really a marketing tool for card companies. Companies know that customers love rewards and prizes and so offer these enticements to lure customers. The major advantage of these cards is that they can help you get more cash value for your money. They can also be fun and rewarding for almost any credit card customer. However, not all reward credit cards are a deal. Some charge high fees to offset the costs of the bonuses. Some also have very low points systems, meaning that you need to spend a lot with your credit card to get any rewards at all. Read the fine print carefully before g.
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Cash Back Credit Cards Cash back credit cards give you money rewards. When you make a purchase with this type of credit card, you get some points based on the amount of money you have spent with your credit card. When you accumulate enough points, you get cash back. On most cards, you can get back about 1% of your total purchases. These cards are great for those who are budget-conscious as they give you some money back from your purchases. However, there are several drawbacks to these types of cards. Some cards have low cash-back percentage rates. Some charge high fees or have limits on how much money you can get back each year. Most cards only offer you cash back advantages on purchases - not on your balance. If you decide this card is right for you, do compare several card offers to find the best cash back credit card option.
Airline Credit Cards This type of card allows you to accumulate frequent flyer points on all your credit card purchases. If you travel a lot or love to travel, this card can help you accumulate points for a free trip or for a discount ticket. In many cases, these cards are great because they allow you to gather points for every purchase. However, these cards can also charge high fees. In some cases, your points will expire if you do not use them within a specified time. Worse, some airline credit cards make use of a point system that is not very -friendly. You may have to slowly accumulate an enormous amount of points to qualify for a trip. If you do not love to travel and if you do not use 28
your Credit card a lot, then, your ability to get rewards you like may be very limited.
Prepaid Debit Cards These cards are sometimes called junior credit cards. They are not truly credit cards at all, since you are not getting credit or loans from the credit card company. Instead, these cards work by having you deposit some money into the card . You can then use your card to charge any amount up to the amount in the . When you add more money, you can charge more to your card.0000000000000000000000000000000000
Secured Credit Cards Secured credit cards use collateral to ensure that the card company will be paid back. Often, these cards are used by people with no credit or bad credit. With secured credit cards, you can enjoy credit card convenience even if you do not qualify for traditional cards. However, you will also have to cope with the additional fees and low credit limits that these credit cards have.
Credit Cards for Bad Credit Bad credit credit cards are designed for people with poor credit histories. These cards generally have very low credit limits and charge extra fees. This is because they are designed for people who are considered far
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less likely to repay their debts. If you have a bad credit rating, these types of credit cards can be a great way to rebuild your credit history. These cards can also allow you to have credit even if you would be rejected for most other cards due to your credit history.
Student Credit Cards Student credit cards are cards meant to attract college and university students. These cards often offer bonuses for students. They are also easier to apply for, since credit card companies recognize that students have much shorter credit histories than the average customer.000000000000 If you are a student, student credit cards can be a great option. They are simple to use and can help you build a good credit rating before you graduate. However, there are some disadvantages to student credit cards. These cards may have no reward programs and may have fewer benefits, including fewer bonuses and services, than other cards.
Business Credit Cards Business credit cards are created especially for business use. They offer many of the same advantages as traditional credit cards, but also offer services that can really help a business. With some business credit cards, for example, you can enjoy higher interest rates, extra cards for business employees, monthly reports on your expenses, and services that let you keep your personal and business expenses separate on the same card. These
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advantages mean that using this card for your business is more convenient.
Types of Credit Cards offered by Indian Banks 31
Silver Cards Silver credit cards rank lowest among the metal named cards, and, because of lower prestige when compared to gold and platinum cards, are commonly known as basic and standard credit cards. Silver credit cards come with advantages such as lower annual hip fees if there is any, and a lower threshold salary which banks use to evaluate your application in case you should apply. Silver credit cards will provide you with almost the same credit limit as other cards provided you have a good credit history. You can also avail of 0% interest balance transfer schemes which are made available for a period of 6-9 months for silver card holders. There are also some disadvantages to using silver credit cards. One would be the lower cash advance limits, less rewards and promotional packages, and less travel perks compared to gold and platinum cards. HDFC Bank, ICICI offer silver credit cards through their HDFC Bank Silver cards and ICICI Sterling Silver credit card
Gold and Platinum Cards Gold and platinum credit cards are a status symbol for any credit card holder, bringing prestige since getting gold and platinum cards usually require that you have good credit rating and a higher income levels. Gold
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and platinum cards offer higher limit for cash advance withdrawals and sometimes can provide higher credit limits as compared to standard or silver cards. If you have a gold or platinum card, you also get better perks and privileges such as travel insurance, extended warranties for appliance purchases and special deals on specific products, and purchase protection insurance. You can also engage in some loyalty schemes that are offered for gold and platinum credit card holders which can sometimes involve cash back promos and reward points systems. Some popular gold and platinum cards available are the American Express Gold card, and the ICICI Solid Gold Credit Card. It is not possible to cover them the exact offerings of these cards but I will highly advice you to check all these websites of the banks to get all the info about the credit cards they are offering. Also try to talk to your friends who are having credit cards to get more info.
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Types of Credit Cards offered By Indian Banks
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Credit Card Data
Credit Card is either Visa or MasterCard which is the Most popular and in some instance American Express.000000000000000000000000000000 The Top 10 Credit Card Issuers in India are as follows, ICICI
Bank
-
5.07
Mn
HDFC
Bank
-
4.42
Mn
Cards
-
2.65
Mn
-
-
2.54
Mn
SBI Citibank HSBC
Cards
-
1.3
Mn
ABN
Amro
-
0.78
Mn
Axis
Bank
-
0.57
Mn
Deutsche
Bank
-
0.495
Mn
American
Express
-
Data Courtesy - The Reserve Bank of India
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0.45
Mn
Ch.5 DEBIT CARD
A debit card (also known as a bank card or check card) is a plastic card that provides an alternative payment method to cash when making purchases. Functionally, it can be called an electronic cheque, as the funds are withdrawn directly from either the bank or from the remaining balance on the card. In some cases, the cards are designed exclusively for use on the Internet, and so there is no physical card. In many countries the use of debit cards has become so widespread that their volume of use has overtaken the cheque and, in some instances, cash transactions. Like credit cards, debit cards are used widely for telephone and Internet purchases and, unlike credit cards, the funds are transferred immediately from the bearer's bank instead of having the bearer pay back the money at a later date. Debit cards may also allow for instant withdrawal of cash, acting as the ATM card for withdrawing cash and as a cheque guarantee card. Merchants may also offer cash back facilities to customers, where a customer can withdraw cash along with their purchase.
Types of debit card systems 36
Online Debit System Online debit cards require electronic authorization of every transaction and the debits are reflected in the ’s immediately. The transaction may be additionally secured with the personal identification number (PIN) authentication system and some online cards require such authentication for every transaction, essentially becoming enhanced automatic teller machine (ATM) cards. One difficulty in using online debit cards is the necessity of an electronic authorization device at the point of sale (POS) and sometimes also a separate PIN pad to enter the PIN, although this is becoming commonplace for all card transactions in many countries. Overall, the online debit card is generally viewed as superior to the offline debit card because of its more secure authentication system and live status, which alleviates problems with processing lag on transactions that may only issue online debit cards. Some on-line debit systems are using the normal authentication processes of Internet banking to provide real-time on-line debit transactions. The most notable of these are Ideal and POL.
Offline Debit System Offline debit cards have the logos of major credit cards (e.g. Visa or MasterCard) or major debit cards (e.g. Maestro in the United Kingdom and other countries, but not the United States) and are used at the point of sale like a credit card (with payer's signature). This type of debit card may be subject to a daily limit, and/or a maximum limit equal to the
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current/checking balance from which it draws funds. Transactions conducted with offline debit cards require 2–3 days to be reflected on s’ balances. In some countries and with some banks and merchant service organizations, a "credit" or offline debit transaction is without cost to the purchaser beyond the face value of the transaction, while a small fee may be charged for a "debit" or online debit transaction (although it is often absorbed by the retailer). Other differences are that online debit purchasers may opt to withdraw cash in addition to the amount of the debit purchase (if the merchant s that functionality); also, from the merchant's standpoint, the merchant pays lower fees on online debit transaction as compared to "credit" (offline) debit transaction.
Electronic Purse Card System Smart-card-based electronic purse systems (in which value is stored on the card chip, not in an externally recorded , so that machines accepting the card need no network connectivity) are in use throughout Europe since the mid-1990s, most notably in (Geldkarte), Austria (Quick), the Netherlands (Chipknip), Belgium and Switzerland (CASH). In Austria and , all current bank cards now include electronic purses.
Prepaid Debit Card Prepaid debit cards, also called reload able debit cards or reload able prepaid cards, are often used for recurring payments. The payer loads funds to the cardholder's card . Prepaid debit cards use either the offline
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debit system or the online debit system to access these funds. Particularly for companies with a large number of payment recipients abroad, prepaid debit cards allow the delivery of international payments without the delays and fees associated with international checks and bank transfers. Providers include Caxton FX prepaid cards, [Escape prepaid cards and Travelex prepaid cards. [ Whereas, web-based services such as stock photography websites (stockpot), outsourced services (odes), and networks (Media Whiz) have all started offering prepaid debit cards for their contributors/freelancers/vendors.
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BENEFITS & FEATURES OF DEBIT CARDS
BENEFITS OF THE DEBIT CARD
• FREE WITH OUR BANK Obtaining a debit card is easy. If we qualify to open a bank , we usually get a debit card, if our bank offers the service. • NO BACKGROUND CHECK When we are applying for a debit card, the ban does not need to look into our credit history. All we need is the documentation to open a bank, , and money in our bank when we use our debit card. • CASH WITHDRAWALS The customer can withdraw a minimum of Rs. 100/- and a maximum Rs.10, 000/- per day • CONVENIENCE A Debit card fees us from carrying a lot of cash or a cheque book. In case, we are an international traveler, we don’t need to stock up on Traveler’s Cheques or cash. We can use our debit card to withdraw Cash from over
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500,000 ATMs around the world in over 100 countries. We can withdraw in the local currency of the country we are in, limited only by the money we have back home in our , and Business Travel Quota (BTQ) limit arability. • FAIR EXCHANGE If we return merchandise or cancel services paid for with a Debit card, the transaction is treated as if it were made with cash or a check. Customers usually get cash back for offline purchases; for on-line transactions, the amount is credited to our . • STATEMENT OF A statement of transactions can be obtained from the customer’s branch. For example, a mini statement containing the last four transactions and balance can be obtained at a State Bank Group during the working hours of the customer’s branch. • BANKING CUM SHPPING CARD Your Debit card can be used as ATM card at any ATM across the world, as well as for making purchase at merchant locations. You can also withdraw cash from any of the 12000 ATMs in India. WIDELY ACCEPTED, INTERNATIONALLY VALID
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FEATURES OF DEBIT CARD
The following are features of Debit cards A) It is a combination of a Cheque and ATM card. Therefore, there are no fees for using the ATM for cash withdrawal, or as a debit card for purchase. B) The Debit Card services in meant for withdrawals against the balance already available in the designated . C) It is the card holder’s obligation to maintain sufficient balance in the designated to meet withdrawals and service charges. D) A Debit card is more affordable than credit card. We just our bank for all our transactions. No credit period. Our bank is debited immediately. E) No credit check is required to get a Debit card. F) Use of card is terminated without notice, upon the death, bankruptcy or insolvency of the cardholder or for other valid reasons. G) Spending is limited to our bank balance.
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Process Debit Card Transactions
A successful business will usually accept debit cards as a part of their overall profile of payment solutions. If you don’t process debit cards, you may not be taking full advantage of all the potential that your merchant can deliver. There are essentially two ways you can accept debit cards, online and offline. Off line debit card transactions An offline debit card transaction is still the way most merchants accept debit cards. This is essentially the same as processing credit cards. You swipe your customer’s debit card through a credit card terminal and have them sign the receipt. If you choose to accept debit cards offline, be sure that the debit card has a VISA or MasterCard logo. Otherwise, the debit card won’t be approved and you won’t be able to process the debit card offline
Online debit card transactions The most advantageous way to process debit cards is to do it online. You will still be able to accept debit cards at the point of sale, but you will need to install a PIN pad on your credit card terminal.
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An online debit card transaction works much like a credit card transaction, except that after your customer swipes his or her debit card, they will enter a PIN instead of g the receipt. At this point the encrypted debit card information is sent to the customer’s bank for authorization, and you’ll receive the funds just as you would for a credit card transaction. Your business has many advantages when you accept debit cards. For example, you pay a flat fee for each debit card transaction that you process, instead the flat fee plus percentage rate that you are charged when you accept credit cards. Over time, this can potentially save you a lot of
money.
0000000000000000000000000000000000000000000000000
Another advantage when you process debit cards is that you can’t be charged higher “downgrade” fees. In a credit card transaction, you are usually charged the “discount rate.” However, some transactions are considered to be a higher risk or expense to the bank, and you are charged a higher rate as a result. But when you accept debit cards, you always pay the same flat rate, with no danger of the rate increasing. You can also cut down on checkout time when you accept debit cards. It takes an average of 30 seconds to hand over the pen, wait for the customer to sign the receipt, and then take the pen back. 44
If you process 20 credit card transactions a day, you’re losing 100 minutes a day just ing a pen back and forth! That’s almost two hours.
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Plastic Fraud
State-of-the-art thieves are concentrating on plastic cards. In the past, this type of fraud was not very common. Today, it is a big business for criminals. Plastic cards bring new convenience to your shopping and banking, but they can turn into nightmares in the wrong hands. This pamphlet describes credit and debit cards and some common schemes involving card fraud with tips to help you avoid them The following are the types of frauds
1. Stolen Cards at the Office 2. Extra Copies of Charge Slips 3. Discarded Charge Slips 4. Unsigned Credit Cards 5. Loss of Multiple Cards 6. Strange Requests for Your PIN Numbers 7. Legitimate Cards 8. Altered Cards 9. Counterfeit Cards
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Ch.6 Advantages & Disadvantage Advantages Plastic money, unlike paper money, will not burn easily and can resist higher temperatures than paper money. You have no fear to be theft. And its easy to use. Plastic money, unlike paper money, will not burn easily and can resist higher temperatures than paper money. Paper money also picks up dirt and stains more easily than plastic money. Plastic money is the debit and credit cards. Plus point of plastic money is that you won't have to carry your cash around all the time. It also doesn't wear after time as paper does nor does it rip and tear. Give you incentives, such as reward points, that you can redeem. Be more convenient to carry than cash. Provide a convenient payment method for purchases made on the Internet 47
and over the telephone. Help you establish a good credit history. Disadvantage
Cost much more than other forms of credit, such as a line of credit or a Personal loan, if you don't pay on time. Damage your credit rating if your payments are late; Allow you to build up more debt than you can handle; Have complicated and conditions; It also doesn't wear after time as paper does nor does it rip and tear. Paper money also picks up dirt and stains more easily than plastic money. I can't really see any advantages to have paper money, unless it is
cheaper to make. Its disadvantage is that, some extra money will be deducted for the bank services. 48
It’s around 2.5% of the money you spent.
Ch.7 TECHNOLOGY AND INFRASTRUCTURE
One of the most important features that Plastic Money offers is the technology associated with this business. Credit card businesses rely on very reliable and secure technology and
demands very Strong connectivity backbone. Although a third world country, with lot of insecurities and almost no infrastructure, Pakistan has no exception when it comes to credit card business. There is approximately 3000 Point of Sale Terminals (POST) present
on merchant's sites connected with bank host system. Inter-city connectivity is accomplished through X.25 networks. Perhaps, it is the most important time in the history of Pakistan as the parameters of its Infrastructures are coming into existence.
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There is an immense need of reliable wide area connectivity and this market is so huge and lucrative that it can accommodate many more industry giant
Ch.8 CASE STUDY
What Happens in Credit Card Fraud Cases?
The Basics
A variety of crimes constitute credit card fraud. The term can describe a person using a stolen credit card to purchase goods or services posing as the person named on the card. It can also describe illegally and fraudulently withdrawing funds from an that is not yours. Identity theft, which is the act of posing as an individual to make purchases, is often classified together with credit card fraud. A victim of credit card fraud can sometimes see bank s emptied of all their funds or negative marks going on her credit report for things she had nothing to do with. Many banks will monitor transactions made with a credit card and alert the person named on the of any potentially suspicious activity. This is to protect the bank or Credit Card Company just as much as it is to protect the customer.
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Investigation Exactly what happens during a credit card fraud case depends a great deal on the actions of the Credit Card Company or bank involved. If fraudulent transactions are proven to have been made on a person's but the amount of the transactions is lower than the cost of an investigation the company can credit the money back to a person and then close the to protect from further harm.00000000000000000000000000 If the amounts of fraudulent charges are so great that an investigation is warranted, the police will be notified. The credit card company can look at a list of the fraudulent charges and determine where they were made. At that point an officer can question witnesses and review security camera footage in an attempt to identify suspects. If a suspect is arrested he can be tried in a court of law.
Felony
Credit card fraud is considered a felony by the courts of the United States. As a result a person convicted of credit card fraud could face jail time (the exact amount of which depends on the extent of the crime). A felony conviction stays on a person's record and can prevent the person from getting hired for a job. Having a felony on a criminal record will also take away a person's eligibility in of running for public office. If a person who is not a natural- born citizen of the United States commits credit card
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fraud and is convicted of a felony the result could be being deported to their country of origin.
Ch.9 CONCLUSION
21ST Century banking has become wholly customer-driven & technology driven by challenges of competition, rising customer expectations & shrinking margins, banks have been using technology to reduce cost & enhance efficiency, productivity & customer convenienence. Technology intensive delivery channels like net banking, mobile banking, etc have created a win-win situation by extending great convenienence. & multiple options for customer. From educating customers about credit cards there is a need to educate them about the differentiating factors of the cards. Because visa and master card are advertising regularly and thereby increases awareness. The strategy should be to emphasize on its differentiating characteristics. They also need to identify potential customers and target those using mailers. As internet is growing at a fast rate the net s can be targeted by having interactive sites. The prospective company’s card personality could
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also be used in the home page to solve customer queries in the ‘Best Possible Manner’.
Ch.10 BIBLIOGRAPHY BOOKS INOVATION IN BANKING & INSURANCE FINANCIAL MARKET & SERVICES INDIAN BANKING INDUSTRIES INDIAN BANKING TIMES OF INDIA NEWS PAPER (1st OCT 2010)
WEBSITE WWW.GOOGLESERCH.COM WWW.YAHOO.COM WWW.RBI.ORG
WWW.WIKIPEDIA .COM WWW.INFOSEE.COM
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WWW.INDIANMBA.COM
WWW.INDINBANKING.ORG
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Plastic money or polymer money, made out of plastic, is a new and easier way of paying for goods and services. Plastic money was introduced in the 1950s and is now an essential form of ready money which reduces the risk of handling a huge amount of cash. It includes debit cards, ATMs, smart cards, etc. Credit cards, variants of plastic money, are used as substitutes for currency. This book on plastic money is divided into two sections titled Concepts and Experiences. The former covers articles on the the emergence of plastic money, different types of plastic cards and their growth in India and other related issues. An experience discusses the experiences of banks like Standard Chartered, Citibank, which deal with plastic money and their growth in the market.
Meaning Plastic money refers to credit cards, you use them whenever you want and pay later (with interest, of course). It makes it too easy for people to buy things they normally could not afford, which makes it easier to get into debt.
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Definition A slang phrase for credit cards, especially when such cards used to make purchases. The "plastic" portion of this term refers to the plastic construction of credit cards, as opposed to paper and metal of currency. The "money" portion is an erroneous reference to credit cards as a form of money, which they are not. Although credit cards do facilitate transactions, because they are a liability rather than an asset, they are not money and not part of the economy's money supply.
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Ch.2 The History Of Credit Cards and Debit Cards In Plastic Money
Credit cards have evolved into a safe and secure manner to purchase goods and services. The Internet has given credit card s additional purchasing power. Banks have options like cash-back rewards, savings plans and other incentives to entice people to use their cards. Debit cards allow people the convenience of cards without the worry of racking up debt. The convenience, security and rewards offered by credit and debit cards keep shoppers using their cards as opposed to checks or cash.
Credit Card Origins
The first credit cards were issued by individual stores and merchants. These cards were issued in limited locations and only accepted by the businesses that issued them. While the cards were convenient for the customers, they also provided a customer loyalty and customer service benefit, which was good for both customer and merchant. It was not until 1950 that the Dinner's Club card was created by a restaurant patron who forgot his wallet and realized there needed to be an alternative to cash only. This started the first credit card specifically for widespread use, even though it was primarily used for entertainment and travel expenses.
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Plastic Becomes the Standard
The first Diner's Club cards were made out of cardboard or celluloid. In 1959 American Express changed all that with the first card made of plastic. American Express created a system of making an impression of the card presented at the for payment. Then that impression was billed to the customer and due in full each month. Several American Express cards still operate like this as of 2010. It was not until the late 1980s that American Express began allowing people to pay their balance over time with additional card options.
Bank Card Associations
In 1966, Bank of America created a card that was a general purpose card or "open loop" card. These "closed loop" agreements limited cards like Diners Club and American Express to certain merchants, unlike the new "open loop" cards. The new general purpose system required interbank cooperation and additional regulations. This created additional safety features and began building the credit card system of today. Two systems emerged as the leaders--Visa and Master Card. However, today there is little difference between the two and most merchants accept both card associations.
Debit Cards Emerge
The Visa association of cards took credit cards to a new level in 1989 when they introduced debit cards. These cards linked consumers to their 4
checking s. Money was now drawn from a checking at the point of sale with these new cards and replaced check writing. This helped the merchants check that money was available and made it easier to track the customer if the funds could not be obtained. Consumers liked the convenience of not having to write checks at the point of sale, which made debit cards a safe alternative to cash and checks.
The Future
There were almost 29 million debit card s as of 2006, with a projected 34.4 million s by 2016. However, online services like PayPal are emerging as a way for people to pay their debts in new, secure and convenient ways. Technology also exists to have devices implanted into phones, keys and other everyday devices so that the ability to pay at the point of sale is even more convenient.
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Ch.3 TYPES OF PLASTIC MONEY Different types:-
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.
Debit card • Debit cards are substitutes for cash or check payments, much the same way that credit cards are. However, banks only issue them to you if you hold an with them. When a debit card is used to make a payment, the total amount charged is instantly reduced from your bank balance. 6
• Don't borrow on your credit card! Here's why • A debit card is only accepted at outlets with electronic swipemachines that can check and deduct amounts from your bank balance online.
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.
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•
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.
•
Credit cards: these dos and don'ts.
•
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.
Dinner club card • 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.
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Global card • Global cards allow you the flexibility and convenience of using a credit card rather than cash or travelers cheque 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. • A debit card with a difference
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• 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.
Master card & 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 worldwide may use their respective credit cards to make various purchases.
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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.
Photo card •
If your photograph is imprinted on a card, then you have what is known as a photo card. Doing this helps identify the of the credit card and is therefore considered safer. Besides, in many cases, your photo card can function as your identity card as well.
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Ch.4 CREDIT CARD INTRODUCTION A credit card is a small plastic card issued to s as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card grants a line of credit to the consumer or the ) from which the can borrow money for payment to a merchant or as a cash advance to the . Usage of the term "credit card" to imply a credit card is a metonym. When a purchase is made the would indicate consent to pay by g a receipt with a record of the card details and indicating the amount to be paid. Issuer agrees to pay the merchant and the credit card agrees to pay the card issuer.
DEFINITION:The credit card can be defined as “A small plastic card that allows its holder to buy goods and services on credit and to pay at fixed intervals through the card issuing agency.
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MEANING:A credit card is a card or mechanism which enables card holder to purchase goods, travels and dine in a hotel without making immediate payments. The holders can use the cards to get credit from banks up to 45 days. The credit card relieves the consumers from the botheration of carrying cash and ensures safety. It is a convenience of extended credit without formality. Thus credit card is a port to, “safety, convenience, prestige and credit.
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ADVANTAGES & DISADVANTAGES OF CREDIT CARD
ADVANTAGES OF CREDIT CARD
The benefits of credit card can be grouped as follows:
(A) BENEFITS TO THE BANK
a) A credit card is an integral part of banks major services these days. The credit card provides the following advantages to the bank:
the system
provides an opportunity to the bank to attract new potential costumers. b) To get new customers the bank has to employee special trained staff. This gives the bank an opportunity to find the latent talent from among existing staff that would have been otherwise wasted. c) The more important function of a credit card, however, is simply to yield direct profit for the bank. There is a scope and a potential for a better profitability out of income / commission earned from the traders turn over.
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d) This also provides additional customer services to the existing clients. It enhances the customer satisfaction. e) More use by the car holder and consequently the growth of banking habits in general. f) Better network of card holders and increased use of cards means higher popularity and image of the bank g) Savings of expense on cash holdings, i.e. stationery, printing and man power to handle clearing transactions while considerably is reduced. It increases (B) BENEFITS TO CARD HOLDER
The principal benefits to a card holder are: a) He can purchase goods and services at a large number of outlets without cash or cheque. The card is useful in emergency, and can save embarrassment. b) The risk factor of carrying and storing cash is avoided. It is convenient for him to carry credit card and he has trouble free travel and may purchase his without carrying cash or cheque.
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c) Months purchases can be settled with a single remittance, thus, tending to reduce bank and handling charges. d) The card holder has the period of free credit usually between 30-50 days of purchase e) Cash can usually be obtained with the card, either on card or by using it as identification when encasings a cheque at the bank. f) Availing credit with minimum formality. g) The credit card saves trouble and paper work to traveling business man.
(C) BENEFITS TO THE MERCHANT ESTABLISHMENT The principal benefits offer credit card to the retailer is a) This will carry prestigious weight to the outlets. b) Increases in sale because of increased purchasing power of the cardholder due to unbilled credit available to the card holder. c) The retailers gain from the impulse buying and trading up the tendency to buy the bigger or better article d) Credit card ensures timely and certainly of payments. 16
e) Suppliers/sellers no longer have to send reminders of outstanding debits. f) Systematic ing since sales receipts are routed through banking channels. g) Advertising and promotional on national scale. h) Development of prestigious clientele base.
DISADVANTAGES OF CREDIT CARD The following are the common disadvantages of the credit card:
a) Some credit card transactions take longer time than cash transactions because of various formalities. b) The customer tends to overspend out of immerse happiness. c) Discounts and rebates can rarely be obtained.
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d) The cardholder is responsible for charges due to loss or theft of the card and the bank may not be party for loss due to fraud or collusion of staff, etc
e) Customers may be denied cash discount for payment through card. f) It might lead to spending habits and cardholders may end up in big debts
i) Avoid the entire cost and security problem involved in handling cash.
j) Losses to bad debts and reduced an additional liquidity is k) It also allows him to delegate spending power to add on
l) Credit card is considered as a status symbol.
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MARKETING STRATEGIES American companies spend billions of dollars each year on marketing. As a matter of fact, in 2001, U.S. advertising expenditures alone topped $230 billion, more than doubling the $105.97 billion spent in 1980. (Source: “Advertising: Exposure and Statistics” November 2003 newsletter of the Media Education Foundation)
Now, these figures may seem staggering to the independent professional on a budget, but don’t panic; there are lots of effective strategies you can utilize that will help you grow your business fast. Here are some of my favorites:
Identify your niche. One of the easiest ways to attract customers is to figure out which group of prospective customers you get your very best results for and go after them exclusively. Many professionals are afraid to do this claiming that they’ll be leaving someone out, but many marketing experts agree that niche marketing as the easiest and fastest way to get business.
Position yourself as an expert. Why? Experts make more money and get more media attention and that’s free advertising! Let’s face it; it’s easier to trust a specialist than a
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generalist who’s trying to be everything to everyone. Once you’ve identified your niche, let the world know about how you can help. Provide free information products, write articles and white papers about the problems your clients face and how they can solve them.
Conduct workshops, seminars and tele-classes specifically geared towards helping your prospective customers and before long you’ll be regarded as an expert in your field. And, while you’re at it don’t forget to, collect names, emails and addresses of prospects to keep filling your pipeline.
Develop
ongoing
relationships
with
complementary
professionals and build your referral team. These are other professionals who sell non-competing services or products to the same niche customers you are targeting. For instance, my clients often need the services of bookkeepers, ants and business attorneys. Likewise, they refer business to me. Here are a couple of other examples: • Residential realtor, mortgage broker, real estate attorney, home improvement contractor, architect and interior designer. 000000000 • Commercial printer, copywriter, graphic designer.
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Institute a system to keep track of all of the people who are interested in your product or services, and find creative ways of keeping in touch with them on a regular basis. To start, go through your notes. Put together a list of all of the people you’ve spoken to in the last 6-9 months who’ve showed interest in you but haven’t become paying customers. Follow up with them in a variety of ways: call them to touch base, use email, ask them to subscribe to a newsletter, send them interesting articles, or invite them to you at events. It takes numerous impressions to make the sale; that’s why you see commercials on TV over and over again for the same products. By Keeping track of all of the people who’ve showed interest and keeping your business on their radar screen you’ll turn more of them into paying customers.
Let your satisfied customers help you sell your products or services. Here are a couple of ways to do this: 00000000000000000000000000
• Ask them for referrals - right away (if you were a car salesman you wouldn’t wait for the new car to get dirty and dented!)000000000000 • Ask them to write testimonials for you, (also right away) and compile a list of testimonials to use in your all of your marketing collateral. 21
Create a marketing calendar and keep to it consistently. Scheduling marketing activities that take place weekly, bi monthly, monthly and quarterly will help you to avoid the feast or famine syndrome that most independent professionals fall prey to. And, by doing so, marketing will become easier since it becomes a regular part of your business life. Identify innovative ways to get more business from existing customers. It’s much easier to get business from customers who are already happy with your services or products. So develop additional services or products to keep customers coming back for more.
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STEPS FOLOWED TRANSACTION
IN
CREDIT
CARD
1. AUTHORIZATION • For Internet Merchants, the shopping card is connected to or integrated with a Payment Gateway. For Retail Merchants, the card is swiped through a magnetic reader on the point of sale terminal the authorization is transmitted to the appropriate card issuer for approval. The issuing bank of card issuer authenticates the card holder and approves or declines the transaction amount. • It is important to note that no money changes hands during the authorization. Merchants must re-present the transaction to receive payment.
2. Merchant balancing •
This is also known as batching out. Most pos terminals and all payment gateway per firm an auto close functions at the and of the day and batch out automatically.
3. Capture • The front end processor matches the authorization data to the settlement data and transmits the card capture file to a back end processor for V/MC transactions or to the appropriate card issuer for other card types.
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4. Clearing • During this stage the back end processor performs compliance checks and risk management procedures and transmits the transaction to V/MC or to the appropriate card issuer for other card types.
5. Interchange (VS/MC Only) • During this stage the V/MC Association sort the transactions by issuing bank and transmit them to the appropriate issuing banks for settlement. 6. Settlement • During this stage the Issuing Bank calculates fees and deductions and routs the net funds to the appropriate Card Issuer which determines the daily deposits for the merchants. 7. Merchant ACH •
During this stage the acquiring bank or card issuer transmits the
merchant deposit to the merchant’s checking .
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Different Types of Credit Cards
Credit cars are of various types, every one has to select credit cards on the basis of the pros and cons of each type of credit card and at the same time the nature of use. This article gives an insight into the several types of credit cards available in the market Today, credit card customers enjoy more options and choices than ever before. To gain new customers, credit card companies compete by offering new services and cards to customers. No matter what your needs, chances are good that there is a card out there that would be ideal for you. If you are looking for the right card, you can begin by considering the many types of cards available to you:
Low Interest Credit Cards These types of credit cards offer very low interest. In some cases, these cards just charge a few percent interests. The reasons for this are numerous. In most cases, the low interest rate is for a limited time only. After a set number of months, you will begin paying higher interest rates. In some cases, low interest credit cards are not really credit cards at all - they are debit cards linked to a low-interest loan such as a line of credit. Check your agreement to find out what type of card you have. If you need to consolidate debts or if you like the idea of having low interest for a while, this type of credit card can be perfect for you.
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Instant Approval Credit Cards These cards are really a product of our fast-paced society. The idea behind this type of credit card is that once you fill out your application, you will be told whether you are approved or not right away. The approval process only takes a few minutes. Instant approval credit cards are very popular online and applicants can apply via the internet or over the phone. If you are very impatient or need credit right away, these types of cards can be for you. However, you should be aware that these cards do not guarantee that you will be approved right away - sometimes, more time is needed to process your application. Another drawback to these cards is that they rely heavily on your credit score. If you have poor credit or any extenuating financial circumstances, these types of cards may not be for you. Balance Transfer Cards Balance transfer cards are a type of temporary low-interest card that is meant to help you consolidate your debt. They work this way: if you have several credit cards with a balance, you can get a balance transfer card. You then transfer all your credit card debt onto the new card and work to pay it off. Since the new card has a low interest rate, you can quickly repay your bills. If you are in debt, a balance transfer card can be a great way to get out of debt. It offers the convenience of one bill and low rates. However, some
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cards have high fees. Also, if you run up your other cards after consolidating your debts or if you are unable to pay off your new card in the limited time before the low interest rate increases, you may find yourself even more in debt than before.
Rewards Credit Cards Rewards credit cards offer you points, rewards, or bonuses for every cash purchase made with your credit card over time. As you accumulate rewards or points, you can redeem your bonus for entertainment events, purchases, travel, and other fun prizes. Some cards even offer customers extra automatic-enter sweepstakes and draws. Each time you use your card, you are entered into a draw to win specific prizes. These types of cards are really a marketing tool for card companies. Companies know that customers love rewards and prizes and so offer these enticements to lure customers. The major advantage of these cards is that they can help you get more cash value for your money. They can also be fun and rewarding for almost any credit card customer. However, not all reward credit cards are a deal. Some charge high fees to offset the costs of the bonuses. Some also have very low points systems, meaning that you need to spend a lot with your credit card to get any rewards at all. Read the fine print carefully before g.
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Cash Back Credit Cards Cash back credit cards give you money rewards. When you make a purchase with this type of credit card, you get some points based on the amount of money you have spent with your credit card. When you accumulate enough points, you get cash back. On most cards, you can get back about 1% of your total purchases. These cards are great for those who are budget-conscious as they give you some money back from your purchases. However, there are several drawbacks to these types of cards. Some cards have low cash-back percentage rates. Some charge high fees or have limits on how much money you can get back each year. Most cards only offer you cash back advantages on purchases - not on your balance. If you decide this card is right for you, do compare several card offers to find the best cash back credit card option.
Airline Credit Cards This type of card allows you to accumulate frequent flyer points on all your credit card purchases. If you travel a lot or love to travel, this card can help you accumulate points for a free trip or for a discount ticket. In many cases, these cards are great because they allow you to gather points for every purchase. However, these cards can also charge high fees. In some cases, your points will expire if you do not use them within a specified time. Worse, some airline credit cards make use of a point system that is not very -friendly. You may have to slowly accumulate an enormous amount of points to qualify for a trip. If you do not love to travel and if you do not use 28
your Credit card a lot, then, your ability to get rewards you like may be very limited.
Prepaid Debit Cards These cards are sometimes called junior credit cards. They are not truly credit cards at all, since you are not getting credit or loans from the credit card company. Instead, these cards work by having you deposit some money into the card . You can then use your card to charge any amount up to the amount in the . When you add more money, you can charge more to your card.0000000000000000000000000000000000
Secured Credit Cards Secured credit cards use collateral to ensure that the card company will be paid back. Often, these cards are used by people with no credit or bad credit. With secured credit cards, you can enjoy credit card convenience even if you do not qualify for traditional cards. However, you will also have to cope with the additional fees and low credit limits that these credit cards have.
Credit Cards for Bad Credit Bad credit credit cards are designed for people with poor credit histories. These cards generally have very low credit limits and charge extra fees. This is because they are designed for people who are considered far
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less likely to repay their debts. If you have a bad credit rating, these types of credit cards can be a great way to rebuild your credit history. These cards can also allow you to have credit even if you would be rejected for most other cards due to your credit history.
Student Credit Cards Student credit cards are cards meant to attract college and university students. These cards often offer bonuses for students. They are also easier to apply for, since credit card companies recognize that students have much shorter credit histories than the average customer.000000000000 If you are a student, student credit cards can be a great option. They are simple to use and can help you build a good credit rating before you graduate. However, there are some disadvantages to student credit cards. These cards may have no reward programs and may have fewer benefits, including fewer bonuses and services, than other cards.
Business Credit Cards Business credit cards are created especially for business use. They offer many of the same advantages as traditional credit cards, but also offer services that can really help a business. With some business credit cards, for example, you can enjoy higher interest rates, extra cards for business employees, monthly reports on your expenses, and services that let you keep your personal and business expenses separate on the same card. These
30
advantages mean that using this card for your business is more convenient.
Types of Credit Cards offered by Indian Banks 31
Silver Cards Silver credit cards rank lowest among the metal named cards, and, because of lower prestige when compared to gold and platinum cards, are commonly known as basic and standard credit cards. Silver credit cards come with advantages such as lower annual hip fees if there is any, and a lower threshold salary which banks use to evaluate your application in case you should apply. Silver credit cards will provide you with almost the same credit limit as other cards provided you have a good credit history. You can also avail of 0% interest balance transfer schemes which are made available for a period of 6-9 months for silver card holders. There are also some disadvantages to using silver credit cards. One would be the lower cash advance limits, less rewards and promotional packages, and less travel perks compared to gold and platinum cards. HDFC Bank, ICICI offer silver credit cards through their HDFC Bank Silver cards and ICICI Sterling Silver credit card
Gold and Platinum Cards Gold and platinum credit cards are a status symbol for any credit card holder, bringing prestige since getting gold and platinum cards usually require that you have good credit rating and a higher income levels. Gold
32
and platinum cards offer higher limit for cash advance withdrawals and sometimes can provide higher credit limits as compared to standard or silver cards. If you have a gold or platinum card, you also get better perks and privileges such as travel insurance, extended warranties for appliance purchases and special deals on specific products, and purchase protection insurance. You can also engage in some loyalty schemes that are offered for gold and platinum credit card holders which can sometimes involve cash back promos and reward points systems. Some popular gold and platinum cards available are the American Express Gold card, and the ICICI Solid Gold Credit Card. It is not possible to cover them the exact offerings of these cards but I will highly advice you to check all these websites of the banks to get all the info about the credit cards they are offering. Also try to talk to your friends who are having credit cards to get more info.
33
Types of Credit Cards offered By Indian Banks
34
Credit Card Data
Credit Card is either Visa or MasterCard which is the Most popular and in some instance American Express.000000000000000000000000000000 The Top 10 Credit Card Issuers in India are as follows, ICICI
Bank
-
5.07
Mn
HDFC
Bank
-
4.42
Mn
Cards
-
2.65
Mn
-
-
2.54
Mn
SBI Citibank HSBC
Cards
-
1.3
Mn
ABN
Amro
-
0.78
Mn
Axis
Bank
-
0.57
Mn
Deutsche
Bank
-
0.495
Mn
American
Express
-
Data Courtesy - The Reserve Bank of India
35
0.45
Mn
Ch.5 DEBIT CARD
A debit card (also known as a bank card or check card) is a plastic card that provides an alternative payment method to cash when making purchases. Functionally, it can be called an electronic cheque, as the funds are withdrawn directly from either the bank or from the remaining balance on the card. In some cases, the cards are designed exclusively for use on the Internet, and so there is no physical card. In many countries the use of debit cards has become so widespread that their volume of use has overtaken the cheque and, in some instances, cash transactions. Like credit cards, debit cards are used widely for telephone and Internet purchases and, unlike credit cards, the funds are transferred immediately from the bearer's bank instead of having the bearer pay back the money at a later date. Debit cards may also allow for instant withdrawal of cash, acting as the ATM card for withdrawing cash and as a cheque guarantee card. Merchants may also offer cash back facilities to customers, where a customer can withdraw cash along with their purchase.
Types of debit card systems 36
Online Debit System Online debit cards require electronic authorization of every transaction and the debits are reflected in the ’s immediately. The transaction may be additionally secured with the personal identification number (PIN) authentication system and some online cards require such authentication for every transaction, essentially becoming enhanced automatic teller machine (ATM) cards. One difficulty in using online debit cards is the necessity of an electronic authorization device at the point of sale (POS) and sometimes also a separate PIN pad to enter the PIN, although this is becoming commonplace for all card transactions in many countries. Overall, the online debit card is generally viewed as superior to the offline debit card because of its more secure authentication system and live status, which alleviates problems with processing lag on transactions that may only issue online debit cards. Some on-line debit systems are using the normal authentication processes of Internet banking to provide real-time on-line debit transactions. The most notable of these are Ideal and POL.
Offline Debit System Offline debit cards have the logos of major credit cards (e.g. Visa or MasterCard) or major debit cards (e.g. Maestro in the United Kingdom and other countries, but not the United States) and are used at the point of sale like a credit card (with payer's signature). This type of debit card may be subject to a daily limit, and/or a maximum limit equal to the
37
current/checking balance from which it draws funds. Transactions conducted with offline debit cards require 2–3 days to be reflected on s’ balances. In some countries and with some banks and merchant service organizations, a "credit" or offline debit transaction is without cost to the purchaser beyond the face value of the transaction, while a small fee may be charged for a "debit" or online debit transaction (although it is often absorbed by the retailer). Other differences are that online debit purchasers may opt to withdraw cash in addition to the amount of the debit purchase (if the merchant s that functionality); also, from the merchant's standpoint, the merchant pays lower fees on online debit transaction as compared to "credit" (offline) debit transaction.
Electronic Purse Card System Smart-card-based electronic purse systems (in which value is stored on the card chip, not in an externally recorded , so that machines accepting the card need no network connectivity) are in use throughout Europe since the mid-1990s, most notably in (Geldkarte), Austria (Quick), the Netherlands (Chipknip), Belgium and Switzerland (CASH). In Austria and , all current bank cards now include electronic purses.
Prepaid Debit Card Prepaid debit cards, also called reload able debit cards or reload able prepaid cards, are often used for recurring payments. The payer loads funds to the cardholder's card . Prepaid debit cards use either the offline
38
debit system or the online debit system to access these funds. Particularly for companies with a large number of payment recipients abroad, prepaid debit cards allow the delivery of international payments without the delays and fees associated with international checks and bank transfers. Providers include Caxton FX prepaid cards, [Escape prepaid cards and Travelex prepaid cards. [ Whereas, web-based services such as stock photography websites (stockpot), outsourced services (odes), and networks (Media Whiz) have all started offering prepaid debit cards for their contributors/freelancers/vendors.
39
BENEFITS & FEATURES OF DEBIT CARDS
BENEFITS OF THE DEBIT CARD
• FREE WITH OUR BANK Obtaining a debit card is easy. If we qualify to open a bank , we usually get a debit card, if our bank offers the service. • NO BACKGROUND CHECK When we are applying for a debit card, the ban does not need to look into our credit history. All we need is the documentation to open a bank, , and money in our bank when we use our debit card. • CASH WITHDRAWALS The customer can withdraw a minimum of Rs. 100/- and a maximum Rs.10, 000/- per day • CONVENIENCE A Debit card fees us from carrying a lot of cash or a cheque book. In case, we are an international traveler, we don’t need to stock up on Traveler’s Cheques or cash. We can use our debit card to withdraw Cash from over
40
500,000 ATMs around the world in over 100 countries. We can withdraw in the local currency of the country we are in, limited only by the money we have back home in our , and Business Travel Quota (BTQ) limit arability. • FAIR EXCHANGE If we return merchandise or cancel services paid for with a Debit card, the transaction is treated as if it were made with cash or a check. Customers usually get cash back for offline purchases; for on-line transactions, the amount is credited to our . • STATEMENT OF A statement of transactions can be obtained from the customer’s branch. For example, a mini statement containing the last four transactions and balance can be obtained at a State Bank Group during the working hours of the customer’s branch. • BANKING CUM SHPPING CARD Your Debit card can be used as ATM card at any ATM across the world, as well as for making purchase at merchant locations. You can also withdraw cash from any of the 12000 ATMs in India. WIDELY ACCEPTED, INTERNATIONALLY VALID
41
FEATURES OF DEBIT CARD
The following are features of Debit cards A) It is a combination of a Cheque and ATM card. Therefore, there are no fees for using the ATM for cash withdrawal, or as a debit card for purchase. B) The Debit Card services in meant for withdrawals against the balance already available in the designated . C) It is the card holder’s obligation to maintain sufficient balance in the designated to meet withdrawals and service charges. D) A Debit card is more affordable than credit card. We just our bank for all our transactions. No credit period. Our bank is debited immediately. E) No credit check is required to get a Debit card. F) Use of card is terminated without notice, upon the death, bankruptcy or insolvency of the cardholder or for other valid reasons. G) Spending is limited to our bank balance.
42
Process Debit Card Transactions
A successful business will usually accept debit cards as a part of their overall profile of payment solutions. If you don’t process debit cards, you may not be taking full advantage of all the potential that your merchant can deliver. There are essentially two ways you can accept debit cards, online and offline. Off line debit card transactions An offline debit card transaction is still the way most merchants accept debit cards. This is essentially the same as processing credit cards. You swipe your customer’s debit card through a credit card terminal and have them sign the receipt. If you choose to accept debit cards offline, be sure that the debit card has a VISA or MasterCard logo. Otherwise, the debit card won’t be approved and you won’t be able to process the debit card offline
Online debit card transactions The most advantageous way to process debit cards is to do it online. You will still be able to accept debit cards at the point of sale, but you will need to install a PIN pad on your credit card terminal.
43
An online debit card transaction works much like a credit card transaction, except that after your customer swipes his or her debit card, they will enter a PIN instead of g the receipt. At this point the encrypted debit card information is sent to the customer’s bank for authorization, and you’ll receive the funds just as you would for a credit card transaction. Your business has many advantages when you accept debit cards. For example, you pay a flat fee for each debit card transaction that you process, instead the flat fee plus percentage rate that you are charged when you accept credit cards. Over time, this can potentially save you a lot of
money.
0000000000000000000000000000000000000000000000000
Another advantage when you process debit cards is that you can’t be charged higher “downgrade” fees. In a credit card transaction, you are usually charged the “discount rate.” However, some transactions are considered to be a higher risk or expense to the bank, and you are charged a higher rate as a result. But when you accept debit cards, you always pay the same flat rate, with no danger of the rate increasing. You can also cut down on checkout time when you accept debit cards. It takes an average of 30 seconds to hand over the pen, wait for the customer to sign the receipt, and then take the pen back. 44
If you process 20 credit card transactions a day, you’re losing 100 minutes a day just ing a pen back and forth! That’s almost two hours.
45
Plastic Fraud
State-of-the-art thieves are concentrating on plastic cards. In the past, this type of fraud was not very common. Today, it is a big business for criminals. Plastic cards bring new convenience to your shopping and banking, but they can turn into nightmares in the wrong hands. This pamphlet describes credit and debit cards and some common schemes involving card fraud with tips to help you avoid them The following are the types of frauds
1. Stolen Cards at the Office 2. Extra Copies of Charge Slips 3. Discarded Charge Slips 4. Unsigned Credit Cards 5. Loss of Multiple Cards 6. Strange Requests for Your PIN Numbers 7. Legitimate Cards 8. Altered Cards 9. Counterfeit Cards
46
Ch.6 Advantages & Disadvantage Advantages Plastic money, unlike paper money, will not burn easily and can resist higher temperatures than paper money. You have no fear to be theft. And its easy to use. Plastic money, unlike paper money, will not burn easily and can resist higher temperatures than paper money. Paper money also picks up dirt and stains more easily than plastic money. Plastic money is the debit and credit cards. Plus point of plastic money is that you won't have to carry your cash around all the time. It also doesn't wear after time as paper does nor does it rip and tear. Give you incentives, such as reward points, that you can redeem. Be more convenient to carry than cash. Provide a convenient payment method for purchases made on the Internet 47
and over the telephone. Help you establish a good credit history. Disadvantage
Cost much more than other forms of credit, such as a line of credit or a Personal loan, if you don't pay on time. Damage your credit rating if your payments are late; Allow you to build up more debt than you can handle; Have complicated and conditions; It also doesn't wear after time as paper does nor does it rip and tear. Paper money also picks up dirt and stains more easily than plastic money. I can't really see any advantages to have paper money, unless it is
cheaper to make. Its disadvantage is that, some extra money will be deducted for the bank services. 48
It’s around 2.5% of the money you spent.
Ch.7 TECHNOLOGY AND INFRASTRUCTURE
One of the most important features that Plastic Money offers is the technology associated with this business. Credit card businesses rely on very reliable and secure technology and
demands very Strong connectivity backbone. Although a third world country, with lot of insecurities and almost no infrastructure, Pakistan has no exception when it comes to credit card business. There is approximately 3000 Point of Sale Terminals (POST) present
on merchant's sites connected with bank host system. Inter-city connectivity is accomplished through X.25 networks. Perhaps, it is the most important time in the history of Pakistan as the parameters of its Infrastructures are coming into existence.
49
There is an immense need of reliable wide area connectivity and this market is so huge and lucrative that it can accommodate many more industry giant
Ch.8 CASE STUDY
What Happens in Credit Card Fraud Cases?
The Basics
A variety of crimes constitute credit card fraud. The term can describe a person using a stolen credit card to purchase goods or services posing as the person named on the card. It can also describe illegally and fraudulently withdrawing funds from an that is not yours. Identity theft, which is the act of posing as an individual to make purchases, is often classified together with credit card fraud. A victim of credit card fraud can sometimes see bank s emptied of all their funds or negative marks going on her credit report for things she had nothing to do with. Many banks will monitor transactions made with a credit card and alert the person named on the of any potentially suspicious activity. This is to protect the bank or Credit Card Company just as much as it is to protect the customer.
50
Investigation Exactly what happens during a credit card fraud case depends a great deal on the actions of the Credit Card Company or bank involved. If fraudulent transactions are proven to have been made on a person's but the amount of the transactions is lower than the cost of an investigation the company can credit the money back to a person and then close the to protect from further harm.00000000000000000000000000 If the amounts of fraudulent charges are so great that an investigation is warranted, the police will be notified. The credit card company can look at a list of the fraudulent charges and determine where they were made. At that point an officer can question witnesses and review security camera footage in an attempt to identify suspects. If a suspect is arrested he can be tried in a court of law.
Felony
Credit card fraud is considered a felony by the courts of the United States. As a result a person convicted of credit card fraud could face jail time (the exact amount of which depends on the extent of the crime). A felony conviction stays on a person's record and can prevent the person from getting hired for a job. Having a felony on a criminal record will also take away a person's eligibility in of running for public office. If a person who is not a natural- born citizen of the United States commits credit card
51
fraud and is convicted of a felony the result could be being deported to their country of origin.
Ch.9 CONCLUSION
21ST Century banking has become wholly customer-driven & technology driven by challenges of competition, rising customer expectations & shrinking margins, banks have been using technology to reduce cost & enhance efficiency, productivity & customer convenienence. Technology intensive delivery channels like net banking, mobile banking, etc have created a win-win situation by extending great convenienence. & multiple options for customer. From educating customers about credit cards there is a need to educate them about the differentiating factors of the cards. Because visa and master card are advertising regularly and thereby increases awareness. The strategy should be to emphasize on its differentiating characteristics. They also need to identify potential customers and target those using mailers. As internet is growing at a fast rate the net s can be targeted by having interactive sites. The prospective company’s card personality could
52
also be used in the home page to solve customer queries in the ‘Best Possible Manner’.
Ch.10 BIBLIOGRAPHY BOOKS INOVATION IN BANKING & INSURANCE FINANCIAL MARKET & SERVICES INDIAN BANKING INDUSTRIES INDIAN BANKING TIMES OF INDIA NEWS PAPER (1st OCT 2010)
WEBSITE WWW.GOOGLESERCH.COM WWW.YAHOO.COM WWW.RBI.ORG
WWW.WIKIPEDIA .COM WWW.INFOSEE.COM
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WWW.INDIANMBA.COM
WWW.INDINBANKING.ORG
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