XPXPXPINSTITUTE OF MANAGEMENT STUDIES

CREDIT CARD

SUBMITTED TO:Miss Deepika Batra

SUBMITTED BY:Jaishree Asnani(55548)Manish Verma(55562)Nidhi Nema(55570)Sanyukta Agrawal(55606)

XPXPXPCredit Card

What is a credit card?

Pre-approved credit which can be used for the purchase of goods and services now and payment of them later

A credit cards credit limit varies based upon an individual’s perceived creditworthiness

Credit limit is the maximum amount

loaned

Creditworthiness is an individuals ability and willingness

to pay the money back

XPXPXPCredit Card Credit cards charge interest and are primarily used for short-term financing.

Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual's credit rating.

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 creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

Holders of a valid credit card have the authorization to purchase goods and services up to a predetermined amount, called a credit limit.

The vendor receives essential credit card information from the cardholder, the bank issuing the card actually reimburses the vendor, and eventually the cardholder repays the bank through regular monthly payments.

If the entire balance is not paid in full, the credit card issuer can legally charge interest fees on the unpaid portion.

XPXPXPCREDIT CARD ISSUER

A credit card issuer is a bank or credit union that offers credit cards.

The credit card issuer makes the credit limit available to cardholders and is responsible for sending payments to merchants for purchases made with credit cards from that bank.

Also called member banks. Chase and Citi are examples of credit card issuers.

Credit card issuers can't issue credit cards all by themselves, they need the help of payment processing networks like Visa and MasterCard (a credit card association).

However, American Express and Discover act as both the credit card issuers and the payment processing network.

XPXPXPCREDIT CARD AGREEMENT

• A Credit Card Agreement is a contract between a credit card issuer and the cardholder. The credit card agreement spells out the terms, conditions, pricing, and penalties of the credit card.

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• The annual percentage rate for each type of balance that can be carried – purchases, balance transfers, and cash advances.

• Finance charge information including the minimum finance charge and the finance charge calculation method.

• Grace Period.• Credit Card Fees.• Credit Limit and information about how your credit card issuer can change it .• Details about using your credit card in another country.• Options for paying your credit card balance.• How your information is shared or kept private. • Changes the credit card issuer can make to your account.• What constitutes default and what happens if you default.• How to handle a lost credit card.• How to close your account.• How to handle disputes with the credit card issuer .• The legal body who enforces the credit card agreement.

The credit card agreement will list:

XPXPXPEligibility For Getting The Card

• Person should have a savings/current account in the bank.

• His assets and liabilities on a particular date are reported to bank.

• A statement of annual or monthly income.• He is considered credit worthy up to certain limit

depending upon his income, assets and expenditure.

XPXPXPHow a Credit Card Issuers Makes

Money• Credit card issuers (most often a bank or credit union) receive revenue

from fees paid by stores that accept their cards and by consumers that use the cards, and from interest charged consumers on unpaid balances.

Credit Card Companies make money in a number of ways like : Fees (annual fee, over limit, past due, etc) Interest on the revolving loan if a credit card balance is not paid in

full each month. The card Issuer [the bank that issued the card and/or the issuer

network ie: Visa, MS, American Express, JCB etc] makes a percentage of each item you purchase from the merchant who accepts your credit card. These rates range from 1% to 4% of each purchase.

Last, the cardholder can make additional money through other means, such as selling your name to a mailing list or sending advertisements in your monthly bill. (Due to regulation, this is becoming less frequent)

XPXPXPTypes of Credit Cards

Standard Credit Card Premium Credit Cards Charge Cards Limited Purpose Card Secured Credit Cards Prepaid Credit Cards Business Credit Cards Reward Credit Cards Student Credit Cards Travel and Entertainment Credit Cards Zero Percent Interest Credit Cards

XPXPXPTypes of Credit Cards

Standard Credit CardsThe most common type of credit card allows you to have a revolving balance up to a certain credit limit. Credit is used up when you make a purchase and made available again once you've made a payment. A finance charge is applied to outstanding balances at the end of each month. Credit cards have a minimum payment that must be paid by a certain due date to avoid late-payment penalties.

Standard credit cards are also called "plain-vanilla" credit cards because they offer no frills or rewards. They're also uncomplicated and relatively easy to understand.

Since each person's financial needs are different, it makes sense that there are different types of credit cards. Before you apply for a credit card, become familiar with the various kinds of credit cards to make sure you're choosing the best credit card for you.

XPXPXPTypes of Credit CardsPremium Credit Cards•These cards offer incentives and benefits beyond that of a regular credit card. Examples of premium credit cards are Gold and Platinum cards that offer cash back, reward points, travel upgrades, and other rewards to cardholders. Premium cards can have higher fees and usually have minimum income and credit score requirements.

Charge Cards•Charge cards do not have a preset spending limit and balances must be paid in full at the end of each month. Charge cards typically do not have a finance charge or minimum payment since the balance is to be paid in full. Late payments are subject to a fee, charge restrictions, or card cancellation depending on your card agreement.

Limited Purpose Card•Limited purpose credit cards can only be used at specific locations. Limited purpose cards are used like credit cards with a minimum payment and finance charge. Store credit cards and gas credit cards are examples of limited purpose credit cards.

XPXPXPTypes of Credit Cards

Secured Credit Cards•Secured credit cards are an option for those without a credit history or those with blemished credit. Secured cards require a security deposit to be placed on the card. The credit limit on a secured credit card is equal typically at least the deposit made on the card, but it could be more in some cases. You're still expected to make monthly payments on your secured credit card balance.

Prepaid Cards•Prepaid cards require the cardholder to load money onto the card before the card can be used. Purchases are withdrawn from the card's balance. The spending limit does not renew until more money is loaded onto the card. Prepaid cards do not have finance charges or minimum payments since the balance is withdrawn from the deposit. These cards are not actually credit cards and they don't directly help you rebuild your credit score. Prepaid cards are similar to debit cards, but are not tied to a checking account.

XPXPXPTypes of Credit Cards

Business Credit Cards•Business credit cards are designed specifically for business use. They provide business owners with an easy method of keeping business and personal transactions separate. There are standard business credit and charge cards available.

Rewards Credit Card•Rewards credit cards give you a bonus based on your card usage. Choosing the right rewards credit card means picking one that gives rewards you can use. With a good rewards card, you can out earn any costs, e.g. annual fee, without too much hassle.

Balance Transfer Credit Cards•Balance transfer credit cards are good for combining several credit card balances or for taking advantage of a lower interest rate. Not only should you consider the introductory balance transfer interest rate, but also how long the rate lasts and the rate that applies once the promotional rate expires.

XPXPXPTypes of Credit Cards

Student Credit Cards• Student credit cards

are designed for college-aged consumers who are just starting out with credit. These cards typically give credit to college students who lack a credit history. Not every credit card with "student" in the title is actually good for students. So, if you're on the market for one of these cards, make sure you pay attention to the credit card terms.

Travel and Entertainment Credit Cards• A credit card that can

be used to cover travelling expenses and for your enjoyment/entertainment. An example of a T&E card is "Diners Club." It can only be used at certain restraunts which would constitute "entertainment.“

Zero Percent Interest Credit Cards• As the name indicates,

zero percent credit cards do not require the credit card owner to make any kind of interest on their shopping. You could utilize your credit card and also purchase anything you desire and pay only the monthly minimum requirement.

XPXPXP CLASSIFICATION OF CREDIT CARDS

Based on mode of credit recovery

Based on status of

credit card

Based on geographical

validity

Based on franchise/

Tie-up

Based on issuer

Category

Charge Card

Revolving credit card

Standard Card

Domesticcard

Internation-al Card

Individ-ual Cards

Corpor-ate Cards

Proprie-tary card

Business Card Gold Card

Master Card

VISACard

Domestic Tie-up Card

XPXPXPBased on mode of credit recovery

• Charge Card- A card that charges no interest but requires the user to pay his/her balance in full upon receipt of the statement, usually on a monthly basis. While it is similar to a credit card, the major benefit offered by a charge card is that it has much higher, often unlimited, spending limits.

• Revolving credit card- A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customer's current cash flow needs

XPXPXPBased on status of credit card

• Standard Card- It is a generally issued credit card

• Business Card- (Executive cards ) It is issued to small partnership firms, solicitors, tax- consultants , for use by executives on their business trips.

• Gold Card- A credit card issued by credit-card companies to favoured clients, entitling them to high unsecured overdrafts, some insurance cover, etc

XPXPXPBased on geographical validity

• Domestic card- Cards that are valid only in India and Nepal are called domestic cards.

• International Card- Credit Cards that are valid internationally are called international cards.

XPXPXPBased on franchise/ Tie-up

• Proprietary Card- A bank issues such cards under its own brands. Eg. SBI card Cancard of canara bank.

• Master Card- This card is issued under the umbrella of “MasterCard International”

• VISA Card – It is issued by any bank having tie up with “VISA international”

• Domestic Tie-up Card- It is issued by any bank having tie up with domestic credit card brands such as CanCard and IndCard.

XPXPXPBased on issuer Category

• Individual Cards- Non-corporate cards that are issued to individuals

• Corporate Cards- Issued to corporate and business firms.

XPXPXPInnovative Cards

• ATM Cards cum Debit Cards- Debits designated saving bank a/c.

• Private label Card- Issued by retailers and can be used only in that retailer’s store.

• Affinity Group Cards- It can be used by collection of people with some form of common interest or relation (professional, alumni, retired persons org. )

XPXPXPSafety Tips

Sign card with signature Do not leave cards lying around Close unused accounts in writing and by phone, then cut up

the card Do not give out account number unless making purchases Keep a list of all cards, account numbers, and phone numbers

separate from cards Report lost or stolen cards promptly

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Thank You

By:- Manish Verma