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THE IMPACT OF CREDIT CARDS ON HDFC BANK

CUSTOMERS IN SHIMOGA AN EVALUATIVE STUDY
V. Vimala
Assistant Professor, Department of Commerce, Avinashilingam Institute for Home Science
and Higher Education for Women, Coimbatore, Tamil Nadu, India
Email: [email protected]

ABSTRACT
The research paper provides a platform to understand the evaluation and
the impact of credit card on the selected HDFC Bank customers of Shimoga
District; it also studies the awareness level, usage of new innovative services
and its beneficial impact on the financial System. It highlights the current
weakness of the existing cardholders in the area selected for the study. The
study focuses on the credit card holders of HDFC Banks, with the help of a
structured schedule for the general public and personal interviews with the
customers the in Shimoga District, Karnataka state, India. It concentrates
on the new emerging challenges in infrastructural development and its
opportunities, issues and policies in Credit card services and upgrade
technical know-how in the Banking Sector with special reference to HDFC
Banks to provide maximum benefits to the Bank customers.

Keywords: Credit Card, Plastic Money, Banking services and Technology,

HDFC Bank and Customers
INTRODUCTION
Credit cards are fundamentally different from the other payment methods in that they involve
extending credit rather than drawing on an existing store of funds. Banks in conjunction with
credit card associations such as Visa and Master card, issue general-purpose credit cards.
Department stores also issues credit card to be used for purchases at that particular store.
Like Electronic Fund Transfer, payment by credit card is not anonymous. Since paying with
a credit card does not involve a store of funds, deposit insurance and reserve requirements
are not directly relevant. The bank that issues the card is liable and thus merchants are paid if
the cardholders default. If the issuing bank fails, the credit card association guarantees
payment to merchants with outstanding transactions and then has a creditors claim on failed
banks.
A credit card is part of a system of payments named after the small plastic card issued to
users of the system. The issuer of the card 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. A credit card is different from a charge card, where a charge card requires the
balance to be paid in full each month. In contrast, credit cards allow the consumers to
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'revolve' their balance, at the cost of having interest charged. Most credit cards are issued by
local banks or credit unions, and are the same shape and size as specified by the ISO 7810
standard. The length of this article or section may adversely affect readability.
LITERATURE REVIEW
The literature in the area of Credit Cards is enormous and the studies vary from simple case
studies to different state studies/cross-country studies to sector-wise comparison studies.
Since it is difficult to review all the works carried out in the area of Plastic Money, this
review is limited to only those studies which are relevant to the objectives of the present
study. With this background, review of a few important works is made in the following
paragraphs with an important objective to identify the research gap that exists at present.
Manas Ratha1 (1997), in his research work The Credit Card Model studied usage of credit
cards and its conceptualization of credit card system. He discussed the system and stock
flows in the credit card which helps to identify the important variable in the system such as
balance payable, credit card purchase, interest charges and other payments. James2 (2008), in
his article Growth of Plastic Money: Prospects and Problem had discussed economic and
business prospects and problems involved in the plastic money market. In his work, it clearly
studied the basic terms, plastic money, electronic payment and credit cards. The study also
focused on plastic money penetration in India, reasons for growth and strong future for
plastic money. Subramanian Ravi and Shiva Kumar3 (2010) in their work Its Your
Number.. Its Your Life! have been analysed plastic cards (both credit and debit cards)
which posed universal presence and acceptance are being used for a variety of general
purchases including for cash withdrawals. Russell G Smith 4 (1997), in his paper Plastic Card
Fraud had analysed the plastic card industry criminals, plastic card frauds, or crimes of
deception committed through the use of credit card, debit cards and stored value cards.
Benito Arrunada5 (2005) in his paper Price Regulation of Plastic Money: A Critical
Assessment of Spanish Rules had analysed the extent of cardholders fee, mandate payment
systems to include only two costs when setting their domestic multilateral interchanges fee
(MIFs): a fixed processing cost and a variable cost for the risk of fraud, the pricing scheme
arising from the decisions will cause unbundling and under provision of those services
whose cost are excluded. Ramalingam6 (2009) in his paper Usage Pattern of Credit Card
Holders had analysed the purpose and use of credit card, behavioural changes of credit card
holder and the consumption pattern of the card holders. Dangwal, Kailash Sakalani and
Swati Anand7 (2010) in their article E-Banking had analysed the banking technology which
was become the engine for triggering rapid change. In their work they discussed the current
IT tools applicabilities in the banking such as Electronic Clearing and Settlement System,
MICR/OCR Clearing System, Credit Clearing System, Debit clearing system, RTGS, SFMS,
SWIFT, Plastic Money (Debit cards, Credit Cards, Smart Cards, Contactless Smart Cards),
E-Commerce, remote banking services, ATM, e-cheque, Mobile Phone Banking, Biometric
ATM for rural India and others. The article discussed era, where most of bank business is
carried out with the help of electronic gadgets.
Kulwant Singh Pathania and Mamta Sharma8 (2010) in their paper Adoption of Banking
Technologies had analysed the adoption rate of the banking technologies and identifies the
operational problems in the use of modern technologies and suggested the measures for
improvement in the use of technologies. Lalit Mohan and Kathuria Singhania9 (2010) in the
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article Investor Knowledge and Investment Practices of Private Sector Bank Employes had
analysed the level of knowledge regarding various investment avenues and present
investment practices of employee of private sector bank. The Study revealed that a large
majority of the respondents in the Ludhiana city had invested in secured investment like
employee provident fund, public provident fund and post office saving schemes and even,
the bank employees considered as an investment tool rather than risk coverage instrument.
Amrinder Kaur10 (2010) in his research article Customer Satisfaction Perspective in Public
Sector Banks: Post Privatisation Scenario has described the metamorphous change in the last
couple of decades after onset of reforms in the financial sector. Here the author endeavors to
appraise the customer satisfaction scenario in the public sector banks in relation to foreign
banks. Kalyan Ram Addanki11 (2009) in his article Customer Rentention in the Banking
Sector had analysed the customer behavior and services provided by the banks behavioral
pattern of a new customer and challenges faced by the banking sector to retention the
customers. Uppal and Rimpi Kaur12 (2008) in their article Customer Services in Banks: An
Empirical Study had analysed the emerging competitive environment and IT era in the
Indian Banking Sector. The Study focused on the liberalization, privatization and
globalization which have been completely changed the customer relationship management in
banks.
RESEARCH METHODOLOGY
This present study has considered both the secondary data and primary data. The primary
data was collected by conducting the survey and personnel interviews with the bank
customers of HDFC Bank in selected area the purpose of survey the structured
questionnaires were used. In this view an attempt was made to measure the extent of
deployment of banking services and impact of credit cards on the customers, particularly in
Shimoga district. The secondary data have been mainly drawn from various magazines,
journals, newspapers, articles, textbooks; reports on Reserve Bank of India and the data
available on web sites. The research study has focused on credit cards and its services in the
Shimoga District. It covers the overview of the Credit card users in the Karnataka, the impact
of its services on HDFC Bank customers and performance of Credit cards, awareness and
usage of the plastic money. (January 2013 May 2013).Collected data had been analyzed
with the help of suitable statistical tools and techniques. The percentages, Frequency
distribution tables and other necessary techniques like t-test were applied for the analysis.
The sample consists of 100 respondents was selected among public in the Coimbatore
District randomly selected on the basis of their income level. The study was carried out
during January 2013 May 2013.
OBJECTIVES OF THE STUDY
The objectives of the study are as follows 1. To study the banking services of HDFC Bank in the Shimoga District;
2. To know the Credit card impact on HDFC Bank customers of Shimoga District;
3. To understand the marketing and promotional strategies of credit cards;
4. To analyze the effectiveness of credit card services; and

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5. To suggest measures to offer good quality of credits cards and the services to the
customers.
HYPOTHESIS OF THE STUDY
Ha0: Credit card services have strong impact on the HDFC Bank customers in Shimoga;
Ha1: Credit card service has strong impact on the HDFC Bank customers in Shimoga;
Hb0: Services of HDFC Bank has significance impact on the customers;
Hb1: Services of HDFC Bank has no significance impact on the customers;
RESULTS, ANALYSIS AND INTERPRETATION OF DATA
This section analyses the network system of banking activities and issues of the credit card
transactions and the impact on customers, particularly in, Shimoga district for various
services and facilities provided by HDFC Bank to their customers (respondents).
Table 1. Socio-Economic Profile of HDFC Bank Customers in Shimoga District
Category
Respondents
Gender
Male
65
Female
35
Total
100
Age Group
Below 18 years
24
18 to 30 years
55
31 to 50 years
17
51 and above age
04
Total
100
Occupation
Student
40
Private Sector Bank
22
Business man
16
Government employees 14
Others
08
Total
100
Income per Annum (in Rs)
Above Rs. 2,00,000
04
1,50,001 to 2,00,000
09
1,00,001 to 1,50,000
10
50,001 to 1,00,000
16
40,001 to Rs. 50,000
21
Below 40,000
40
Total
100

Percentages
65%
35%
100%
24%
55%
17%
04%
100%
40%
22%
16%
14%
08%
100%
04%
09%
10%
16%
21%
40%
100%

Source: Survey data, January May, 2013.

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Only 65% of sample are men effectively using the service of HDFC Bank in the Shimoga,
District and are having daily dealings in various aspects;

Majority (79%) of customers are young (18 to 30), senior citizens / customers are
very few (4%);

From the above table, it is evident that the 40% of the respondents are students who
are playing major role in the utilization of the HDFC Bank services in and around
the Shimoga district

Most of the customers (40%) are from low level income (LLI) (below Rs 4,000),
47% belongs to middle and only 13% of the (HLI) High level income group uses the
credit card services of HDFC Bank in Shimoga District.
Table 2. HDFC Bank Customers Satisfaction in holding the Credit cards

Particulars
Comfortable and Convenient
Limit of transaction
Period of Credit
Quality of Services
Interest Rate

Excellent
31
11
12
15

Very Good
71
54
74
74
67

Good
12
14
12
11

Average
03
01
02
07

Poor
29
-

Source: Survey data, January May, 2013.

Table 3. Awareness Credit card from the customers
Sl. No
01.
02.
03.
Total

Sources
Advertisements
Family members
Friends

No. of respondents
42
58
00
100

percentage
42%
58%
00%
100%

Source: Survey data, January May, 2013.

58% of the respondents are well aware of the credit cards from their own family members
and 42% from the advertisement.
Table 4. Role Media and Bankers to promote Credit card services to the customers
Sl. No
01.
02.
03.
Total

Media
Pamphlets and publicity Materials
News Paper
others

No. of respondents
34
55
11
100

percentage
34%
55%
11%
100%

Source: Survey data, January May, 2013.

55% of the respondents had an opinion that the news paper is a good media to promote credit
card services.
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TESTING OF THE HYPOTHESIS
Testing of Hypothesis I
Ha0: Credit card services have strong impact on the HDFC Bank customers in Shimoga;
Ha1: Credit card service has strong impact on the HDFC Bank customers in Shimoga;
Table 5. Paired Samples Statistics
Category
Plastic Money and Credit card Services of
HDFC Bank
HDFC Bank services difference between other
Banking Services
HDFC Banking services in Shimoga District
Credit Card Services and its impact on HDFC
Bank customers in the Shimoga District in the
Karnataka

Mean

Std.
Deviation

Std. Error
Mean

1.34

50

.479

.068

1.38

50

.490

.069

2.46

50

1.092

.154

1.84

50

.934

.132

Table 6. Paired Samples Test

Paired Differences

Mean

Std.
Std.
Devia- Error
tion
Mean

95%
Confidence
Interval of the
Difference
Lower Upper

1.960

1.577

0.223

1.512

1.180

0.661

0.093

1.060

0.620

1.040

0.699

Category

Plastic Money and

Credit card Services
of HDFC Bank
HDFC Bank services
difference between
other Banking
Services
HDFC Banking
services in Shimoga
District
Credit Card Services
and its impact on
HDFC Bank
customers in the
Shimoga District in
the Karnataka

Sig.
(2taile
d)

df

2.408

8.786

49 .000

0.368

0.008

9.927

49 .060

0.088

0.236

0.116

8.685

49 .497

0.099

1.159

0.239

9.405

49 .687

As Ha0 is two-sided in the above table, by applying the two-sided test for determining the
rejection regions at 5% level which come to as under, using SSPS package, and the t-value
are 8.786, 9.927, 8.685, and 9.405 respectively. Here table value is higher than the calculated
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value hence the result is rejected and it is true that Credit card service has strong impact on
the HDFC Bank customers in Shimoga.
Testing of Hypothesis II
Hb0: Services of HDFC Bank has significance impact on the customers;
Hb1: Services of HDFC Bank has no significance impact on the customers;
Table 7. Marketing and Promotional strategies for Credit Card Services by the HDFC Bank
Response
Yes
No

Frequency
40
60

Proportions
(
(

0.40
0.60

cal = 20 > Z0.05 , and Z0.01, i.e., 1.96 and 2.56 respectively
Hence H0 is rejected and we can conclude that the marketing and promotional strategy for
credit card services by HDFC Bank has no significance impact on the customers. It is just of
a peripheral component in a Banking services and hence most of the times the Banking
sector are doesnt follow the systematic promotional strategies.

Table 8. One-Sample t - Test

Test Value = 0
Hypothesis
tested for
Sig.
goodness
t(Cal)
df
(2of their fit
tailed)
Ha0
Ha1
Hb0
Hb1

18.14
27.26
18.97
16.25

49.00
49.00
49.00
49.00

0.00
0.00
0.00
0.00

Mean
Difference
1.66
2.32
1.29
1.54

99%
Confidence
Interval
Lower Upper
1.33
1.81
1.87
2.38
1.16
1.46
1.19
1.89

95%
Confidence
Interval
Lower Upper
1.36
1.75
1.94
2.26
1.16
1.45
1.33
1.73

All these factors when tested for goodness of their fit are seen that the calculated Students t
value is much higher than the acceptable value both at 5% and 1% percent level of
significance. Hence, the null hypothesis for Hb1 are rejected and we could conclude that the
Credit Card services and its Impact on the Bank customers has strong ly affect the customers
in the selected ares when intending to create a favorable and acceptable facilities and
services will have to focus on considering the ethical varsities prevailing in the providing
best banking technology and services, so that they would not deter the value system banking
services and credit cards usages in the Shimoga district.
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RESULTS
The major findings of the study are as follows

HDFC Bank provide the best timely quality services at the reasonable cost to the
their customers in the Shimoga district;

Most of the customers are effectively using the credit cards and other banking
services;

Very less number of women and the senior citizens are utilizing the credit cards;

Only very few customers fall on High Level Income group (4%) ranging from Rs.
200,000 per annum;

40% of customers and approximately 52% of public customers belongs to private

sector banks, business man and government employees and 08% are others who use
the credit cards and other services effectively in the city;

65% of customers are men and senior citizens those are utilizing the credit cards and
banking services up to their level in the day to day activities for their lively hood;

58% of the customers are well aware about the credit cards services in the
Shivamogga District;

The Most effective media to promote the credit cards was News paper, its about 55%
in the city which created a strong impact on the HDFC Bank customers; and

Credit cards are quite safe to the people.

CONCLUSION
The study was conducted to understand effectiveness of the credit card services provided to
the Shimoga district HDFC Bank customers and its performance are evaluated. The study
understands the marketing and promotional strategies implemented by the HDFC Bank in
the selected areas. In a developing country like India, there is a great need for providing
better and efficient banking services to their customers. The role of credit card services and
its impact in the development of credit card services was analyzed. The banking products
and services is the key activities for the development of the Banking sectors. The study
contributes to increase the quality services and usefulness from the innovations of banking
products in India. The plastic money efficient services and credit card development in
Shimoga district contributes significantly to the banking development of the country.
LIMITATION OF THE STUDY

The study in limited only to Shimoga District, Karnataka state and credit card
holders of HDFC Bank and its services limited; and

It covers only 50 customers and focused only on the credit card holders.

SCOPE FOR FURTHER RESEARCH

Banking Technology products and services, problems and its developments in urban
areas

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Credit cards user among the rural customers in remote villages and its impact with
developmental strategies

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Manas Ratha (1997), The Credit Card Model, MIT System, Dynamics in Education
Project, June 16 1997, PP No. 01- 33, (MIT Massachusetts Institute of Technology).

2.

Jame J (2008), Growth of Plastic Money: Prospects and Problems, Management

Researcher, Vol XIV No. 04, April - June, 2008, PP No. 28 39.

3.

Subramaniam Ravi and Shiva Kumar (2010), Its Your Number. Its Your Life,
Treasury Management, March 2010, PP No. 41 44.

4.

Russell G Smith (1997), Plastic Card Fraud, Australian Institute of Criminology

Trends and Issues in Crime and Criminal Justice No. 71, July 1997, PP No. 01- 06.

5.

Benito Arrunada (2005), Price Regulation of Plastic Money: A Critical Assessment of

Spanish Rules, European Business Organisation Law Review, 2005, 6(4), PP No. 625650.

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Ramalingam P (2009), Usage Pattern of Credit Card Holders, Indian Journal of Finance,
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Dangwal RC, Kailash Sakalani and Swathi Anand (2010), E Banking, Professional
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Kulwant Singh Pathania and Mamta Sharma (2010), Investor Knowledge and
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Kathuria Singhania (2010) ,Investor Knowledge and Investment Practices of Private

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