A PROJECT REPORT

ON
PLASTIC MONEY

Submitted in partial fulfillment for the award degree

of
Master in Business Administration

Submitted to Submitted by
Mrs. Mini Labh Singh
(Lecturer) MBA PART-1

2009-11
Arya Institute of Engg. & Technology
Kukas, Jaipur
(Affiliated to RTU Kota approved by AICTE)
 PREFACE

A professional course like business administration demands depth theoretical

and practical exposure to its application.

The course aim to groom the student professionally and offer him/her a chance
to work in the environment of the corporate world. So as to have and opportunity to gain
experience on practical aspects and supplement his/her theoretical knowledge.

A project report is a necessary part of the fulfillment of the MBA degree course it
helps the student to gain knowledge about various aspects of interpreting practical
problem through application of concepts and techniques of management.

Throughout the program the content material has been presented in the form of
experiments to develop scientific observation and thereby leading to meaningful
conclusions.

While unfolding this program, gradually and logically in a simple language

emphasis have been made on conceptual understanding reasoning.
 ACKNOWLEDGEMENT

I wish to express my sincere gratitude to all those persons who extended their help,
guidance and suggestions without which it would not have been possible to complete
the project report.
I am deeply indebted to my guide Mrs. Mini For her valuable and enlightened
guidance and who encouraged me in compilation of my project.
I am really thankful to Mr. Rupesh Roshan Singh (HEAD OF DEPARTMENT, Arya
institute of engg. & technology), who has been the chief facilitator of this project and I
could enhance my knowledge in the field of Plastic Money.

Labh Singh
 CONTENTS:
 INTRODUCTION

 ORIGIN OF CREDIT CARD

 AGE OF PLASTIC MONEY

 CREDIT CARD AND ITS FUNCTIONS.

 ADVANTAGES OF HAVING A CREDIT CARD

 REASONS OF FEAR DURING ACCEPTANCE OF PLASTIC

MONEY

 TYPES OF CARDS

 THE NECESSITY OF CREDIT CARDS

 METHODOLOGY IN CREDIT CARDS BUSINESS

 RISKS IN THE BUSINESS

 PARTIES INVOLVED IN CREDIT CARD BUSINESS

 OVERVIEW OF VARIOUS CARD ISSUES

 EXAMPLE OF CITIBANK

 SUMMARY

 BIBLIOGRAPHY
ABOUT PLASTIC MONEY: -

Plastic money is also known as paper money. As the competitive workforce is gaining
its sophistication and effectiveness, this tool is helping a lot in this respect to develop
not only develop the persons thinking approach but also the purchasing ability which
results in improved people interest towards Investment and transactions which is
boosting the economy.
Actually credit card came in existence in an Indian economy in 1951, but one can’t
say it the emergence of it because the thing by the name credit card for the purchasing
purpose was in existence 3000 years before in Austria, Bebilone and Mexico. The paper
money concept was came in 17th century. The advertisements for the credit cards came
in the year 1730 by the efforts of Mr. Christopher Thorne tone. From 18 th to 20th century
the textile merchants had given the concept of weekly payment so these people were
called Teleman. In 1920 the concept of “Buy now pays later” in America was first time
introduced by any shopkeeper. In 1950 Dinners club and American express had
launched first time the charge cards but in 1951 only credit cards had launched so
called plastic money.
On this plastic money the magnetic tape came in 1970, which was the gift of
Information Technology.
OBJECTIVE: -
The main purpose to serve on this topic under the Dissertation is to discover the
accurate dimensions of the Plastic Money.
As every project has its own specific purpose, my project is to: -
1) Find out that how the credit card may help in the development of an economy like
ours a developing economy.
2) Find out what is required to do for a credit card market and to establish credit card as
a special security tool.
3) Find out the reasons of fear in the mind of the customers during the acceptance of
the credit cards.
4) To understand the toughness of the credit card market due to emerging competition.
5) To know the credit cards procedure, documentation and the growth of credit cards in
Indian context.
6) To know the credit cards division of the Banking Industry very closely.
METHODOLOGY USED: -

I have to trace out the role and competition of plastic money in the developing economy
and the reasons of fear in the mind of the customers during the acceptance of the credit
cards, so I will collect the fact of it from secondary sources of data collection. Secondary
sources that contribute the major from the Internet, Magazines, Journals and the Dailies
etc.
 INTRODUCTION

The concept of ‘Buy Now, Pay Later’ dates back the to late 1960s & 70s with the
introduction of plastic money in the western nations. It originated because the people
wanted a convenient and rapid means of accessing their bank accounts. Also, the
exorbitant price of money changing hands between the consumer, merchants and the
banks led to the diffusion of this concept in the banking system.

For spendthrifts and habitual borrowers plastic money induces spontaneous and on-the-
spur spending. But its advantages in terms of convenience, flexibility and safety far
outweigh its pitfalls. Provision for easy repayment gives the card the liquidity of cash
along with the accountability of credit card.

In the past 20 years these cards have proliferated the world market so successfully that
they have altered the face of retail banking. With the power of plastic ruling the world,
India cannot remain behind. With a slow and steady move towards scrip less trading the
country is moving towards cashless transactions.

The plastic money market is bubbling with activity with both Indian and foreign banks
vying to expand their market presence. While the foreign banks have been hogging the
limelight Indian banks are the slumbering giants. The latter have the advantage of a
large customer base, branch network along with low service charges. These
advantages need to be tapped to realize the full potential of these banks.
Plastic money gaining currency fast:

FINANCIAL cards witnessed a robust growth in India in 2004-05. The cards in

circulation increased by 50 per cent. The growth in transaction value, at 95 per cent,
was even more spectacular. These results are attributable to the thriving economy
which led to a large increase in disposable income for mid- and high-level income
groups in urban and metropolitan areas.

Consumers were not only more open to the possibility of owning a financial card, but
were also more willing to use their cards to settle dues. The status symbol aspect of
owning and using cards, too, played its part in bringing about such robust growth over
the space of a single year. Debit cards, in particular, proved immensely popular.
The number and transaction volumes of all types of financial cards grew substantially
between 2004 and 2005. But it was debit cards that played the pivotal role. Consumers
preferred debit cards because they were wary of winding up spending more than they
could afford.

Another contributing factor was the quiet but aggressive promotion campaign launched
by key `producers' in this sector. The growth of credit cards in number and transaction
volumes in India was low compared to other countries in the Asia-Pacific region. But
there is definitely room for further growth. Debit cards, too, have yet to realize their full
potential. Among the factors that limited growth was the comparatively slow rate of
growth of ATMs in India. This is not the way most Indians perceive this issue, but cross-
country statistics very definitely bear out the position as stated in the Executive
Summary of a $1400-report on `Financial Cards in India'.

It is, however, expected that this constraint to further growth will ease up in the near
future as the advent of ever-new technologies drives down the costs of opening and
operating terminals. In the meantime, the trend in India has been to greatly enhance the
networking of ATMs. Cards issued by one bank, are increasingly accepted by ATMs
owned and operated by other banks, on the payment of a small fee. This, incidentally, is
true of debit cards as well; not only of credit cards.

A large number of cardholders, however, remain unaware of this development. Debit

cards issued by, say, HSBC, can be used at all `Visa electron' enabled ATMs, including
those belonging to Citibank and HDFC bank. HSBC debit card drawls on HDFC Bank
terminals cost only Rs 55. If, on the other hand, you merely wish to check the balance in
your account, you can do so for a mere Rs 15. Credit cards are often used for `big
ticket' spending in India, like dining at 5 star hotels, and purchasing (often reimbursable)
air tickets. Industry sources believe that in future credit cards are also likely to be used
in a big way for the payment of school fees, and hospitalization expenses.

A projection for the 2003-2008 periods, the number of financial cards in circulation will
register a compounded annual growth rate of nearly 51 per cent. These estimate,
however, seems conservative, representing as it does only a 2 per cent increase over
the growth between 2002 and 2003. Debit cards are expected to continue to spearhead
the growth of financial cards in terms of the number of cards. Though, for a variety of
reasons, this may not be the case in terms of transaction volumes.
Plastic money is here, there & everywhere:

The age of plastic money seems to be here to stay. ‘Share of Wallet' study among
cardholders across the six cities of Delhi, Mumbai, Kolkata, Chennai, Bangalore and
Hyderabad reveals that card usage is highest for dining and shopping, while it is also
popular for travel-related expenses such as air tickets, hotels and car rentals.

The result of the Indian survey is in line with the other markets in the Asia Pacific region
that were surveyed. Cardholders in countries such as Singapore, New Zealand,
Thailand, Malaysia, Hong Kong and Australia spend 10-30 per cent more on the same
services.

While travel and entertainment-related expenses continue to be "big ticket" expenditure

items, Indian consumers are increasingly using the plastic alternative for everyday
spends such as petrol, hospitals, telephone services, home furnishing and good old
eating.

The survey indicates that consumers in the country are increasingly looking to use
credit cards to pay school dues for their kids. In fact, this has spurred American Express
to tie up with the Delhi Public group of schools to facilitate parents to pay by card. Right
now, India is at a low 11 per cent in comparison to other countries in the Asia-Pacific
region when it comes to using plastic money for recurring bills such as utilities,
subscriptions and insurance. In this category, Malaysia tops at 42 per cent, Taiwan at
31 per cent, both even higher than Hong Kong and Australia.

According to the wallet study, the frequency of card usage is expected to go up in the
forthcoming months. About 32 per cent of the consumers surveyed anticipate using the
card more frequently in the next six months, while 18 per cent said that they would add
more credit cards to their wallets.

Interestingly, 39 per cent consumers in Thailand also anticipated increased card spends
while about 19 per cent expected to acquire more credit cards in the next six months.

However, in the developed markets of Australia, Singapore, Hong Kong and New
Zealand, the number of credit cards are expected to remain the same, obviously due to
saturation.

But corporate cards continue to have good potential. According to the survey, there are
about 30,000 mid-market companies in India, with sales revenues from Rs 5 crore to Rs
500 crore incurring a total travel and entertainment expenditure is $2.7 billion. This
expense in India is expected to grow at the rate of 8 per cent and is estimated to exceed
$5 billion by year 2006. The use of corporate cards can bring savings up to 40 per cent
for the middle market companies through process savings and purchase savings.

The credit card market in India, according to American Express, is growing at 20-25 per
cent per annum. From the half-a-million cardholders in 1992, the population is at a
whopping nine million today. Also, the total billings on cards are estimated at over Rs
10,000 crore, growing at 20 per cent per annum.
 ORIGIN OF CREDIT CARDS

The credit card has its beginning in an embarrassing incident that took place in the early
1950’s in America. The story goes that Mr. McNamara; a New York businessman took
his friends out to dinner. The end of meal he discovered that he had forgotten his wallet
at home; the proprietor was kind enough to allow him a later settlement of bill. As
McNamara stepped out of the restaurant he had the brainwave for the introduction of
credit cards - system of availing instant credit upon confirming the identity of card
holder. Thus was born the Diners Club Cards, the pioneer of today’s multibillion dollar
plastic money business. Diners club adopted a promising approach by recruiting various
Hotels and restaurants to act as member establishment for accepting the cards. Not
only did these establishments pay a commission on member’s purchases but the
members also paid an annual subscription fee. Diners Club vetted its members for
credit worthiness and guaranteed payment to participating establishment. Thus was
born the first ‘Travel and Entertainment Card’. It was followed by American Express
which is now a dominant force in the Travel and Entertainment cards industry, and by
1959 by Carte Blanche, after many vicissitudes is now a part of Citi Bank Empire
Together With Diners Club. In the present time American Express leads the travel and
entertainment (T&E) card industry.The next great leap-forward came from Bank of
America, which in other banks. Such card holders could use their card 1966 offered to
license its successful blue, white and gold Bank America card to at any accepting
merchant establishments around the globe. Later in 1977 all the national and
international Bank America licenses were pulled together under the single name of Visa.

Not to be outdone, a rival group of American Banks came together in 1966 under the
name of Interbank, later renamed Master Charge and later still Master Card. Ever since
Master Card and Visa and their affiliates have carved the world credit card market.

In the 1980s credit card concept was launched in India through the Diners Club card,
and soon, within a couple of months both Visa and Master card entered into the Indian
market.
 AGE OF PLASTIC MONEY

Banking has evolved a long way from the days of the medieval moneylenders counting
coins on the bench to the present scenario, where it is hard to trace the trail of money
from the beginning to the end.

The trail starts right from the small saver leaving a few rupees in his local bank to the
billions of rupee loans raised by a syndicate banks and financial institutions, capable of
financing projects in any country in the world. Still, these banking majors are heavily
dependent upon their retail home base of savers and borrowers. Most of the bankers
began focusing on this retail market segment as global competition intensified in late
seventies and early eighties.

Credit cards, one of the banking products that cater to the needs of retail segment has
seen its number grow in geometric progression in recent years. This growth has been
strongly supported by the development in the field of technology, without which this
could not have been possible.

The history of phenomenal growth in the credit card segment traces way back to in
1950, the time when ‘Diners Club’ was established. The card provided select members
with credit at 22 restaurants in New York and collected a commission for paying the bills
promptly. The credit card industry got a further boost with the arrival of American
Express in the arena in 1958. American Express began selling their card as a prestige
to hotels, restaurants, shops or airlines in America and slowly expanded the network
across the world.

The success of these two players attracted many other banks to join the credit card
business. The entire breed of new players saw a fresh opportunity of granting
unsecured loans at high interest rates to those credit cardholders who did not pay their
bills on time. These banks were not so concerned with collecting commissions from
shops but were thriving on high interest income from those who did not pay their bills on
time.

Starting from ‘Diners Club’, some 50 years ago, the card industry has been growing with
a rapid pace world over and so has been the growth in the domestic card industry. With
only two players in domestic card industry, HSBC and Citibank in the early 80s, the
number swelled to over 25 in the year 2001. Credit cards in India, made their debut in
1981, and are on the verge of an unprecedented boom. Between 1987 and 2001, the
market has virtually grown to over 4 million cards with over 25-30% of compounded
annual growth in new cardholder’s base.

Its not that only the card numbers have increased, but even the types of cards on offer
have seen a surge. Today the domestic card industry is flooded with different types of
cards ranging from gold, silver, global, co-branded credit cards, smart to secure,.the list
is endless. Foreign banks have shouldered the major responsibility of increasing the
card base and adding value-added services to the card products in the past. This is also
evident from the fact that the market share of these foreign banks is estimated to be
well over 70%. But the scenario has changed dramatically in the last of couple of years
with the entry of State Bank of India (SBI), a domestic major in the banking sector. More
and more nationalized banks and private sector banks like ICICI and HDFC Bank are
aggressively launching credit card with value added features.
There is immense growth potential in the domestic card industry. A glance at the Indian
population reveals that India’s middle/upper middle class (target segment) represents a
population of over 10 m. There are only 2 to 3 m cardholders, each possessing an
average of 2 cards. This is a very low figure given India’s huge middle to upper class
population. There is no doubt that the domestic card industry has to yet to mature and
offers significant long-term growth potential.

Given the lack of maturity of the domestic card industry, its growth will depend upon
building core retail business, with more sophisticated products. In the expansion of
domestic credit card market, the existing foreign players, SBI, other nationalized banks
and the new domestic private sector banks are expected to play important role with
complementary strategies.

Foreign banks with the advantage of technology and industry experience are expected
to concentrate on increasing card spending and customer loyalty in the major cities.
SBI, on the other hand is expected to capitalize its superior distribution network to
expand card acceptance in the smaller towns. The new private sector banks would have
the opportunity to capture significant market share by combining the strengths of foreign
banks and nationalized bank like SBI.

Although at present the card market is mainly limited to India’s relatively bigger cities
and tourist locations only, there is also a potential in smaller cities. Domestic banks,
owing to their vast network and reach to smaller cities, can easily tap this potential.
They would be better off, penetrating into smaller cities and bringing credit card to the
masses rather than cannibalizing other foreign banks’ existing cardholder base.

The efforts of these banks to increase the card base is going to be wholeheartedly
supported by the residents of these smaller cities with their higher disposable income,
changing lifestyle, increasing travel and the growth in the entertainment sector.
The age of plastic money seems to be here to stay. A recent American Express `Share
of Wallet' study among cardholders across the six cities of Delhi, Mumbai, Kolkata,
Chennai, Bangalore and Hyderabad reveals that card usage is highest for dining and
shopping, while it is also popular for travel-related expenses such as air tickets, hotels
and car rentals.

The result of the Indian survey is in line with the other markets in the Asia Pacific region
that were surveyed. Cardholders in countries such as Singapore, New Zealand,
Thailand, Malaysia, Hong Kong and Australia spend 10-30 per cent more on the same
services.
While travel and entertainment-related expenses continue to be "big ticket" expenditure
items, Indian consumers are increasingly using the plastic alternative for everyday
spends such as petrol, hospitals, telephone services, home furnishing and good old
eating.

The survey indicates that consumers in the country are increasingly looking to use
credit cards to pay school dues for their kids. In fact, this has spurred American Express
to tie up with the Delhi Public group of schools to facilitate parents to pay by card. Right
now, India is at a low 11 per cent in comparison to other countries in the Asia-Pacific
region when it comes to using plastic money for recurring bills such as utilities,
subscriptions and insurance. In this category, Malaysia tops at 42 per cent, Taiwan at
31 per cent, both even higher than Hong Kong and Australia.
According to the wallet study, the frequency of card usage is expected to go up in the
forthcoming months. About 32 per cent of the consumers surveyed anticipate using the
card more frequently in the next six months, while 18 per cent said that they would add
more credit cards to their wallets.

Interestingly, 39 per cent consumers in Thailand also anticipated increased card spends
while about 19 per cent expected to acquire more credit cards in the next six months.
However, in the developed markets of Australia, Singapore, Hong Kong and New
Zealand, the number of credit cards are expected to remain the same, obviously due to
saturation.

But corporate cards continue to have good potential. According to American Express,
there are about 30,000 mid-market companies in India, with sales revenues from Rs 5
crore to Rs 500 crore incurring a total travel and entertainment expenditure is $2.7
billion. This expense in India is expected to grow at the rate of 8 per cent and is
estimated to exceed $5 billion by year 2006. The use of corporate cards can bring
savings up to 40 per cent for the middle market companies through process savings
and purchase savings.

The credit card market in India, according to American Express, is growing at 20-25 per
cent per annum. From the half-a-million cardholders in 1992, the population is at a
whopping nine million today. Also, the total billings on cards are estimated at over Rs
10,000 crore, growing at 20 per cent per annum.

Australia began printing plastic notes in 1988. Since then Securency has spread its
ambit to 23 countries—Bangladesh to Vietnam, Nepal to Mexico, and now Singapore.
‘‘A 24th country has just signed on,’’ said a Securency official, ‘‘but the name is
confidential.”

Securency prints its notes on a polymer substrate called Guardian, which it has
patented. ‘‘While polymer notes cost 1.5 to two times more than paper notes,’’ said
Curtis, ‘‘they are more durable and difficult to counterfeit. Against a counterfeit rate of 68
per million for notes in Europe and 100 per million in the US, Australia has only nine
counterfeit notes per million.’’

In India, where the velocity of money—the number of times it changes hands—is high, it
is longevity that is emphasised. Low-denomination paper currency, such as the Rs 10
note, usually survives six months. Securency’s experience with polymer suggests a life
of almost four years. As for higher denominations, Aus $50 notes issued in 1995 are still
going strong.

Securency first spoke to RBI in 1999. Sample Rs 10 and Rs 100 polymer notes were
produced but the idea was perhaps still too novel. About nine months ago, Securency
presented its case afresh, pointing out that polymer notes did not get dirty, tear or
crumple, were never rejected by teller machines—and were a huge cost saver.

The Australian firm quoted the example of Brazil’s 10 reais polymer notes, issued in
April 2000 and roughly analogous to India’s Rs 10 note. ‘‘There are 250 million 10 reais
polymer notes in circulation,’’ said a Securency official, ‘‘a Brazilian government study in
2003 calculated that in three years they had saved the central bank $17 million.’’ India
issues seven billion Rs 10 notes a year. Just do the calculation.
Securency’s tentative offer to India includes a joint venture ‘‘with an Indian entity of the
government’s choice’’ to produce the polymer substrate locally. Asked what sort of an
investment by Securency this would entail, Curtis was evasive. ‘‘May be between $25-
50 million.’’

On their part, Indian officials said: ‘‘the polymer technology is good but no final decision
has been taken. These things take time.’’
Delay would appear perfectly explicable. The banknote industry has conservatism and
secrecy written all over it. Change is unusual.

In the US—seen by some as ‘‘the final frontier for polymer notes’’—the dollar is printed
on special paper, 75 per cent cotton and 25 per cent linen, supplied to the Federal
Reserve by a family-run firm for the past 125 years.

Based in Dalton, Massachussetts, Crane and Company patented this paper in 1879. In
2003, it signed a four-year contract with the Treasury, agreeing to supply paper worth
$336 million. The company’s chairman, Lansing E Crane, is one of America’s wealthiest
men, even if few have heard of him.
For 50 years, free India printed its rupees on machines bought from De La Rue Giori,
run by the Swiss family Giori and till recently said to control 90 per cent of the banknote
printing business.
The Giori saga has an unfortunate Indian subtext. In December 1999, M Roberto Giori,
eldest of the Giori brothers and company chairman, was among those hijacked to
Kandahar. If the Taliban had figured out who this economy class passenger was, he
would have been the uber hostage.
Giori never recovered, insiders say. In 2001, he sold his business to Koenig & Bauer, a
German firm.

In the 1990s, India diversified. Turning away from De La Rue Giori, it bought machines
from Japan’s Komori for the RBI’s new presses. That decision was taken when
Manmohan Singh was finance minister. As PM, will he take the next leap to plastic? At
Securency, they’re betting their polymer on it.
 CREDIT CARD AND ITS FUNCTIONS.

For starter, a credit card is as good as bank behind it. A form of 'near money' these
cards are issued by commercial bank to people whose creditworthiness has been
ascertained. Instead of carrying unmanageable weds of cash, the card holder enjoy the
flexibility and safety of purchasing any thing from groceries, cosmetics, petrol to high
value items like refrigerators, television, and washing machines by using his credit card.
Banks ask for TDS certificate or income tax returns document before enrolling a
member.

Credit Card provides the card holder with authorized line of credit of some specified
amount. Such cards may be used for following purposes:-

Purchase of air, rail and road tickets for traveling

For the Settlement of hotel bills.

For Cash withdrawals.

For the Settlement of club bills.

For the Payment of purchase bills.

For the Payment of insurance premium.

Refilling the fuels in vehicles.

Payment of phone, water and electricity bills.

Payment of school/ education expenses.

 WHAT ARE CREDIT CARDS?

A Credit Card is referred to as 'plastic money'. Carrying a lot of cash on you can be
cumbersome, risky and sometimes, you run short of it, just when you most need it.
(Remember the SALE at your favorite ready-mades store?). A Credit card is the smart
solution to these problems. It is a convenient and safe alternative for cash.

Besides, it says things about you. Most people associate a credit card with a prestige,
which it most certainly bestows on you, but more importantly, it says that you have
taken the onus of being responsible - to be extended credit! So, when you get yourself a
card, remember that, because your bank does!

SALIENT FEATURES OF CREDIT CARDS

ANNUAL FEE

All credit card issuers charge an annual fee which is payable at the start of the year.
The start of the year, of course, is your membership year, and not the calendar year.
So, if you got yourself a card in March, you can expect to be billed the annual fee every
March until you cancel your card. As a privilege, this fee is sometimes waived the first
time. When the time comes for renewal of your card, you can even use the reward
points you have accumulated from using the credit card over the year to settle your
annual fee.

FORWARDING BALANCE (OR REVOLVING)

The most attractive feature of a credit card is that you need not pay off your dues in
whole. You can opt to pay 5% of the total amount on or before the due date, every
month, the rest is carried forward. But there's a price to pay for this extended credit -
interest! Normally, interest varies between 2.5% and 3% per month.
APR OR ANNUAL PERCENTAGE RATE
The interest rate that reflects the yearly cost of the interest the outstanding on your card
is called the annual percentage rate. This rate is charged to the card holder on the
amounts carried forward beyond the due date for the payment of balances. Most card
issuers will tell you their monthly rate of interest. It might sound low at 3%, but when you
look at the interest rate over the year, it turns out to be as high as 43%.

CASH ADVANCE
An important feature - lets you withdraw cash from designated ATMs using your credit
card. Use discretion when withdrawing cash on your credit card because the charges
for this facility are high, around 2.5% to 3% per transaction.

ADVANTAGES OF HAVING A CREDIT CARD

1. If you pay by credit card there is implicit guarantee of satisfaction because as a

customer one can stop payment.

2. If a airline ticket is booked on a credit card and especially if you are going overseas,
the travel insurance is covered, that could otherwise be a lot of money.

3. Free airfare mileage based on point system that can take you or your family to a
destination of your choice if you can accumulate points. This is quite easy as the
shopping can be done on credit card and the points are accumulated that can be
encased for gifts or travel.
4. The best part is that you can get statement of all expenses and you can keep a track
of your expenses at a glance.

5. It helps to establish a credit history and can help in getting loan if needed.

6. There are a number of innovative credit cards that help benefit the customer. There
are cards that help accumulating points towards reducing the cost of your new car.

7. On internet it is the preferred option and you can also participate in on line auctions if
you have good credit rating.

8. You can get cash advance anywhere at so many cash outlets.

9. Some cards have your picture on it that is as good as a identification paper .

REASONS OF FEAR DURING ACCEPTANCE OF PLASTIC

MONEY

1. There is a temptation to acquire more and more cards. Some have more than their
share of cards. They can loose track of payments and be in difficulty.

2. Some credit cards have conditions that may put you in difficulty if you have not read
the fine print.

3. Then there is a danger of someone can get hold of your credit card number and
misuse it.
4. There are a number of cases of double dipping done at your expense when paying at
an outlet by credit card.

5. Static’s are available that the domestic violence increases after the festive season in
the credit card user societies when the credit card bills arrive.

6. Using credit card exposes one to the possibility of some companies profiling and
lobbying you based on your spending pattern. Some governments also take interest in
the spending patterns of individuals and credit card statements make their job easier.
There are always dangers when money matters are involved but one has to live with the
necessary evil. The happy are those credit card users that pay up and take advantage
of the free credit days that the credit card companies provide.

So being a good creation and instrument of financial market it is risky too, so there
are several things to be kept in mind and people should take in using it.
SOME TERMINOLOGY USED IN CONCERN WITH CREDIT CARDS

Before we go any further, why not become familiar with the various terms and jargons
used by the credit card industry.

Credit Card – A credit card is a financial instrument, which can be used more than once
to borrow money or buy products and services on credit. Banks, retail stores and other
businesses generally issue these.

Credit limit – The maximum amount of charges a cardholder may apply to the account.
Annual fee – A bank charge for use of a credit card levied each year, which ranges
depending upon the type of card one possesses. Banks usually take an initial fixed
amount in the first year and then a lower amount as yearly renewal fees.

Revolving Line Of Credit - An agreement to lend a specific amount to a borrower and to

allow that amount to be borrowed again once it has been repaid. Most credit cards offer
revolving credit.

Personal Identification Number (PIN) - As a security measure, some cards require a

number to be punched into a keypad before a transaction can be completed. The
number can usually be changed by the cardholder.

Teaser Rate - Often called the introductory rate, it is the below-market interest rate
offered to entice customers to switch credit cards.

Joint Credit - Issued to a couple based on both of their assets, incomes and credit
reports. It generally results in a higher credit limit, but makes both parties responsible
for repaying the debt.
 TYPES OF CARDS

MasterCard – MasterCard is a product of MasterCard International and along

with VISA are distributed by financial institutions around the world. Cardholders borrow
money against a line of credit and pay it back with interest if the balance is carried over
from month to month. Its products are issued by 23,000 financial institutions in 220
countries and territories. In 1998, it had almost 700 million cards in circulation, whose
users spent $650 billion in more than 16.2 million locations.

VISA Card – VISA cards is a product of VISA USA and along with MasterCard is
distributed by financial institutions around the world. A VISA cardholder borrows money
against a credit line and repays the money with interest if the balance is carried over
from month to month in a revolving line of credit. Nearly 600 million cards carry one of
the VISA brands and more than 14 million locations accept VISA cards.

Affinity Cards - A card offered by two organizations, one a lending institution,

the other a non-financial group. Schools, non-profit groups, pro wrestlers, popular
singers and airlines are among those featured on affinity cards. Usually, use of the card
entitles holders to special discounts or deals from the non-financial group.

Standard Card– It is the most basic card (sans all frills) offered by issuers.

Classic Card– Brand name for the standard card issued by VISA.
Gold Card/Executive Card– A credit card that offers a higher line of
credit than a standard card. Income eligibility is also higher. In addition, issuers provide
extra perks or incentives to cardholders.

Platinum Card– A credit card with a higher limit and additional perks than a
gold card.

Titanium Card – A card with an even higher limit than a platinum card.
Secured Card – A credit card that a cardholder secures with a savings deposit to
ensure payment of the outstanding balance if the cardholder defaults on payments. It is
used by people new to credit, or people trying to rebuild their poor credit ratings.

Smart Card – Smart cards, sometimes called chip cards, contain a computer
chip embedded in the plastic. Where a typical credit card's magnetic stripe can hold only
a few dozen characters, smart cards are now available with 16K of memory. When read
by a special terminals, the cards can perform a number of functions or access data
stored in the chip. These cards can be used as cash cards or as credit cards with a
preset credit limit, or used as ID cards with stored-in passwords.

Charge Card – Falls between a debit and credit card. Works like the latter and
you don't have to be an accountholder. Just pay up in full when the bill arrives with the
mail. No outstanding are allowed, in other words, no revolving credit facility either.
American Express and Diners are providers.
Rebate Card – This is a card that allows the customer to accumulate cash,
merchandise or services based on card usage.

Co-Branded Card – This is a marriage of convenience between two service

providers who want a trade-off with the other's strengths. Specific facilities are made to
members through these tie-ups. So, Times Bank and Citibank have a co-branded card
that allows concessional rates for add-on cards or telephone banking. Stan chart and
Hindustan Lever Limited have a co-branded card to sell Aviance beauty products. SBI-
GE Capital has a co-branded card for retail loans.

Cash Card – Cash cards, similar to pre-paid phone cards, contain a set amount
of value, which can be read by a special cash card reader. Participating retailers will use
the reader to debit the card in increments until the value is gone. The cards are like
cash -- they have no built-in security, so if lost or stolen, they can be used by anyone.

Travel Card – These work mostly as debit cards for the limited purpose of
travel. Citibank Dollar Card, American Express, Bobcard Global and Hongbank Bank
Thomas Cook International Card are among the players in this section.

cards

THE NECESSITY OF CREDIT CARDS

If it is for the convenience of not carrying cash then a debit card can suffice. And, if it is
for the free credit that the companies claim they give, then last week we had highlighted
the high cost of using such credit where the customer ends up paying more than 5 per
cent interest per month depending on the amount of credit due on the card.

For those who want to use the credit facility at a reasonable cost then we suggest that
they use facilities like overdraft against salary accounts or loan against fixed deposits or
shares. Rolling credit on the card is not feasible as the interest paid on credit cards is
phenomenally higher than what is charged on overdraft facilities.

Going a step further, in case you don't have the cash to pay off your credit card bill in
one month then it makes more sense to take an overdraft for that amount to repay the
bill because the interest on the overdraft works out far cheaper than what the card
company will levy on you if the payment is not made in time.

Almost all banks offer overdraft facilities at reasonable rates to customers who have
salary accounts with the said bank, as well as to the general public. Salary account
holders can avail of the overdraft without any collateral, which is called a clean
overdraft. For the general public, banks provide overdraft facilities against collateral like
NSCs, shares, fixed deposits, etc. For overdraft against salary accounts the rates being
quoted in the market are very competitive and are as low as 1% per month on a
reducing balance. Similarly, one can avail an overdraft facility against NSCs at 13% p.a.
and up to 65% of the face value or against fixed deposits at 9% p.a. up to 90% of the
value.

Then why should a customer pay 2.95% interest per month on an amount of Rs. 40,000
to a credit card company when he can pay 1% interest per month on the overdraft
against the salary account or 8.5% per annum for overdraft against fixed deposits?
 METHODOLOGY IN CREDIT CARDS BUSINESS

Following methodology is used for credit card business:

Credit Card bank advertises or approaches the prospective cardholder.

Prospective card holders apply for credit card membership by filling the prescribed form
which normally contains personal and financial particulars.

Issuer of credit card evaluates the form and issues the credit card and fixes the money
limit for use of such credit card.

Cardholder puts the signature on the prescribed place on the card before putting it to
use and starts using it.

Member establishment prepares a charge slip (for cost to be recovered) gets it signed
by the card holder, tallies the signature, and return, on the copy of charge slip of charge
slip to the credit card holder. The second copy is sent to the issuer for recovery of
money and he retains third copy.

Card issuer receives the bill and charge slip and makes payment to the member
establishment.

Card issuer prepares an account statement and sends it to card holder for payment to
bank directly or through its authorized collection centers.
 RISKS IN THE BUSINESS
TO THE BANKS:
Banks excited at the projected 40% growth rate 1 in the plastic money industry are
apprehensive about the potential corresponding increase in fraud cases. Some banks
register upto 7% fraudulent case in a year.

1. Default in payments - Currently banks have huge amounts of funds blocked with
willful defaulters. Lack of reliable data / infrastructure to check the credit worthiness of
individuals has led to the situation where people without sufficient resources have
become eligible for availing credit facilities. The marketers in India find it more cost
effective to just right-off the unpaid amount in their balance sheets, after trying to
recover it for six months, than to pursue it throughout the litigation labyrinths.

2. Multiple Imprints or Record of Charge (ROC) Pumping - It refers to the expedient

system by which merchants make multiple charge slips instead of the relevant number
when a cardholder gives in his plastic card.

3. Lost/Stolen Cards - These account for 60% of fraud in India. In case of loss all
multinational banks and some Indian banks limit the liability of the cardholder upto Rs. 0
(for Gold card) and Rs. 1000 (for Classic card) if card is used after lost / stolen card has
been reported. These banks transfer their risks to insurance companies and generally
replace the lost card within three days. Some banks carry the risk themselves and
investigate the loss before determining the liability of cardholders. These banks take
about a month to replace the missing card.
To combat this, banks have started the Photo card Option which provides the
photograph of the cardholder on the card. They are also providing information about the
lost/stolen cards .

1
Through the Hot Card Bulletin which is continuously upgraded and sent to merchant
establishments to provide them with the current status. But the success of this measure
is debatable.
A majority of the credit card losses are skewed towards the issuer as the risk on the
cards is carried by the issuer. Visa and MasterCard have a formal set of guidelines
known as charge back rules. Once a card holder has informed the bank of the loss of
the card, he is subject only to a minimum liability, which most banks fix at Rs.1000
regardless of how much the card is used fraudulently. Before the hot card date, the
fraud loss is the issuer’s responsibility. However, if a merchant accepts a hot listed card,
the issuer is entitled to ‘charge back’ the transaction to the merchants, through the
acquirer. If a merchant is found guilty of willful fraud, his bank is liable.
Visa offers its members a national merchant alert service which acquiring banks can
refer to in order to check on the credentials of the merchants whose business they woo.
It also has its risk identification service which monitors every single transaction through
Visa Net. This enormous database helps zero in on cardholders and locations prone to
fraudulent activity.
Master Cards security and risk management team organizes regular training programs
for banks and member establishments on fraud prevention.
Delivering new cards to members by courier has drastically cut fraud arising from non-
receipt of cards.

TO CARD HOLDERS:
The main problem with credit card is that it is easy to get in over the head. A majority of
card users utilize their maximum limit. Credit cards charge higher interest than some of
the other forms of borrowing. While a credit card offers convenience, that convenience
can be expensive if the card holder is slow in paying off his outstanding dues. In terms
of the annual percentage rate that an individual is charged towards paying off his debt,
the figure ranges from anywhere between 22% to 34% p.a. depending upon the roll
over period ( 30 / 45 days ).Tocombatthese problems potential card owners decide
upon the mode of payment before selecting a card. In India, for the majority of people
who believe in paying off their balances in full, the prerequisites would include a card
with a low or no annual fee and long grace period

PARTIES INVOLVED IN CREDIT CARD BUSINESS.

There are five parties involved in credit card business:

THE CARD ISSUER.

When one applies and is issues the card.

THE CARD HOLDER.

When the customer applies to the bank for a credit card, the bank checks the credit
worthiness of the customers and once the application is approved, the bank issues
credit card with a specified credit limit. The customers then becomes a card holder and
can use the credit card to purchase goods or services from a merchant. Each month the
cardholder receives a bill from the card issuer for the amount the cardholder incurred
with the credit card, as well as finance charges if any.

THE MERCHANT.
When the cardholder uses the credit card to pay for goods and services at retail shops,
restaurants, hotels, airlines or any establishments that accept the credit card , the
establishment is a merchant. A merchant should be of good reputation and be
financially responsible.

THE ACQUIRER.
In order for an establishment to be a merchant, it must be accepted by a financial
institution who is a member of Master card/ or visa. There financials institutions is the
acquirer. When a merchant accepts visa or mastercard as a mean of payment, he is
bound by a written agreement with the acquirer.

THE ASSOCIATES.
Master card international and visa international are known as Associates. They are
owned or controlled by a group of member institutions. For financial institutions to be a
member of Master card or Visa, they have to meet the criteria set by the associates.

OVERVIEW OF VARIOUS CARD ISSUES

ISSUER BANK CLASSIFICATION OF CARDS

1 ANZ GRINDLAYS SILVER - MASTERCARD

GOLD- MASTERCARD
VISA INTERNATIONAL

2 AMERICAN EXPRESS AMERICAN EXPRESS CARD CHARGE

CARD
CORPORATE CARD

3 CITI BANK CLASSIC - VISA / MASTER

CARD
PREFERRED - VISA /
MASTERCARD
DINERS CLUB CARD CHARGE
CARD
US $ VISA CARD

4 STANDARD CHARTERED CLASSIC - VISA / MASTER

BANK CARD
EXECUTIVE - VISA / MASTER
CARD
GOLD - VISA / MASTER CARD

5 HONGKONG & SHANGHAI CLASSIC VISA / MASTER CARD

BANK
GOLD VISA / MASTER CARD
US $ MASTER CARD

6 BANK OF BARODA BOB CARD CHARGE

 CARD
BOB SILVER
BOB EXCLUSIVE
BHARAT BOB CARD PREMIUM
BOB CARD GLOBAL

7 CENTRAL BANK OF INDIA CENTRAL MASTER CARD

8 BANK OF INDIA INDIA MASTER CARD

TAJ CARD CHARGE
CARD

9 CANARA BANK CANCARD VISA / MASTER CHARGE

CARD
CANCARD PROPRIETOR CHARGE
CARD

10 VIJAYA BANK VIJAYA GOLD CHARGE

CARD
VIJAYA CLASSIC CHARGE
CARD

11 ANDHRA BANK ANDHRA GOLD CHARGE

CARD
ANDHRA CLASSIC CHARGE
CARD

12 ICICI BANK CLASSIC - VISA / MASTER

CARD
EXECUTIVE - VISA / MASTER
CARD
GOLD - VISA / MASTER CARD
13 STATE BANK OF INDIA CLASSIC - VISA / MASTER
CARD
EXECUTIVE - VISA / MASTER
CARD
 Example of Citibank:

As the undisputed leader in the Cards business, Citibank has more than 70 million card
member accounts worldwide. Growth has continued through the acquisition of the AT&T
Universal Card Services business, introduction of the Driver's Edge and Sony Citibank
cards, and expansion of the Citibank-American Airlines partnership. The merger adds
more than one million credit card accounts, principally with members of professional
associations and other affinity groups, including Salomon Smith Barney clients.

The Citibank Advantage card, now in 25 countries, is the most successful co-branded
card in the industry.

Citibank has 25 million cards, including affiliates, in force in Latin America, Asia,
Central and Eastern Europe, and the Middle East. In most of these markets we have
double-digit share: 43 percent in Puerto Rico, 11 percent in Argentina and Chile, and
more than 20 percent in Hong Kong and Taiwan. In Poland, where Citibank launched a
card in late 1997, we have 20,0000 card holders today.

In the United States, Citibank is strongly committed to maintaining Cards as one of the
great success stories of the bank. Acquisition of the AT&T Universal Card increased our
market share of total U.S. card receivables from 11 percent to 15 percent.

CITIBANK CREDIT CARDS

DINERS CLUB CREDIT CARD

Diners Club was the first card in the Indian market. Launched in 1960, just after 10
years it was launched in the market of United States. It was the firs charge card in the
world. The early eighties saw the launch of credit cards in India by some Indian banks,
viz. Central bank, Andhra bank et. , with Visa and Master Card affiliations. The size of
the credit card market was around 300,000 in 1990. Credit Card was a status symbol for
upscale individuals who had high travel and entertainment needs. More than 40,000-
business establishments in the country now accept credit cards. The total credit they
provided in 2004- 05 was Rs. 80000 crore.

FEATURES OF THE CARD

Your lifestyle demands complete financial flexibility and convenience. Unlike other Card,
the Diners Club Card does not restrict you with a pre-set spending limit. At Diners Club,
you’re spending and payment patters and personal resources determine how much you
can charge. So, over time, you set your own limit.

Club Assurance
As a Diners Club Member, you are insured against loss of life in an air accident for
Rs.30 laky, or Rs.2 laky in any other accident. This insurance is available to you,
wherever you are in the world.

Club Protection
Household Insurance this cover protects household articles (excluding jeweler and
valuables) for a value of upto Rs. 1,00,and 000/- per annum. This insurance is on first
loss basis that insures articles for the entire sum insured.

Baggage Insurance
Baggage Insurance protects your baggage against theft or loss for upto Rs. 40,000/- in
India and upto Rs. 60,000/- while traveling abroad.

Delayed Baggage
If your baggage is not delivered within 12 hours of arrival of a flight, you will be
reimbursed for purchase of essential clothing of upto Rs.5,000/- in India and Rs.
10,000/- when abroad.

Delayed Flight
If you miss an onward flight due to late arrival of an incoming flight, and if there is no
alternative flight within 6 hours (of actual arrival time) or the airline do not provide
accommodation, you will be entitled to Rs.15,000 reimbursement for hotel
accommodation.

Loss of Passport/Ticket
If you lose your passport in a foreign country, you can claim upto Rs.25,000/- towards
the cost of obtaining a fresh Passport. If you lose your air tickets you will be reimbursed
for it upto Rs.5,000/-

Purchase Protection
Under International Purchase Protection, purchases on your card are insured against
loss or damage due to fire or theft, for a period of 180 days, from the time of purchase
up to a value of Rs. 50,000/-

Club Rewards - with Fast Track option

With Diners Club Card, you also get the most powerful rewards program in the country.
For every Rs.100 spent on the Diners Club Card, you earn one Club
Rewards Point. You can redeem the Rewards Points you have earned for fabulous
travel packages and delightful gifts. Moreover, these Points are 'evergreen', which
means you can encash them whenever you want.

Besides Diners Club has tied up with Flying Returns, India's No.1 frequent flyer program
from Indian Airlines and Air India. Which means you can now redeem your Points for
free miles!
Finally, your Club Rewards Points can also be converted to Oberoi Top Points and
Welcome Award Stars - the rewards programs of the Oberoi Group and Welcome group
respectively.

Club Perks
Club Perks is a unique promotional offer exclusively for Diners Club Members. Club
Perks gives you special discounts at your favorite restaurants, hotels, car rentals and
retails across the country. It also gives you complimentary into some of the most
prestigious discotheques in the country. All you have to do is charge your bill to your
Diners Club Card every time you visit any of these places.

Club Lounges
Relax between flights.
You can now relax in plush airport lounges, designed exclusively for Diners Club
Members. There are more than 74 such lounges located at various international
airports. In India, you have complimentary access to airport lounges located at the
domestic departure areas in Mumbai, New Delhi, Chennai and Bangalore.

Club Cash
The Diners Club Card gives you the convenience of drawing cash in an emergency, 24
hours a day, 7 days a week! You can access up to Rs.20,000 through Club Cash
through our extensive network of Automated Teller Machines.

Club Privileges-Phone Home, Global One Calling Card

Finally, Diners Club offers you an exclusive range of international privileges.
The GlobalOne Calling Card, the international calling card which enables you to call
from 60 countries to over 300 countries whenever you travel overseas, and pay later in
Indian Rupees through your Diners Club Card. This facility is available absolutely free.

Citibank international gold card

High Credit Limit

For someone as powerful as you, only the most powerful Card in the world will do - the
Citibank International Gold Card. A true reflection of your power, this Card gives you the
ultimate financial freedom in India and everywhere in the world. The best part is this
Card is yours at no additional cost, and comes with the advantage of spending in
International currencies and paying back in Indian Rupees!
Comprehensive Insurance Benefits *
PersonalAccidentInsuranceuptoRs.20lakh

Free House hold Insurance

This cover protects household articles (excluding jewelry and valuables) for a value of
up to Rs.75,000/- per year. This is valid for primary Card members only.

Free Baggage Insurance

This unique insurance protects your baggage against theft or loss for up to Rs. 40,000/-
in India and up to Rs. 60,000/- while traveling abroad.

Free Delayed Flight Insurance

If you miss an onward flight due to late arrival of an incoming flight, and if there is no
Alternative flight within 6 hours (of actual arrival time) or the Airlines does not provide
accommodation, you will be entitled to Rs.15,000/- as reimbursement for hotel
accommodation.

FreePassportLossInsurance
If you lose your passport in a foreign country, you can claim up to Rs.25,000/- towards
cost of obtaining a fresh passport. On loss of an air ticket, you will be reimbursed for up
toRs.5000/-.

FreeGlobalPurchaseProtection
Under International Purchase Protection, purchases on the Card are insured against
loss or damage due to fire or theft for a period of 180 days from the time of purchase for
a value of upto Rs. 40,000/-.

Unique reward program.

Every time you use your Card you earn Citibank Rewards Points that can be exchanged
for many exclusive privileges like Free Air Miles, free Hotel Nights, leather accessories
and much more. You can exchange your Citibank Rewards Points for miles on airline
frequent flyer programs and fly free to your dream destination and stay free at hotel
properties
participating in our Rewards Program. You can also choose to pay your Card Renewal
Fee (in part or full) using your Rewards Points as well. What's more, your Citibank
Rewards Points are evergreen and never lapse.

Revolving Credit Facility

With Citibank's powerful Revolving Credit Facility you can choose to buy high-value
items now and pay later in parts. And pay as little as 5% of your total outstanding every
month.

Free GlobalOne Calling Card

The next time you make an international call from overseas, you do not need to use
precious foreign exchange or hunt for loose change. The Global One Calling Card
makes international calling absolutely easy. The Global one Calling Card charges will
be conveniently billed later to your Citibank International Gold Card and itemized call
details will appear on your monthly statement.

Special Discounts on Travel

India's leading travel management company Travel House (a member of the ITC Group)
brings you 3.5% off on basic domestic air fares and 7% off on basic International air
fares
when you buy tickets on your Citibank International Gold Card. In fact your tickets will
be delivered to you at no extra cost.

Free Phone Home facility

In case of an emergency or for any urgent clarification on your Card, while you are
overseas, you can use FREE Phone Home Facility.

24- hour ATMs

While travelling overseas you can access cash (up to 60%**** of your Credit Limit) at
over 12,50,000 Visa/MasterCard ATMs across the globe. There are 24-Hour ATMs in
Ahmedabad, Bangalore, Calcutta, Chennai, Delhi, Hyderabad, Mumbai and Pune too.
You can also draw cash from any Citibank branch.

24- hour CitiPhone

CitiPhone, the revolutionary phone banking service ensures that Citibank is just a phone
call away from you. From the minute you dial in, the world-class Interactive Voice
Response (IVR) Service will guide you right through. Call our courteous CitiPhone
Officers standing by to assist you. 24 hours a day, and 7 days a week.

Worldwide Assistance
The Visa/MasterCard Global Assistance Services can be used for reporting lost or
stolen Cards, requesting for an emergency Card replacement or for emergency Cash
Advances. A wide range of miscellaneous information is also available for your benefit.

Additional Card
You can share the power of your Citibank International Gold Card with your family. Your
Citibank International Gold Card Membership entitles you to Additional Cards for two
members of your family, over 18 years of age, at a special price of Rs.1000/- p.a. per
Card.

Citibank silver card.

Exciting gifts with Citibank Rewards
Every time you use your Card, you earn valuable Citibank Rewards Points that can be
exchanged for fabulous gifts. Choose from a wide range of gifts - cosmetics to cameras,
CDs to wallets. You can also exchange your Citibank Rewards Points to pay your Card
Renewal Fee (in part or full). What's more your Citibank Rewards Points are evergreen
and never lapse.
 COMPETITION IN CREDIT CARD BUSINESS

With the emergence of plastic money (credit cards) as a social security tool and the
modest way to come under transactions with time saving the customers are widely
looking and accepting credit cards for their transactions. No doubt due to several
advantages of it, is gaining its market and competency. Due to wide acceptance in the
market every institution in financial market whether it public sector or private sector
institution are engaged in this discipline with better customer focused strategy to
capture the untapped market soon.

Banks like ICICI, HDFC, CITI BANK, SBI, PNBwith the multinational banks like HSBC,
IDBI and STANDARD CHARTERED are engaged and competing for the market
capitalization. Every banking company is ready to serve with better schemes, rates,
terms and conditions which can suit the customers’ requirements.

To be an active player of the financial market every institution is issuing

several types of cards like the life time free cards with extended date to pay the amount
back to the banks. They have good strategies and workforce with many reputed direct
sales associates and direct sales teams to fetch good sales and to win the consumers
faith. The government of India is also taking initiative to protect the consumer rights in
this credit cards division.

So this market is now a days a global market which is gaining its growth like anything.
SUMMARY

One of the most important commercial developments since the second world was is the
emergence of the credit card as a substitute for cash.Since the beginning of history man
has been involved with trade and commerce. As this area has expanded and become
more important, different mediums of exchange have been developed. Barter gave way
to advance of money, and money in turn has faced the advance of checks. In this age of
rapid technological advances it is only natural that man should seek out a new, more
efficient system of carrying on trade and commerce. This system seems to be the credit
card.

Though the credit card industry in India was stared in early 80's with the launch of
Central Card by Central Bank of India and has seen the boom time only in late 80's. So
the plastic card concept is not very new to Indian market. India is fast emerging as a
market with an immense growth potential for credit cards. That is why after the launch of
central card, a number of India and foreign banks had entered in the credit cards
business. According to optimistic estimate, the Indian market, which is now roughly 1.2
million, is expected to be biggest market outside USA by 2000 AD. During the last
decade, this small plastic card, money market has come a long way, growing at the rate
of 25% per annum, contributing to both convenience and extravagance. The economy
matures, cash, as a payment mechanism will be replaced by plastic card. This shift will
primarily happen because of the change in the customer's attitude and evolution of
financial market in the payment service area.

The sector of plastic money has been an upward trend in India. There are various
players in India which have given boost to there sector namely, Standard Chartered,
State Bank o India, Bank of Baroda, Citi bank, ICICI Bank, HSBC etc. The different
facilities offered by different issuers have lured the consumers. Today with increase in
competition issuer is becoming more and more liberal in order to tap more and more
customers. However an attempt to increase business by means of being liberal has
proved to be un-lucrative as it has given rise to mounting of bad debts to the issuer.
This project is an attempt to understand the consumer behavior towards credit cards
and whether in their opinion it has helped to increase the purchasing power or it is just
another financial burden on the users.

BIBLIOGRAPHY:
www.scribd.com

www.mbaguru.com

REFRENCES:

Steven M. Sheffrin
Gracia, Mike