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  1. 1. Credit cards Presented by GLOBAL INSTITUTE OF MANAGEMENT
  2. 2. What is a credit card? •It is a plastic card having a magnetic strip, issued by a bank or business authorizing the holder to buy goods or services on credit. Also called charge cards. •It is a card that facilitates its user to buy goods and services based on the holders promise to pay for these goods and services.. •It enables an individual to purchase certain products and services without paying immediately, so the credit card considered as good substitute for cash and cheques
  3. 3. How credit cards work •Credit cards are issued by a credit card issuer, such as a bank or credit union, after an account has been approved by the credit provider, after which cardholders can use it to make purchases at merchants accepting that card. • When a purchase is made, the credit card user agrees to pay the card issuer. The cardholder indicates consent to pay by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a personal identification number (PIN).
  4. 4. •The credit issuer charges interest on the amount owed if the balance is not paid in full (typically at a much higher rate than most other forms of debt). •In addition, if the credit card user fails to make at least the minimum payment by the due date, the issuer may impose a "late fee" and/or other penalties on the user.
  5. 5. Eligibility 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.
  6. 6. Particulars Displayed On Credit Cards •Name of the customer •16-digit card number •Validity date •The VISA hologram and the VISA logo •Name of the issuing bank •Signature period •Magnetic strip •PIN
  7. 7. Credit card issuer •A credit card issuer is a bank or credit union that offers credit cards to their customer . •The credit card issuer is responsible for sending payments to merchants for purchases made by the customer with credit cards from that bank. •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
  8. 8. Types of credit cards •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 cards-The gold card offers many additional benefits and facilities such as higher credit limits, more cash advance limits etc that are not available with standard or executive cards. •Domestic cards-Cards that are valid only in India and Nepal are called ‘domestic cards’. All transactions will be in rupees . These cards are issued by most of the banks in India.
  9. 9. •International card-Credit cards that have international validity are called “international cards ”. They are issued to people who travel abroad frequently. •Master card-The issuing bank has to obtain a franchise from the Mastercard Corporation of USA. The franchised cards will be honored in the Mastercard network. •Visa card- This is a type of credit card, which can be issued by any bank having tie-up with VISA international corporation , USA. The banks that issue Visa cards are said to have a franchise is that one can avail the facility of the VISA network for transactions.
  10. 10. Advantages •To customer-Simple, convenient and can be substituted for cash •Convenient method of payment •He need not approach a bank for taking credit •Credit cards issued by leading banks are acceptable in many countries •Holders can withdraw cash from any branch of major banks worldwide. •Issuer of card provides 24 hrs customer helpline available across the world in case of any emergency.
  11. 11. To Merchants/ Shopkeepers – •Guaranteed payment •Lessens the security risk of holding the cash •Overseas visitors may purchase more, providing new market for retailer To issuer- • Source of revenue - Joining fee - card renew fee - services charges from retailers - Interest charged to customer
  12. 12. Disadvantages To cardholders : •Loss or stealing of card To Merchants/ Shopkeepers : •Retailers are required to pay a certain fee and service •charges at an agreed percentage of their credit card sales. To credit card companies : •Risk of bad debt •Risk of fraud
  13. 13. Safety 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