GLOBAL INSTITUTE OF MANAGEMENT
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
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).
•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
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
Particulars Displayed On Credit Cards
•Name of the customer
•16-digit card number
•The VISA hologram and the VISA logo
•Name of the issuing bank
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
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.
•International card-Credit cards that have
international validity are called “international cards ”.
They are issued to people who travel abroad
•Master card-The issuing bank has to obtain a
franchise from the Mastercard Corporation of USA.
The franchised cards will be honored in the
•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.
•To customer-Simple, convenient and can
be substituted for cash
•Convenient method of payment
•He need not approach a bank for taking
•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
To Merchants/ Shopkeepers –
•Lessens the security risk of holding the cash
•Overseas visitors may purchase more,
providing new market for retailer
• Source of revenue
- Joining fee
- card renew fee
- services charges from retailers
- Interest charged to customer
To cardholders :
•Loss or stealing of card
To Merchants/ Shopkeepers :
•Retailers are required to pay a certain fee
•charges at an agreed percentage of their
credit card sales.
To credit card companies :
•Risk of bad debt
•Risk of fraud
•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
•Keep a list of all cards, account numbers, and phone
numbers separate from cards
•Report lost or stolen cards promptly