Sri Sharada Institute Of Indian Management - Research

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E-mail: administration@srisim.org; Website: www.srisim.org

PROJECT REPORT ON
“EVALUATION OF PAPER MONEY –MOVING TOWARDS PLASTIC
MONEY”

SUBMITTED TO: SUBMITTED BY:

PRF. HARPEET SINGH ARJIT JAIN(161)
ARNAB BANERJEE(162)

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 ACKNOWLEDGEMENT

We present this project report on “Financial statement analysis” with a sense

of great pleasure and satisfaction. We undersign with pleasure to take this
opportunity to thank all those related directly or indirectly in preparation of
this project report.We express our sincere thanks to Prof. HARPEET
SINGH for his support & guidance.

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 Money
Coins and banknotes – the two most common physical forms of money.
Money is any object that is generally accepted as payment for goods and services and
repayment of debts in a given country or socio-economic context. The main functions of
money are distinguished as: a medium of exchange; a unit of account; a store of value;
and, occasionally, a standard of deferred payment.
Money originated as commodity money, but nearly all contemporary money systems are
based on fiat money. Fiat money is without intrinsic use value as a physical commodity,
and derives its value by being declared by a government to be legal tender; that is, it must
be accepted as a form of payment within the boundaries of the country, for "all debts,
public and private".The money supply of a country consists of currency (banknotes and
coins) and demand deposits or 'bank money' (the balance held in checking accounts and
savings accounts). These demand deposits usually account for a much larger part of the
money supply than currency. Bank money is intangible and exists only in the form of
various bank records. Despite being intangible, bank money still performs the basic
functions of money, being generally accepted as a form of payment.
The use of barter-like methods may date back to at least 100,000 years ago, though there
is no evidence of a society or economy that relied primarily on barter. Instead, non-
monetary societies operated largely along the principles of gift economics. When barter
did occur, it was usually between either complete strangers or potential enemies
Many cultures around the world eventually developed the use of commodity money. The
shekel was originally a unit of weight, and referred to a specific weight of barley, which
was used as currency. The first usage of the term came from Mesopotamia circa 3000
BC. Societies in the Americas, Asia, Africa and Australia used shell money – often, the
shells of the money cowry (Cypraea moneta L. or C. annulus L.). According to
Herodotus, the Lydians were the first people to introduce the use of gold and silver coins.
It is thought by modern scholars that these first stamped coins were minted around 650
-600 BC.The system of commodity money eventually evolved into a system of
representative money. This occurred because gold and silver merchants or banks would

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 issue receipts to their depositors – redeemable for the commodity money deposited.
Eventually, these receipts became generally accepted as a means of payment and were
used as money. Paper money or banknotes were first used in China during the Song
Dynasty. These banknotes, known as "jiaozi" evolved from promissory notes that had
been used since the 7th century. However, they did not displace commodity money, and
were used alongside coins. Banknotes were first issued in Europe by Stockholms Banco
in 1661, and were again also used alongside coins. The gold standard, a monetary system
where the medium of exchange are paper notes that are convertible into pre-set, fixed
quantities of gold, replaced the use of gold coins as currency in the 17th-19th centuries in
Europe. These gold standard notes were made legal tender, and redemption into gold
coins was discouraged. By the beginning of the 20th century almost all countries had
adopted the gold standard, backing their legal tender notes with fixed amounts of gold.
After World War II, at the Bretton Woods Conference, most countries adopted fiat
currencies that were fixed to the US dollar. The US dollar was in turn fixed to gold. In
1971 the US government suspended the convertibility of the US dollar to gold. After this
many countries de-pegged their currencies from the US dollar, and most of the world's
currencies became unbacked by anything except the governments' fiat of legal tender and
the ability to convert the money into goods via payment.
Medium of exchange
When money is used to intermediate the exchange of goods and services, it is performing
a function as a medium of exchange. It thereby avoids the inefficiencies of a barter
system, such as the 'double coincidence of wants' problem.
Unit of account
A unit of account is a standard numerical unit of measurement of the market value of
goods, services, and other transactions. Also known as a "measure" or "standard" of
relative worth and deferred payment, a unit of account is a necessary prerequisite for the
formulation of commercial agreements that involve debt. To function as a 'unit of
account', whatever is being used as money must be:
Divisible into smaller units without loss of value; precious metals can be coined from
bars, or melted down into bars again.

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Fungible: that is, one unit or piece must be perceived as equivalent to any other, which is
why diamonds, works of art or real estate are not suitable as money.
A specific weight, or measure, or size to be verifiably countable. For instance, coins are
often milled with a reeded edge, so that any removal of material from the coin (lowering
its commodity value) will be easy to detect.
Store of value
To act as a store of value, a money must be able to be reliably saved, stored, and
retrieved – and be predictably usable as a medium of exchange when it is retrieved. The
value of the money must also remain stable over time. Some have argued that inflation,
by reducing the value of money, diminishes the ability of the money to function as a store
of value.
Standard of deferred payment
While standard of deferred payment is distinguished by some texts, particularly older
ones, other texts subsume this under other functions. A "standard of deferred payment" is
an accepted way to settle a debt – a unit in which debts are denominated, and the status of
money as legal tender, in those jurisdictions which have this concept, states that it may
function for the discharge of debts. When debts are denominated in money, the real value
of debts may change due to inflation and deflation, and for sovereign and international
debts via debasement and devaluation.

Money supply
In economics, money is a broad term that refers to any financial instrument that can
fulfill the functions of money. These financial instruments together are collectively
referred to as the money supply of an economy. Since the money supply consists of
various financial instruments (usually currency, demand deposits and various other types
of deposits), the amount of money in an economy is measured by adding together these
financial instruments creating a monetary aggregate. Modern monetary theory
distinguishes among different types of monetary aggregates, using a categorization
system that focuses on the liquidity of the financial instrument used as money

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 Market liquidity

Market liquidity describes how easily an item can be traded for another item, or into the
common currency within an economy. Money is the most liquid asset because it is
universally recognised and accepted as the common currency. In this way, money gives
consumers the freedom to trade goods and services easily without having to barter.
Liquid financial instruments are easily tradable and have low transaction costs. There
should be no (or minimal) spread between the prices to buy and sell the instrument being
used as money.
Measures of money
The money supply is the amount of financial instruments within a specific economy
available for purchasing goods or services. The money supply is usually measured as
three escalating categories M1, M2 and M3. The categories grow in size with M1 being
currency (coins and bills) and checking account deposits. M2 is currency, checking
account deposits and savings account deposits, and M3 is M2 plus time deposits. M1
includes only the most liquid financial instruments, and M3 relatively illiquid
instruments.
Another measure of money, M0, is also used, although unlike the other measures, it does
not represent actual purchasing power by firms and households in the economy. M0 is
base money, or the amount of money actually issued by the central bank of a country. It
is measured as currency plus deposits of banks and other institutions at the central bank.
M0 is also the only money that can satisfy the reserve requirements of commercial banks.
Types of money
Currently, most modern monetary systems are based on fiat money. However, for most
of history, almost all money was commodity money, such as gold and silver coins. As
economies developed, commodity money was eventually replaced by representative
money, such as the gold standard, as traders found the physical transportation of gold and
silver burdensome. Fiat currencies gradually took over in the last hundred years,
especially since the breakup of the Bretton Woods system in the early 1970s.
Commodity money

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 Many items have been used as commodity money such as naturally scarce precious
metals, conch shells, barley, beads etc., as well as many other things that are thought of
as having value. Commodity money value comes from the commodity out of which it is
made. The commodity itself constitutes the money, and the money is the commodity.
Examples of commodities that have been used as mediums of exchange include gold,
silver, copper, rice, salt, peppercorns, large stones, decorated belts, shells, alcohol,
cigarettes, cannabis, candy, etc. These items were sometimes used in a metric of
perceived value in conjunction to one another, in various commodity valuation or Price
System economies. Use of commodity money is similar to barter, but a commodity
money provides a simple and automatic unit of account for the commodity which is
being used as money. Although some gold coins such as the Krugerrand are considered
legal tender, there is no record of their face value on either side of the coin. The rationale
for this is that emphasis is laid on their direct link to the prevailing value of their fine
gold content. American Eagles are imprinted with their gold content and legal tender face
value.
Representative money
In 1875 economist William Stanley Jevons described what he called "representative
money," i.e., money that consists of token coins, or other physical tokens such as
certificates, that can be reliably exchanged for a fixed quantity of a commodity such as
gold or silver. The value of representative money stands in direct and fixed relation to the
commodity that backs it, while not itself being composed of that commodity.
Fiat money
Fiat money or fiat currency is money whose value is not derived from any intrinsic value
or guarantee that it can be converted into a valuable commodity (such as gold). Instead, it
has value only by government order (fiat). Usually, the government declares the fiat
currency (typically notes and coins from a central bank, such as the Federal Reserve
System in the U.S.) to be legal tender, making it unlawful to not accept the fiat currency
as a means of repayment for all debts, public and private.
Some bullion coins such as the Australian Gold Nugget and American Eagle are legal
tender, however, they trade based on the market price of the metal content as a

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 commodity, rather than their legal tender face value (which is usually only a small
fraction of their bullion value).
Fiat money, if physically represented in the form of currency (paper or coins) can be
accidentally damaged or destroyed. However, fiat money has an advantage over
representative or commodity money, in that the same laws that created the money can
also define rules for its replacement in case of damage or destruction. For example, the
U.S. government will replace mutilated Federal Reserve notes (U.S. fiat money) if at
least half of the physical note can be reconstructed, or if it can be otherwise proven to
have been destroyed. By contrast, commodity money which has been lost or destroyed
Commercial bank money
Demand deposit in cheque form.
Commercial bank money or demand deposits are claims against financial institutions that
can be used for the purchase of goods and services. A demand deposit account is an
account from which funds can be withdrawn at any time by check or cash withdrawal
without giving the bank or financial institution any prior notice. Banks have the legal
obligation to return funds held in demand deposits immediately upon demand (or 'at
call'). Demand deposit withdrawals can be performed in person, via checks or bank
drafts, using automatic teller machines (ATMs), or through online banking.
Commercial bank money is created through fractional-reserve banking, the banking
practice where banks keep only a fraction of their deposits in reserve (as cash and other
highly liquid assets) and lend out the remainder, while maintaining the simultaneous
obligation to redeem all these deposits upon demand. Commercial bank money differs
from commodity and fiat money in two ways, firstly it is non-physical, as its existence is
only reflected in the account ledgers of banks and other financial institutions, and
secondly, there is some element of risk that the claim will not be fulfilled if the financial
institution becomes insolvent. The process of fractional-reserve banking has a cumulative
effect of money creation by commercial banks, as it expands money supply (cash and
demand deposits) beyond what it would otherwise be. Because of the prevalence of
fractional reserve banking, the broad money supply of most countries is a multiple larger
than the amount of base money created by the country's central bank.

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 Plastic Money
Plastic money or polymer money, made out of plastic, is a new and easier way of paying
for goods and services. Plastic money was introduced in the 1950s and is now an
essential form of ready money which reduces the risk of handling a huge amount of cash.
It includes debit cards, ATMs, smart cards, etc. Credit cards, variants of plastic money,
are used as substitutes for currency. This book on plastic money is divided into two
sections titled Concepts and Experiences. The former covers articles on the the
emergence of plastic money, different types of plastic cards and their growth in India and
other related issues. An experience discusses the experiences of banks like Standard
Chartered, Citibank, which deal with plastic money and their growth in the market.

Meaning

Plastic money refers to credit cards, you use them whenever you want and pay
later (with interest, of course). It makes it too easy for people to buy things they normally
could not afford, which makes it easier to get into debt.

The History Of Credit Cards and Debit Cards In Plastic Money

Credit cards have evolved into a safe and secure manner to purchase goods and services.
The Internet has given credit card users additional purchasing power. Banks have options
like cash-back rewards, savings plans and other incentives to entice people to use their
cards. Debit cards allow people the convenience of cards without the worry of racking up
debt. The convenience, security and rewards offered by credit and debit cards keep
shoppers using their cards as opposed to checks or cash.

Credit Card Origins

The first credit cards were issued by individual stores and merchants.
These cards were issued in limited locations and only accepted by the businesses that

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issued them. While the cards were convenient for the customers, they also provided a
customer loyalty and customer service benefit, which was good for both customer and
merchant. It was not until 1950 that the Dinner's Club card was created by a restaurant
patron who forgot his wallet and realized there needed to be an alternative to cash only.
This started the first credit card specifically for widespread use, even though it was
primarily used for entertainment and travel expenses.

Plastic Becomes the Standard

The first Diner's Club cards were made out of cardboard or celluloid. In 1959
American Express changed all that with the first card made of plastic. American Express
created a system of making an impression of the card presented at the register for
payment. Then that impression was billed to the customer and due in full each month.
Several American Express cards still operate like this as of 2010. It was not until the late
1980s that American Express began allowing people to pay their balance over time with
additional card options.

Bank Card Associations

In 1966, Bank of America created a card that was a general purpose card or "open
loop" card. These "closed loop" agreements limited cards like Diners Club and American
Express to certain merchants, unlike the new "open loop" cards. The new general purpose
system required interbank cooperation and additional regulations. This created additional
safety features and began building the credit card system of today. Two systems emerged
as the leaders--Visa and Master Card. However, today there is little difference between
the two and most merchants accept both card associations.

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Debit Cards Emerge

The Visa association of cards took credit cards to a new level in 1989 when they
introduced debit cards. These cards linked consumers to their checking accounts. Money
was now drawn from a checking account at the point of sale with these new cards and
replaced check writing. This helped the merchants check that money was available and
made it easier to track the customer if the funds could not be obtained. Consumers liked
the convenience of not having to write checks at the point of sale, which made debit
cards a safe alternative to cash and checks.

The Future

There were almost 29 million debit card users as of 2006, with a projected 34.4
million users by 2016. However, online services like PayPal are emerging as a way for
people to pay their debts in new, secure and convenient ways. Technology also exists to
have devices implanted into phones, keys and other everyday devices so that the ability
to pay at the point of sale is even more convenient.

TYPES OF PLASTIC MONEY

Different types:-

 Credit card

• A credit card is plastic money that is used to pay for products and services at over
20 Million locations around the world. All you need to do is produce the card and
sign a charge slip to pay for your purchases. The institution which issues the card
makes the payment to the outlet on your behalf; you will pay this 'loan' back to
the institution at a later date.

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 Debit card

• Debit cards are substitutes for cash or check payments, much the same way that
credit cards are. However, banks only issue them to you if you hold an account
with them. When a debit card is used to make a payment, the total amount
charged is instantly reduced from your bank balance.
• Don't borrow on your credit card! Here's why
• A debit card is only accepted at outlets with electronic swipe-machines that can
check and deduct amounts from your bank balance online.

 Charge card

• A charge card carries all the features of credit cards. However, after using a
charge card you will have to pay off the entire amount billed, by the due date. If
you fail to do so, you are likely to be considered a defaulter and will usually have
to pay up a steep late payment charge.
• When you use a credit card you are not declared a defaulter even if you miss your
due date. A 2.95 per cent late payment fees (this differs from one bank to another)
is levied in your next billing statement.

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  Amex card

• Amex stands for American Express and is one of the well-known charge cards.
This card has its own merchant establishment tie-ups and does not depend on the
network of MasterCard or Visa.
• Credit cards: Remember these dos and don'ts.
• This card is typically meant for high-income group categories and companies and
may not be acceptable at many outlets. There are a wide variety of special
privileges offered to Amex cardholders.

 Dinner club card

• Diners Club is a branded charge card. There are a wide variety of special
privileges offered to the Diners Club cardholder. For instance, as a cardholder
you can set your own spending limit. Besides, the card has its own merchant
establishment tie-ups and does not depend on the network of MasterCard or
Visa.

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 • However, since this card is typically meant for high-income group categories, it
may not be acceptable at many outlets. It would be a good idea to check whether
a member establishment does accept the card or not in advance.

 Global card

• Global cards allow you the flexibility and convenience of using a credit card
rather than cash or travelers cheque while traveling abroad for either business or
personal reasons.

 Co-branded card

• Co-branded cards are credit cards issued by card companies that have tied up with
a popular brand for the purpose of offering certain exclusive benefits to the
consumer.
• A debit card with a difference

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 • For example, the Citi-Times card gives you all the benefits of a Citibank credit
card along with a special discount on Times Music cassettes, free entry to Times
Music events, etc.

 Master card & Visa

• MasterCard and Visa are global non-profit organizations dedicated to promote the
growth of the card business across the world.
• They have built a vast network of merchant establishments so that customers
worldwide may use their respective credit cards to make various purchases.

 Smart card

• A smart card contains an electronic chip which is used to store cash. This is most
useful when you have to pay for small purchases, for example bus fares and

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 coffee. No identification, signature or payment authorization is required for using
this card.
• The exact amount of purchase is deducted from the smart card during payment
and is collected by smart card reading machines. No change is given. Currently
this product is available only in very developed countries like the United States
and is being used only sporadically in India.


Photo card

• If your photograph is imprinted on a card,

then you have what is known as a photo card. Doing this helps identify the user of
the credit card and is therefore considered safer. Besides, in many cases, your
photo card can function as your identity card as well.

CREDIT CARD

A credit card is a small plastic card issued to users as a system of payment. It

allows its holder to buy goods and services based on the holder's promise to pay for these
goods and services. The issuer of the card 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. Usage of the term "credit card" to imply a credit card account is a
metonym.

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 When a purchase is made the user would indicate consent to pay by signing a
receipt with a record of the card details and indicating the amount to be paid. Issuer
agrees to pay the merchant and the credit card user agrees to pay the card issuer.

DEFINITION:-

The credit card can be defined as “A small plastic card that allows its
holder to buy goods and services on credit and to pay at fixed intervals through the card
issuing agency.

MEANING:-

A credit card is a card or mechanism which enables card holder to purchase

goods, travels and dine in a hotel without making immediate payments. The holders can
use the cards to get credit from banks up to 45 days.

The credit card relieves the consumers from the botheration of carrying cash and
ensures safety. It is a convenience of extended credit without formality. Thus credit card
is a passport to, “safety, convenience, prestige and credit.

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 ADVANTAGES & DISADVANTAGES OF CREDIT CARD

 ADVANTAGES OF CREDIT CARD

The benefits of credit card can be grouped as follows:

(A) BENEFITS TO THE BANK

a) A credit card is an integral part of banks major services these days. The credit card
provides the following advantages to the bank: the system provides an opportunity to the
bank to attract new potential costumers.

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b) To get new customers the bank has to employee special trained staff. This gives the
bank an opportunity to find the latent talent from among existing staff that would have
been otherwise wasted.

c) The more important function of a credit card, however, is simply to yield direct profit
for the bank. There is a scope and a potential for a better profitability out of income /
commission earned from the traders turn over.

d) This also provides additional customer services to the existing clients. It enhances the
customer satisfaction.

e) More use by the car holder and consequently the growth of banking habits in general.

f) Better network of card holders and increased use of cards means higher popularity and
image of the bank

g) Savings of expense on cash holdings, i.e. stationery, printing and man power to handle
clearing transactions while considerably is reduced. It increases

(B) BENEFITS TO CARD HOLDER

The principal benefits to a card holder are:

a) He can purchase goods and services at a large number of outlets without cash or
cheque. The card is useful in emergency, and can save embarrassment.

b) The risk factor of carrying and storing cash is avoided. It is convenient for him to
carry credit card and he has trouble free travel and may purchase his without carrying
cash or cheque.

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c) Months purchases can be settled with a single remittance, thus, tending to reduce bank
and handling charges.

d) The card holder has the period of free credit usually between 30-50 days of purchase

e) Cash can usually be obtained with the card, either on card account or by using it as
identification when encasings a cheque at the bank.

f) Availing credit with minimum formality.

g) The credit card saves trouble and paper work to traveling business man.

(C) BENEFITS TO THE MERCHANT ESTABLISHMENT

The principal benefits offer credit card to the retailer is

a) This will carry prestigious weight to the outlets.

b) Increases in sale because of increased purchasing power of the cardholder due to

unbilled credit available to the card holder.

c) The retailers gain from the impulse buying and trading up the tendency to buy the
bigger or better article

d) Credit card ensures timely and certainly of payments.

e) Suppliers/sellers no longer have to send reminders of outstanding debits.

f) Systematic accounting since sales receipts are routed through banking channels.

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g) Advertising and promotional support on national scale.

h) Development of prestigious clientele base.

 DISADVANTAGES OF CREDIT CARD

The following are the common disadvantages of the credit card:

a) Some credit card transactions take longer time than cash transactions because of
various formalities.

b) The customer tends to overspend out of immerse happiness.

c) Discounts and rebates can rarely be obtained.

d) The cardholder is responsible for charges due to loss or theft of the card and the bank
may not be party for loss due to fraud or collusion of staff, etc

e) Customers may be denied cash discount for payment through card.

f) It might lead to spending habits and cardholders may end up in big debts

i) Avoid the entire cost and security problem involved in handling cash.

j) Losses to bad debts and reduced an additional liquidity is

k) It also allows him to delegate spending power to add on members

l) Credit card is considered as a status symbol.

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 STEPS FOLOWED IN CREDIT CARD TRANSACTION

1. AUTHORIZATION

• For Internet Merchants, the shopping card is connected to or integrated with a

Payment Gateway. For Retail Merchants, the card is swiped through a magnetic
reader on the point of sale terminal the authorization is transmitted to the
appropriate card issuer for approval. The issuing bank of card issuer authenticates
the card holder and approves or declines the transaction amount.

• It is important to note that no money changes hands during the authorization.

Merchants must re-present the transaction to receive payment.

2. Merchant balancing

• This is also known as batching out. Most pos terminals and all payment gateway
per firm an auto close functions at the and of the day and batch out automatically.

3. Capture

• The front end processor matches the authorization data to the settlement data and
transmits the card capture file to a back end processor for V/MC transactions or to
the appropriate card issuer for other card types.

4. Clearing

• During this stage the back end processor performs compliance checks and risk
management procedures and transmits the transaction to V/MC or to the
appropriate card issuer for other card types.

5. Interchange (VS/MC Only)

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 • During this stage the V/MC Association sort the transactions by issuing bank and
transmit them to the appropriate issuing banks for settlement.

6. Settlement

• During this stage the Issuing Bank calculates fees and deductions and routs the
net funds to the appropriate Card Issuer which determines the daily deposits for
the merchants.

7. Merchant ACH

• During this stage the acquiring bank or card issuer transmits the merchant deposit
to the merchant’s checking account.

 Different Types of Credit Cards

Credit cars are of various types, every one has to select credit cards on the basis
of the pros and cons of each type of credit card and at the same time the nature of use.
This article gives an insight into the several types of credit cards available in the market
Today, credit card customers enjoy more options and choices than ever before. To gain
new customers, credit card companies compete by offering new services and cards to
customers. No matter what your needs, chances are good that there is a card out there that
would be ideal for you. If you are looking for the right card, you can begin by
considering the many types of cards available to you:

Low Interest Credit Cards

These types of credit cards offer very low interest. In some cases, these cards just
charge a few percent interests. The reasons for this are numerous. In most cases, the low
interest rate is for a limited time only. After a set number of months, you will begin
paying higher interest rates. In some cases, low interest credit cards are not really credit

23
cards at all - they are debit cards linked to a low-interest loan such as a line of credit.
Check your agreement to find out what type of card you have. If you need to consolidate
debts or if you like the idea of having low interest for a while, this type of credit card can
be perfect for you.

Instant Approval Credit Cards

These cards are really a product of our fast-paced society. The idea behind this
type of credit card is that once you fill out your application, you will be told whether you
are approved or not right away. The approval process only takes a few minutes. Instant
approval credit cards are very popular online and applicants can apply via the internet or
over the phone.

If you are very impatient or need credit right away, these types of cards can be for
you. However, you should be aware that these cards do not guarantee that you will be
approved right away - sometimes, more time is needed to process your application.
Another drawback to these cards is that they rely heavily on your credit score. If you
have poor credit or any extenuating financial circumstances, these types of cards may not
be for you.

Balance Transfer Cards

Balance transfer cards are a type of temporary low-interest card that is meant to
help you consolidate your debt. They work this way: if you have several credit cards with
a balance, you can get a balance transfer card. You then transfer all your credit card debt
onto the new card and work to pay it off.

Rewards Credit Cards

Rewards credit cards offer you points, rewards, or bonuses for every cash
purchase made with your credit card over time. As you accumulate rewards or points,

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you can redeem your bonus for entertainment events, purchases, travel, and other fun
prizes. Some cards even offer customers extra automatic-enter sweepstakes and draws.
Each time you use your card, you are entered into a draw to win specific prizes.

These types of cards are really a marketing tool for card companies. Companies
know that customers love rewards and prizes and so offer these
enticements to lure customers. The major advantage of these cards is that they can help
you get more cash value for your money. They can also be fun and rewarding for almost
any credit card customer. However, not all reward credit cards are a deal. Some charge
high fees to offset the costs of the bonuses. Some also have very low points systems,
meaning that you need to spend a lot with your credit card to get any rewards at all. Read
the fine print carefully before signing.

Cash Back Credit Cards

Cash back credit cards give you money rewards. When you make a purchase with
this type of credit card, you get some points based on the amount of money you have
spent with your credit card. When you accumulate enough points, you get cash back. On
most cards, you can get back about 1% of your total purchases.

These cards are great for those who are budget-conscious as they give you some
money back from your purchases. However, there are several drawbacks to these types of
cards. Some cards have low cash-back percentage rates. Some charge high fees or have
limits on how much money you can get back each year. Most cards only offer you cash
back advantages on purchases - not on your balance. If you decide this card is right for
you, do compare several card offers to find the best cash back credit card option.

Airline Credit Cards

This type of card allows you to accumulate frequent flyer points on all your credit
card purchases. If you travel a lot or love to travel, this card can help you accumulate
points for a free trip or for a discount ticket. In many cases, these cards are great because

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they allow you to gather points for every purchase. However, these cards can also charge
high fees. In some cases, your points will expire if you do not use them within a specified
time. Worse, some airline credit cards make use of a point system that is not very user-
friendly. You may have to slowly accumulate an enormous amount of points to qualify
for a trip. If you do not love to travel and if you do not use your Credit card a lot, then,
your ability to get rewards you like may be very limited.

Prepaid Debit Cards

These cards are sometimes called junior credit cards. They are not truly credit
cards at all, since you are not getting credit or loans from the credit card company.
Instead, these cards work by having you deposit some money into the card account. You
can then use your card to charge any amount up to the amount in the account.
Secured Credit Cards

Secured credit cards use collateral to ensure that the card company will be paid
back. Often, these cards are used by people with no credit or bad credit. With secured
credit cards, you can enjoy credit card convenience even if you do not qualify for
traditional cards. However, you will also have to cope with the additional fees and low
credit limits that these credit cards have.

Credit Cards for Bad Credit

Bad credit credit cards are designed for people with poor credit histories. These
cards generally have very low credit limits and charge extra fees. This is because they are
designed for people who are considered far less likely to repay their debts. If you have a
bad credit rating, these types of credit cards can be a great way to rebuild your credit
history. These cards can also allow you to have credit even if you would be rejected for
most other cards due to your credit history.

Student Credit Cards

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 Student credit cards are cards meant to attract college and university students.
These cards often offer sign-up bonuses for students. They are also easier to apply for,
since credit card companies recognize that students have much shorter credit histories.
00000000000
If you are a student, student credit cards can be a great option. They are simple to
use and can help you build a good credit rating before you graduate. However, there are
some disadvantages to student credit cards. These cards may have no reward programs
and may have fewer benefits, including fewer bonuses and services, than other cards.

Business Credit Cards

Business credit cards are created especially for business use. They offer many of
the same advantages as traditional credit cards, but also offer services that can really help
a business. With some business credit cards, for example, you can enjoy higher interest
rates, extra cards for business employees, monthly reports on your expenses, and services
that let you keep your personal and business expenses separate on the same card. These
advantages mean that using this card for your business is more convenient.

Types of Credit Cards offered by Indian Banks

Silver Cards

Silver credit cards rank lowest among the metal named cards, and, because of
lower prestige when compared to gold and platinum cards, are commonly known as basic
and standard credit cards. Silver credit cards come with advantages such as lower annual
membership fees if there is any, and a lower threshold salary which banks use to evaluate
your application in case you should apply.

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 Silver credit cards will provide you with almost the same credit limit as other
cards provided you have a good credit history. You can also avail of 0% interest balance
transfer schemes which are made available for a period of 6-9 months for silver card
holders.

There are also some disadvantages to using silver credit cards. One would be the
lower cash advance limits, less rewards and promotional packages, and less travel perks
compared to gold and platinum cards. HDFC Bank, ICICI offer silver credit cards
through their HDFC Bank Silver cards and ICICI Sterling Silver credit card

Gold and Platinum Cards

Gold and platinum credit cards are a status symbol for any credit card holder,
bringing prestige since getting gold and platinum cards usually require that you have
good credit rating and a higher income levels. Gold and platinum cards offer higher limit
for cash advance withdrawals and sometimes can provide higher credit limits as
compared to standard or silver cards.

If you have a gold or platinum card, you also get better perks and privileges such
as travel insurance, extended warranties for appliance purchases and special deals on
specific products, and purchase protection insurance.
You can also engage in some loyalty schemes that are offered for gold and platinum
credit card holders which can sometimes involve cash back promos and reward points
systems.
Some popular gold and platinum cards available are the American Express Gold card,
and the ICICI Solid Gold Credit Card.

It is not possible to cover them the exact offerings of these cards but I will highly
advice you to check all these websites of the banks to get all the info about the credit
cards they are offering. Also try to talk to your friends who are having credit cards to get
more info.

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Types of Credit
Cards offered
By
Indian Banks

29
 DEBIT CARD
A debit card (also known as a bank card or check card) is a plastic card that provides an
alternative payment method to cash when making purchases. Functionally, it can be
called an electronic cheque, as the funds are withdrawn directly from either the bank
account or from the remaining balance on the card. In some cases, the cards are designed
exclusively for use on the Internet, and so there is no physical card.

In many countries the use of debit cards has become so widespread that their
volume of use has overtaken the cheque and, in some instances, cash transactions.

Like credit cards, debit cards are used widely for telephone and Internet purchases
and, unlike credit cards, the funds are transferred immediately from the bearer's bank
account instead of having the bearer pay back the money at a later date.

Debit cards may also allow for instant withdrawal of cash, acting as the ATM
card for withdrawing cash and as a cheque guarantee card. Merchants may also offer cash
back facilities to customers, where a customer can withdraw cash along with their
purchase.

Types of debit card systems

Online Debit System

Online debit cards require electronic authorization of every transaction and the
debits are reflected in the user’s account immediately. The transaction may be
additionally secured with the personal identification number (PIN) authentication system
and some online cards require such authentication for every transaction, essentially
becoming enhanced automatic teller machine (ATM) cards. One difficulty in using

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online debit cards is the necessity of an electronic authorization device at the point of sale
(POS) and sometimes also a separate PIN pad to enter the PIN, although this is becoming
commonplace for all card transactions in many countries. Overall, the online debit card is
generally viewed as superior to the offline debit card because of its more secure
authentication system and live status, which alleviates problems with processing lag on
transactions that may only issue online debit cards. Some on-line debit systems are using
the normal authentication processes of Internet banking to provide real-time on-line debit
transactions. The most notable of these are Ideal and POL.

Offline Debit System

Offline debit cards have the logos of major credit cards (e.g. Visa or MasterCard)
or major debit cards (e.g. Maestro in the United Kingdom and other countries, but not the
United States) and are used at the point of sale like a credit card (with payer's signature).
This type of debit card may be subject to a daily limit, and/or a maximum limit equal to
the current/checking account balance from which it draws funds. Transactions conducted
with offline debit cards require 2–3 days to be reflected on users’ account balances. In
some countries and with some banks and merchant service organizations, a "credit" or
offline debit transaction is without cost to the purchaser beyond the face value of the
transaction, while a small fee may be charged for a "debit" or online debit transaction
(although it is often absorbed by the retailer). Other differences are that online debit
purchasers may opt to withdraw cash in addition to the amount of the debit purchase (if
the merchant supports that functionality); also, from the merchant's standpoint, the
merchant pays lower fees on online debit transaction as compared to "credit" (offline)
debit transaction.

Electronic Purse Card System

Smart-card-based electronic purse systems (in which value is stored on the card
chip, not in an externally recorded account, so that machines accepting the card need no
network connectivity) are in use throughout Europe since the mid-1990s, most notably in

31
Germany (Geldkarte), Austria (Quick), the Netherlands (Chipknip), Belgium and
Switzerland (CASH). In Austria and Germany, all current bank cards now include
electronic purses.

Prepaid Debit Card

Prepaid debit cards, also called reload able debit cards or reload able prepaid
cards, are often used for recurring payments. The payer loads funds to the cardholder's
card account. Prepaid debit cards use either the offline debit system or the online debit
system to access these funds. Particularly for companies with a large number of payment
recipients abroad, prepaid debit cards allow the delivery of international payments
without the delays and fees associated with international checks and bank transfers.
Providers include Caxton FX prepaid cards, [Escape prepaid cards and Travelex prepaid
cards. [ Whereas, web-based services such as stock photography websites (stockpot),
outsourced services (odes), and affiliate networks (Media Whiz) have all started offering
prepaid debit cards for their contributors/freelancers/vendors.

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 BENEFITS & FEATURES OF DEBIT CARDS

 BENEFITS OF THE DEBIT CARD

• FREE WITH OUR BANK ACCOUNT

Obtaining a debit card is easy. If we qualify to open a bank account, we usually get a
debit card, if our bank offers the service.

• NO BACKGROUND CHECK

When we are applying for a debit card, the ban does not need to look into our credit
history. All we need is the documentation to open a bank, account, and money in our
bank when we use our debit card.

• CASH WITHDRAWALS

The customer can withdraw a minimum of Rs. 100/- and a maximum Rs.10, 000/- per
day

• CONVENIENCE

A Debit card fees us from carrying a lot of cash or a cheque book. In case, we are an
international traveler, we don’t need to stock up on Traveler’s Cheques or cash. We can
use our debit card to withdraw Cash from over 500,000 ATMs around the world in over
100 countries. We can withdraw in the local currency of the country we are in, limited
only by the money we have back home in our account, and Business Travel Quota (BTQ)
limit arability.

33
 • FAIR EXCHANGE

If we return merchandise or cancel services paid for with a Debit card, the transaction is
treated as if it were made with cash or a check. Customers usually get cash back for
offline purchases; for on-line transactions, the amount is credited to our account.

• STATEMENT OF ACCOUNT

A statement of transactions can be obtained from the customer’s branch. For example, a
mini statement containing the last four transactions and balance can be obtained at a State
Bank Group during the working hours of the customer’s branch.

• BANKING CUM SHPPING CARD

Your Debit card can be used as ATM card at any ATM across the world, as well as for
making purchase at merchant locations. You can also withdraw cash from any of the
12000 ATMs in India.

WIDELY ACCEPTED, INTERNATIONALLY VALID

 FEATURES OF DEBIT CARD

The following are features of Debit cards

A) It is a combination of a Cheque and ATM card. Therefore, there are no fees for using
the ATM for cash withdrawal, or as a debit card for purchase.

B) The Debit Card services in meant for withdrawals against the balance already
available in the designated account.

34
C) It is the card holder’s obligation to maintain sufficient balance in the designated
account to meet withdrawals and service charges.

D) A Debit card is more affordable than credit card. We just our bank account for all our
transactions. No credit period. Our bank account is debited immediately.

E) No credit check is required to get a Debit card.

F) Use of card is terminated without notice, upon the death, bankruptcy or insolvency of
the cardholder or for other valid reasons.

G) Spending is limited to our bank balance.

 Process Debit Card Transactions

A successful business will usually accept debit cards as a part of their overall
profile of payment solutions. If you don’t process debit cards, you may not be taking full
advantage of all the potential that your merchant account can deliver. There are
essentially two ways you can accept debit cards, online and offline.

Off line debit card transactions

An offline debit card transaction is still the way most merchants accept debit
cards. This is essentially the same as processing credit cards. You swipe your customer’s
debit card through a credit card terminal and have them sign the receipt.

If you choose to accept debit cards offline, be sure that the debit card has a VISA
or MasterCard logo. Otherwise, the debit card won’t be approved and you won’t be able
to process the debit card offline

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Online debit card transactions

The most advantageous way to process debit cards is to do it online. You will still
be able to accept debit cards at the point of sale, but you will need to install a PIN pad on
your credit card terminal.

An online debit card transaction works much like a credit card transaction, except
that after your customer swipes his or her debit card, they will enter a PIN instead of
signing the receipt.

At this point the encrypted debit card information is sent to the customer’s bank
for authorization, and you’ll receive the funds just as you would for a credit card
transaction.
Your business has many advantages when you accept debit cards.

For example, you pay a flat fee for each debit card transaction that you process,
instead the flat fee plus percentage rate that you are charged when you accept credit
cards. Over time, this can potentially save you a lot of money.
0000000000000000000000000000000000000000000000000

Another advantage when you process debit cards is that you can’t be charged
higher “downgrade” fees.

In a credit card transaction, you are usually charged the “discount rate.” However,
some transactions are considered to be a higher risk or expense to the bank, and you are
charged a higher rate as a result.

But when you accept debit cards, you always pay the same flat rate, with no
danger of the rate increasing.

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 You can also cut down on checkout time when you accept debit cards. It takes an
average of 30 seconds to hand over the pen, wait for the customer to sign the receipt, and
then take the pen back
Plastic Fraud
State-of-the-art thieves are concentrating on plastic cards. In the past, this type of fraud
was not very common. Today, it is a big business for criminals. Plastic cards bring new
convenience to your shopping and banking, but they can turn into nightmares in the
wrong hands. This pamphlet describes credit and debit cards and some common schemes
involving card fraud with tips to help you avoid them

The following are the types of frauds

1. Stolen Cards at the Office

2. Extra Copies of Charge Slips
3. Discarded Charge Slips
4. Unsigned Credit Cards
5. Loss of Multiple Cards
6. Strange Requests for Your PIN Numbers
7. Legitimate Cards
8. Altered Cards
9. Counterfeit Cards

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 Advantages & Disadvantage
Advantages

 Plastic money, unlike paper money, will not burn easily and can resist higher
temperatures than paper money.

 You have no fear to be theft. And its easy to use.

 Plastic money, unlike paper money, will not burn easily and can resist higher
temperatures than paper money.

 Paper money also picks up dirt and stains more easily than plastic money.

 Plastic money is the debit and credit cards. Plus point of plastic money is
that you won't have to carry your cash around all the time.

 It also doesn't wear after time as paper does nor does it rip and tear.

 Give you incentives, such as reward points, that you can redeem.

 Be more convenient to carry than cash.

 Provide a convenient payment method for purchases made on the Internet

and over the telephone.

 Help you establish a good credit history.

Disadvantage

 Cost much more than other forms of credit, such as a line of credit or a

38
  Personal loan, if you don't pay on time.

 Damage your credit rating if your payments are late;

 Allow you to build up more debt than you can handle;

 Have complicated terms and conditions;

 It also doesn't wear after time as paper does nor does it rip and tear.

 Paper money also picks up dirt and stains more easily than plastic money.

 I can't really see any advantages to have paper money, unless it is cheaper to make.

 Its disadvantage is that, some extra money will be deducted for the bank services.

 It’s around 2.5% of the money you spent.

CONCLUSION

21ST Century banking has become wholly customer-driven & technology driven
by challenges of competition, rising customer expectations & shrinking margins, banks
have been using technology to reduce cost & enhance efficiency, productivity &
customer convenienence. Technology intensive delivery channels like net banking,
mobile banking, etc have created a win-win situation by extending great convenienence.
& multiple options for customer.

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 From educating customers about credit cards there is a need to educate them
about the differentiating factors of the cards. Because visa and master card are
advertising regularly and thereby increases awareness. The strategy should be to
emphasize on its differentiating characteristics.

They also need to identify potential customers and target those using mailers. As
internet is growing at a fast rate the net users can be targeted by having interactive sites.
The prospective company’s card personality could also be used in the home page to solve
customer queries in the ‘Best Possible Manner’.

BIBLIOGRAPHY

BOOKS

 INOVATION IN BANKING & INSURANCE

 FINANCIAL MARKET & SERVICES
 INDIAN BANKING INDUSTRIES
 INDIAN BANKING
 TIMES OF INDIA NEWS PAPER (1st OCT 2010)

WEBSITE

 WWW.GOOGLESERCH.COM
 WWW.YAHOO.COM
 WWW.RBI.ORG
 WWW.WIKIPEDIA .COM

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 WWW.INFOSEE.COM
 WWW.INDIANMBA.COM
 WWW.INDINBANKING.ORG

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