INDEX

1. Introduction ................................................................................................................................ 3
1.1 Origin of debit and credit card ............................................................................................................................... 5

1.2 Meaning ................................................................................................................................................................ 7

1.3 Definition .............................................................................................................................................................. 9

2. The History of Credit Card and Debit Card .......................................................................... 11

2.1 Credit Card Origin ............................................................................................................................................... 11

2.2 Plastic Becomes the Standard .............................................................................................................................. 11

2.3 Bank Card Associations ...................................................................................................................................... 12

2.4 Debit Card Emerge .............................................................................................................................................. 12

2.5 The Future ........................................................................................................................................................... 12

3. Objective of study ..................................................................................................................... 13

3.1 Types of Credit Cards offered by Indian Banks ....................................................................................................................... 13

3.2 Significance of Plastic world ............................................................................................................................... 15

3.3Advantages and Disadvantages of Credit Card ......................................................................................................................... 16

Benefits and Features of Debit Card .............................................................................................................................................. 18

4. Credit Card .................................................................................... Error! Bookmark not defined.

4.1 Introduction ......................................................................................................................................................... 21

4.2 Definition ............................................................................................................. Error! Bookmark not defined.

4.3 Meaning ............................................................................................................... Error! Bookmark not defined.

4.4 Advantages and Disadvantages of Credit Card ..................................................... Error! Bookmark not defined.

4.5 Marketing Strategies............................................................................................. Error! Bookmark not defined.

4.6 Steps followed in Credit Card Transaction ........................................................... Error! Bookmark not defined.

4.7 Different types of Credit Cards............................................................................. Error! Bookmark not defined.

4.8 Types of Credit Cards offered by Indian Banks.................................................... Error! Bookmark not defined.

5. Debit Card ...................................................................................... Error! Bookmark not defined.

5.1 Introduction ......................................................................................................................................................... 26

5.2 Types of Debit Card Systems ............................................................................... Error! Bookmark not defined.

5.3 Benefits and Features of Debit Card .................................................................................................................... 26

5.4 Process Debit Card Transaction............................................................................ Error! Bookmark not defined.

6. Credit V/s Debit Cards ............................................................................................................. 34

7. Plastic Fraud .................................................................................. Error! Bookmark not defined.

8. Review of Literature ................................................................................................................. 34

9. Research Methodology .................................................................. Error! Bookmark not defined.

9.1 Different types ..................................................................................................................................................... 21

9.2 Significance of Plastic world ............................................................................................................................... 24

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10. Conclusion and Suggestions ..................................................................................................... 44

11. References 49

12. Bibliography .............................................................................................................................. 51

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1. Introduction

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.

Credit cards or debit cards are called Plastic cards. Plastic cards are one of
the most popular forms of payment. In fact, Plastic cards are an inevitable part of
our life. They allow cardholders to pay for goods and services easily and
conveniently and provide an alternative to cash and cheques. As Credit Card, Debit
card, ATM card etc are, used as the alternative to money such as cash or cheque,
and are made of plastic, they are also called Plastic money. This article is
about: What are plastic cards? Debit cards and Credit cards, Kinds of Cards(Add-on
card, charge card), Details of plastic cards, EMV card, Analysis of card number.

Plastic cards are issued to users by a variety of organisations (called as card

issuers) such as banks, retailers such as Big Bazaar, Shopper Stop. There are various
plastic card schemes such as MasterCard, Visa, Rupay Cards, American Express,
Diners Club, Maestro etc. These operators work behind the scene to make sure that
card works The types of cards issued and their levels of functionality vary from card
issuer to card issuer and between the different card schemes under which the cards
are issued.

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 Indian economy has flourished with the advent of Liberlisation, Privatisation
and Globalisation. Banking sector is not an exception too. These reforms have
presented a challenge before Indian banking sector to shake hands with the pace of
new technology. However, mere technology upgradation or introduction of
innovative products cannot improve the state of affairs until customers don't respond
to it positively. Hence, it becomes very necessary for the banks to offer the services
or products while taking into consideration the customers’ needs, preferences,
perceptions and convenience. Also, the banks' services are not just confined to their
particular branch customers only. Customer is now treated as customer of banks as a
whole, which means that he is now capable of enjoying facilities such as anywhere,
anytime banking (Kamesam, 2003). This concept has enabled the bankers to
establish long term connection with their customers.

Hence, Electronic banking is the new trend significantly adopted by banking

sector worldwide due to its wider scope for the customers as well as banks at large.
Various sophisticated products have been launched by the banks which help them to
meet the basic requirements of their customers. With the entry of tech savvy private
sector banks and foreign banks, the competitive environment has started prevailing
in banking sector too. No doubt, Public sector banks have large network of
traditional branches to approach their customers as compared to the private and
foreign players. However, with the help of information technology, it has now
become possible for banks to deliver products and services efficiently and to
improve customer base without opening new branches. Hence, these new private
and foreign players are trying to compete with them on the basis of adoption of new
technological services like plastic cards, PC banking, Electronic Funds Transfer
(EFT), Internet banking etc. to approach the maximum customers inspite of having
less physical branches (Venkatesan and Kumar, 2007). Due to this reason, public
sector banks are also likely to move towards electronic banking, which ultimately
leads the entire banking sector to the remarkable improvement with respect to its
efficiency, customer services, productivity, profitability etc. Thus, Banks are now
reengineering the way in which their services can be reached to their customers by
bringing in flexibility in their "distribution channels" (De Sarkar et. al. 2001).

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 1.1 Origin of debit and credit card

Money is the most important and useful inventions made by man. The word
“Money” has been derived from the Latin word “Moneta” which denotes the Roman
goddess Juno in whose temple money used to be minted (Crowther, 1972). We
know that this man made instrument became essential for the development of social
economy which is principally a monetary economy. An economic system in which
exchange is Introduction 3 facilitated by the use of money, as distinct from a barter
system, where no money is employed. In barter system, there is the direct exchange
of commodities and services against commodities and services in the society. In
other words, barter system is a system in which people sell goods and services
through direct exchange. Thus, it served the self interest of every individual in
society.

It has been observed that the barter system of exchange usually flourishes
among the uncivilized and economically backward communities and countries
(Devraj, 2004). It is next to impossible that all wishes of bartering individuals
should coincide as to the kind, quality, quantity and value of the things which are
mutually desired, especially in modern economy in which on a single day millions
of persons may exchange millions of commodities and services. In barter system of
exchange, people had to encounter the problems like: inconvenience of lack of
double coincidence of wants, common measure of value, mean of sub division, store
of value.

The inconvenience and difficulties of the barter system led to the evolution
and growth of a common unit of account. It has been observed that barter system of
exchange was suited to the primitive conditions under which the requirement of
human life were simple and limited only. It is obvious that under pure barter
exchange only a very primitive economy where people produced and exchanged
only very few goods and services could exist (Vaish, 1997). But with the passage of
time, people grew in the scale of civilization, wants multiplied and with the division
of labour, the difficulties and inconvenience encountered in barter system became
serious and intolerable.

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 The origin of money came as a multifold blessing to the mankind as the
barter system of exchange was an outmoded way of life for those people who were
keen to grow and impatient to conduct their trade cheaply and efficiently in many
commodities. Money deserves to be ranked among man’s outstanding inventions.
By overcoming the difficulties of barter, man has made possible a tremendous
saving of time and trouble in marshaling productive factors and distributing the
output to ul Introduction 4 invent a system, a medium of exchange, which is free
from handicaps of barter. Money was found to be the best and lasting solution.

However, it would be a great mistake to presume that money was

discovered and introduced overnight. The introduction of money came as a
multifold blessing to mankind. Money is one of the most fundamental of man’s
inventions. Every branch of knowledge has its fundamental discovery. In mechanics
it is the wheel, in science it is the fire and in politics the votes. Similarly, in
economics in the whole commercial side of man’s social existence money is the
essential invention on which all the rest is based (Crowther, 1972).

From its very invention, money was circulated in society in different forms.
Money can be classified on different criteria, like the physical characteristics of
money material like animal money, metallic money, etc. In the beginning, ordinary
commodities like furs, skins, jaws of animals, etc were used as money. The
commodity money change in form and given the way to metallic money which in
turn has given way to paper and credit money. Money has been around in one form
or the other with some or all of the functions and characteristics, since almost 5000
BC. It has evolved over thousands of years to attain new characteristics and to
perform new functions.

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 1.2 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 term plastic money has been used in different settings to describe a
wide variety of payment systems and technologies (Basle, 1996). “Stored-value”
products are Introduction 6 generally prepaid payment instruments in which a record
of funds owned by or available to the consumers is stored on an electronic device in
the consumer’s possessions, and the amount of “stored value” is increased or
decreased, as appropriate, whenever the consumer uses the device to make a
purchase or other transaction.

By contrast, “access” products are those typically involving a standard

personal computer, together with appropriate software, that allow a consumer to
access conventional payment and banking products and services, such as credit
cards or electronic funds transfers, through computer networks such as the internet
or through other telecommunications links (Hanacek, 1998).

According to Basel (1998) plastic/electronic money refers to “stored value”

or prepaid payment mechanisms for executing payments via point of sale terminals,
direct transfers between two devices, or over open computer networks such as the
internet. Stored value products include “hardware” or “Card- based” mechanisms
(also called “electronic purses”), and “Software” or “network-based” mechanisms
(also called “digital cash”). Stored value cards can be “single – purpose” or “multi-
purpose”. Single- purpose card (e.g. telephone cards) are used to purchase one type
of good or services, or products from one vendor, multi-purpose cards can be used
for a variety of purchases from several vendors.

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 Also, RBI (2002) quoted European central Bank (1998) definition which
states that plastic money is an electronic store of monetary value on a technical
device used for making payments to undertakings other than the issuer without
necessarily involving bank accounts in the transaction, but acting as a prepaid bearer
instrument. Basle (1998) argues that banks may participate in electronic money
schemes as issuers, but they may also perform other functions. Those include,
distributing electronic money issued by other entities; redeeming the proceeds of
electronic money transactions for merchants, handling the processing, clearing, and
settlement of electronic money transactions; and maintaining records of
transactions. Plastic money which includes stored value card could be of three
types–single– purpose card, closed-system or limited-purpose card and general-
purpose or multipurpose card.

The single-purpose card generally with a magnetic chip recording the

amount of fund therein is designed to facilitate only one type of transaction e.g.,
telephone calls, public transportation, laundry, parking facilities etc. Here, the
Introduction 7 distinguishing point is that the issuer and the service provider
(acceptors) are identical for the cards. These cards are expected to substitute coins
and currency notes.

The closed system or the limited-purpose cards are generally used in a

small number of well- identified points of sale within a well-identified location such
as corporate/ university campus. The multi- purpose card on the other can perform
variety of functions with several vendors’ viz., credit card, debit card, stored value
card, identification card, repository of personal medical information etc. These cards
may reduce demand for currency accounts in the bank for likely reduction in
transaction costs and prudent portfolio management.

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 1.3 Definition

A slang phrase for credit cards, especially when such cards used to make
purchases. The "plastic" portion of this term refers to the plastic construction of
credit cards, as opposed to paper and metal of currency. The "money" portion is an
erroneous reference to credit cards as a form of money, which they are not.
Although credit cards do facilitate transactions, because they are a liability rather
than an asset, they are not money and not part of the economy's money supply.

It is a term increasingly being used to refer to all forms of credit cards,

debit cards, retailer cards, diner cards and other types of plastic cards which we use
daily instead of actual currency notes.

Plastic/polymer notes which is actual money printed on polymer notes is

also sometimes referred to as plastic currency but the former usage is the more
common one currently.

Plastic money is a term that is used predominantly in reference to the hard

plastic cards we use every day in place of actual bank notes. They can come in many
different forms such as cash cards, credit cards, debit cards, pre-paid cash cards and
store cards.

Plastic money is the alternative to the cash or the standard 'money'. Plastic
money is used to refer to the credit cards or the debit cards that we use to make
purchases in our everyday life. Plastic money is much more convenient to carry
around as you do not have to carry a huge sum of money with you. It is also much
safer to carry it along or to travel with it as if it is stolen one can consult the bank
whose service you are using and get it blocked hence saving your money from
getting stolen or even lost.

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 Nowadays even developing countries like India are encouraging the use of
this plastic money more than cash due to these reasons. Furthermore these credit and
debit cards also have plastic used in their making and that is where the name 'plastic
money' has originated from.

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2. The History of Credit Card and Debit Card

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.

2.1 Credit Card Origin

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
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.

2.2 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.

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 2.3 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.

2.4 Debit Card 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.

2.5 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.

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3. Objective of study

3.1 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.

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.

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  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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  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.

3.2 Significance of Plastic world

Today's world is an ever changing place and the dynamicity of modern day
business market has experienced the greatest of paradigm shifts. The change is
undoubtedly buoyed by development in terms of technology to incorporate state of
the art facilities to people who are reaping the benefits out of this scenario. Of these,
plastic card is one of the smartest of technologies ever be made available to do
business with.

Plastic cards spread over the business world in terms of plastic money or credit and
debit cards as well as ATM cards,

Business cards and Identity cards, Smart Cards, Membership Cards and
loyalty cards of a retail shop, Hotel Key cards and Luggage tags etc. the plastic card
has changed and adjusted so fast and significantly with development and
modernization that in today's life it is virtually impossible to do away with these
cards in some forms or the others. From simple shopping to purchasing tickets in
trains and buses to amusement parks, availing different services and refuelling cars,
meeting new clients etc. are to name a few of the places when we reach our pockets
to take out a plastic card.

Plastic cards finding more and more and usage of them has metamorphosed
leaps and bound into thinner, more flexible and smarter looking cards of different
attractive shapes and colours. PVC cards, Polycarbonate cards, frosted plastic cards
had given the customers the benefits of reusing the cards and this more than
anything has help the environment. The throwing off of the plastic has been done
away with as plastic cards are immortal and beautifully and aesthetically done cards
remain attractive and worthy of usage for long.

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 Interestingly, it was in 1950, the Diner's Club in US has used a plastic card
as charge cards for their diners which they could use in 27 restaurants. It started
with two hundred takers which shot up to as high as twenty thousand by the end of
the year. Since then plastic card found its active usage in practically hundreds of
aspects of life as it is proven to be a greener, leaner, more durable and more cost
effective options to be ever found.

3.3Advantages and Disadvantages of Credit Card

 Advantages of Credit Card

The benefits of credit card can be grouped as follows

 Benefits to the Bank:

• 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 customers.
• 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.
• 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.
• This also provides additional customer services to the existing clients. It
enhances the customer satisfaction.
• More use by the car holder and consequently the growth of banking habits in
general.

• Better network of card holders and increased use of cards means higher
popularity and image of the bank.
• Savings of expense on cash holdings, i.e. stationery, printing and man power
to handle clearing transactions while considerably is reduced. It increases.

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  Benefits to Card Holder:

• 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.
• 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.
• Months purchases can be settled with a single remittance, thus, tending to
reduce bank and handling charges.
• The card holder has the period of free credit usually between 30-50 days of
purchase

• 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.
• Availing credit with minimum formality.

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

 Benefits to Merchant Establishment:

• This will carry prestigious weight to the outlets.

• Increases in sale because of increased purchasing power of the cardholder due

to unbilled credit available to the card holder.
• The retailers gain from the impulse buying and trading up the tendency to buy
the bigger or better article
• Credit card ensures timely and certainly of payments.

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

• Systematic accounting since sales receipts are routed through banking

channels.

• Advertising and promotional support on national scale.

• Development of prestigious clientele base.

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  Disadvantages of Credit Card

• Some credit card transactions take longer time than cash transactions because
of various formalities.
• The customer tends to overspend out of immerse happiness.

• Discounts and rebates can rarely be obtained.

• 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.
• Customers may be denied cash discount for payment through card.

• It might lead to spending habits and cardholders may end up in big debts.

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

• Losses to bad debts and reduced an additional liquidity is

• It also allows him to delegate spending power to add on members

• Credit card is considered as a status symbol.

Benefits and Features of Debit Card

 Benefits of the Debit Card

• Free with 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 traveller, we don’t need to stock up
on Traveller’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.

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 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.
• Faire 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 Shipping 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.

Debit Card Disadvantages

The downsides associated with debit card use mainly revolve around the fees
charged but there are one or two other disadvantages as well:
 More Fees: There are potentially quite a few fees involved in regular debit
card use that can add up quite quickly. The largest of these fees tends to be
the charges you incur when you use an ATM to withdraw cash – if you use
an ATM that does not belong to your card issuer’s network then you may be
charged two fees – one by your own bank and one by the ATM owner and
these days these fees when combined can be as high as $5 per withdrawal.
Monthly fees and PIN transaction fees can add up as well. Many of these
fees can be avoided though if you shop around carefully as some debit cards
offer a much better value in terms of fees than others.
 Dealing with Problem Transactions – Sometimes people are faced with a
dilemma when making larger purchases or purchases online – which should
they use, their credit card or their debit card? In one respect paying with a
debit card may be a better idea as the item is paid in full. On the other hand
though if there is a problem with a transaction or you need to return an item
getting your money back on a debit card can be a lengthy and confusing
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 process, whereas if you had opted to use a credit card the transaction would
simply be reversed and you would not be “out” the money.
 Recurring Transactions – As people spend more and more time on the
Internet they tend to sign up for all kinds of services that have a monthly
charge attached to them – everything from a TV service like Netflix to
music services like Spotify and 101 things in between. Most of these
services accept a debit card as readily as they accept a debit card. The
danger is though that you will forget that one of these payments is due and
the charge will be made when you do not quite have enough money in your
bank account to cover it and you will be tied up with overdraft fees and
cancelled subscriptions, something that would probably not be an issue with
a credit card.
In the end how and when they use a debit card is up to the individual. With some
careful shopping around you can find debit cards that have lower fees attached to
them and there are ways you can minimize the fees you are charged – asking for
cash back when making a debit card purchase instead of withdrawing money from
an ATM for example. Life without a debit card can be rough these days so using
them occasionally is almost a must, and can be quite beneficial if you use it
sensibly.

 Features of Debit Card

• 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.
• The Debit Card services in meant for withdrawals against the balance already
available in the designated account.
• It is the card holder’s obligation to maintain sufficient balance in the designated
account to meet withdrawals and service charges.
• 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.
• No credit check is required to get a Debit card.

• Use of card is terminated without notice, upon the death, bankruptcy or

insolvency of the cardholder or for other valid reasons.
• Spending is limited to our bank balance.

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4. Research Methodology

4.1 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.

 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

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 differs from one bank to another) is levied in your next billing
statement.
 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.
• 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.

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  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

• 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/Visa Card

• 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 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.

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  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.

4.2 Significance of Plastic world

Today's world is an ever changing place and the dynamicity of modern day
business market has experienced the greatest of paradigm shifts. The change is
undoubtedly buoyed by development in terms of technology to incorporate state of
the art facilities to people who are reaping the benefits out of this scenario. Of these,
plastic card is one of the smartest of technologies ever be made available to do
business with.

Plastic cards spread over the business world in terms of plastic money or credit and
debit cards as well as ATM cards,

Business cards and Identity cards, Smart Cards, Membership Cards and
loyalty cards of a retail shop, Hotel Key cards and Luggage tags etc. the plastic card
has changed and adjusted so fast and significantly with development and
modernization that in today's life it is virtually impossible to do away with these
cards in some forms or the others. From simple shopping to purchasing tickets in
trains and buses to amusement parks, availing different services and refuelling cars,
meeting new clients etc. are to name a few of the places when we reach our pockets
to take out a plastic card.

Plastic cards finding more and more and usage of them has metamorphosed
leaps and bound into thinner, more flexible and smarter looking cards of different
attractive shapes and colours. PVC cards, Polycarbonate cards, frosted plastic cards
had given the customers the benefits of reusing the cards and this more than
anything has help the environment. The throwing off of the plastic has been done
away with as plastic cards are immortal and beautifully and aesthetically done cards
remain attractive and worthy of usage for long.

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 Interestingly, it was in 1950, the Diner's Club in US has used a plastic card
as charge cards for their diners which they could use in 27 restaurants. It started
with two hundred takers which shot up to as high as twenty thousand by the end of
the year. Since then plastic card found its active usage in practically hundreds of
aspects of life as it is proven to be a greener, leaner, more durable and more cost
effective options to be ever found.

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5. Need of debit card and Credit card

5.1 Introduction

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.

5.2 Need of Debit Card

 Benefits of the Debit Card

• Free with 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

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 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 traveller, we
don’t need to stock up on Traveller’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.
• Faire 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 Shipping 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.

 Features of Debit Card

• 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.
• The Debit Card services in meant for withdrawals against the
balance already available in the designated account.
• It is the card holder’s obligation to maintain sufficient balance in
the designated account to meet withdrawals and service charges.

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 • 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.
• No credit check is required to get a Debit card.

• Use of card is terminated without notice, upon the death,

bankruptcy or insolvency of the cardholder or for other valid
reasons.
• Spending is limited to our bank balance.

5.3 Introduction

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.

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.

Need of Credit Card

 1.Peace of mind

Credit cards come with handy, free additional consumer protection, known
as Section 75. So, if a purchase is faulty, isn’t as described or simply doesn’t
turn up you can turn to your credit card provider for financial compensation as
well as the retailer on any purchase between £100-£30,000.

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  Free borrowing

There is no cheaper way to borrow than with the right credit card. Whether
you are wanting to clear existing debt or build up new debt you can borrow
interest-free for well over a year with a credit card that offers 0% on
purchases. Find the right low-cost card for you with credit card comparison
service.

 Earn free money

Many credit cards reward you for using them, either with money or points that
you can use to buy anything from a frozen turkey to a flight to Turkey. Why
would you shop with cash or a debit card, when for the exactly same amount
of effort you could be earning rewards or cold, hard cash?

 Cheap money abroad

Savvy travellers carry plastic. Not only does it give you extra consumer
protection (Section 75 covers foreign purchases as well as domestic), a credit
card will also save you money. When you use the right credit card abroad you
don’t have to pay any commission and get the best possible exchange rate.
Find out more about taking your plastic abroad.

 Build a good credit report

A good credit report will help you buy a house, a car and get you the best
interest rates on both. A bad one will stop you getting pretty much anything
you can’t pay up front for. Getting a credit card and using it sensibly is the
best way to build a credit record or rehabilitate a bad one.

 Free insurance

Some credit cards come with free purchase protection for a short period after
you buy. This means that if the item you bought is lost or stolen within a set
time – usually around 90 days – you get your money back.

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  Protect your money

If you lose your wallet full of cash the chances are you will never see that
money again. If you lose your credit card, provided you were careful and
weren’t swinging it around your head screaming your pin number, you won’t
be liable for money spent on it after you lost it. Just make sure you report the
loss swiftly and are always careful with your pin. If your credit card company
can prove your were negligent they won’t pay up.

 It’s the only way to pay

Some companies will still insist on a credit card when taking payment, for
example when you make hotel reservations or rent a car. This is because with
a credit card they get greater assurance that they can recoup any additional
costs you run up.

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6. Process of Debit card and Credit card
Process of debit card

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.

 Offline 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.

 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.

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 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.

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.

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.

If you process 20 credit card transactions a day, you’re losing 100 minutes
a day just passing a pen back and forth! That’s almost two hours.

Process of Credit card

 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.

 Merchant Balancing

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

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  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.

 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.

 Interchange (VS/MC only)

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

 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.

 Merchant ACH

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

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7. Functions of debit and Credit Card

Function of credit card

The following points highlight the nine main functions of credit. The functions are: 1.
Economy in the use of money 2. Easy exchange and remittance 3. Helpful to
production 4. Promotion of trade especially foreign trade 5. Expansion of bank credit
6. Financial accommodation to industries 7. Benefits to consumers 8. Credit to the
government sector 9. Stability.

Economy in the use of money:

The credit system economises the use of metallic money and paper notes. The credit
instruments like promissory notes, bills of exchange, cheques, credit cards, etc. are
used in the modern society as money-substitutes, and so they have reduced the cost of
issuing metallic money and paper notes. Likewise they have minimized or eliminated
the risks and inconveniences involved in cash transactions.

Easy exchange and remittance:

The credit instruments minimize the cash transactions and thereby make the scope of
exchange wider and the remittance of funds easier. They permit wealth to be
transferred to places where more economic use can be made of it.

Helpful to production:

The credit system facilitates large- scale pro-duction. It stimulates and finances
production in anticipation of demand. Producers nowadays very often obtain credit
from banks to begin and expand their operations. Even the farmers and the small
artisans depend on bank credit for production. The wholesale and retail traders
conduct their trading with bank credit.

It is rightly said that the credit system lubricates the production processes and keeps
the wheels of production constantly moving. There is a steady flow of goods from the
wholesaler to the retailer and from the latter to the consumer with the help of credit.

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Promotion of trade especially foreign trade:
The bills of exchange have increased the scope of both internal and external trade as
the trade- payments can now be made without the transfer of funds or gold. The
commercial credit enables the buyers to make payments for the value received at
convenient times. So, the credit system enables the traders to tide over periods of
difficulty.

Expansion of bank credit:

The credit system enables the banks to create a large amount of credit out of a small
amount of deposit. This has resulted in the vast expansion of bank deposits.

Financial accommodation to industries:

Industries get short-term credit from foe commercial banks and the long-term credit
from the development banks. This enables them not only to tide over the temporary
financial stringency but also to maintain continuity in their activities.

Benefits to consumers:
Bank credit to the consumers enables them to buy durable consumer goods,
especially household goods on installment basis.

Credit to the government sector:

The credit to the government also helps them to meet both temporary necessities and
growth requirements.

Stability:
If the issue of credit is properly regulated, it tends to stabilise trade and reduce
fluctuations in prices.

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Function of debit card

There are currently three ways that debit card transactions are
processed: EFTPOS (also known as online debit or PIN debit), offline debit (also
known as signature debit), and the Electronic Purse Card System.[1] One physical
card can include the functions of all three types, so that it can be used in a number of
different circumstances.
Although the four largest bank card issuers (American Express, Discover
Card, MasterCard, and Visa) all offer debit cards, there are many other types of debit
card, each accepted only within a particular country or region, for
example Switch (now: Maestro) and Solo in the United Kingdom, Interac in
Canada, Carte Bleue in France, EC electronic cash (formerly Eurocheque) in
Germany, UnionPay in China, RuPay in India and EFTPOS cards in Australia and
New Zealand. The need for cross-border compatibility and the advent of
the euro recently led to many of these card networks (such as Switzerland's "EC
direkt", Austria's "Bankomatkasse", and Switch in the United Kingdom) being re-
branded with the internationally recognized Maestro logo, which is part of the
MasterCard brand. Some debit cards are dual branded with the logo of the (former)
national card as well as Maestro (for example, EC cards in Germany, Switch and
Solo in the UK, Pinpas cards in the Netherlands, Bancontact cards in Belgium, etc.).
The use of a debit card system allows operators to package their product more
effectively while monitoring customer spending.

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; some
online cards require such authentication for every transaction, essentially becoming
enhanced automatic teller machine (ATM) cards.
One difficulty with using online debit cards is the necessity of an electronic
authorization device at the point of sale (POS) and sometimes also a
separate PINpad 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
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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 online debit transactions.

Offline debit system

Offline debit cards have the logos of major credit cards (for example, Visa
or MasterCard) or major debit cards (for example, 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 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).

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 8. Working of debit card and credit card

How a Debit Card Works

When you use your debit card, the merchant will place a hold on your account for the amount
of money of your transaction. Your bank may show you the pending transactions on your
account. These are the holds put in by the merchants. The merchants then complete the
transaction by submitting their transactions and then the money is taken from your account
and shows up in your cleared transactions. Some merchants may take longer to file the
transactions, and you may have a transaction listed as pending for a few days.
If you use your debit card at a hotel or for a car rental, the company may put a larger hold on
the account to cover extra costs that you may accrue. It is important to be aware of this so
that you do not run into a situation in which your card may be declined because of the hold.
Be sure to have additional money in your account if you use it for a hotel or a car rental.
Spotting Debit Card Transactions on Your Statement
When you look at your statement, the transactions down with a debit card may show up as
POS transactions, with the merchant listed on the account. If you see an ACH transaction,
this means that the money was directly debited from your account and that you did not use
your debit card to complete your transaction.
Understanding this can help you if you are trying to find out if someone accessed your
account without your permission. It can also help you identify spending if something is not
labeled correctly. For example, your local fast food restaurants may be doing business under
another name.
Debit Cards and Overdrawing Your Account
You can overdraw your account with a debit card. Some banks allow you to overdraw your
account to a certain dollar amount and simply charge you fees for each transaction that they
pay into the negative. Additionally, if you have checks clear later that night, you can find
yourself overdrawn while using your debit card. It is important to keep a running balance on
the account so that you know how much money you have available to you.
Some charges may drop off the hold before they clear your account. It makes the money
available again, which means that you can overdraw your account while using a debit card.
Additionally, a check may not have cleared, which allows you to overdraw. Tracking your
purchases yourself on paper or with an app is the best way to protect your money.
Fees Associated With a Debit Card
When you use a debit card at an ATM, you may be responsible for ATM fees. Your bank
may have fees associated with your debit card, and it is important to carefully read the rules
around using the debit card. There may be a monthly service fee associated with having a

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debit card. Some banks may limit the number of debit transactions you have for free each
month. Although as debit card use has become more common, these fees and restrictions are
less common. You may consider switching account types or banks if there are fees related to
your debit card, especially if you are limited to a low number of debit card transactions each
month.
Precautions With a Debit Card
One of the biggest precautions you need to take with your debit card is to make sure that it or
the information on it is not stolen. If your card is physically stolen, you need to call the bank
immediately and cancel the card. Criminals might hack a website and steal the card
information and then use it to make purchases online. Your bank may have sent you a new
debit card at some point because there was a data breach at a merchant. If you find
unauthorized transactions in your account, you need to call the bank immediately to find out
what happened.
Another way that criminals are getting the information is through card skimming. The person
can either swipe your card through the machine themselves (this happens at restaurants or
other places where they take your card from you momentarily) or they can attach a skimmer
to a machine where you use your card (like an ATM, vending machine, or RedBox). The
skimmers are very small and blend in well. They can be difficult to spot. However, if one of
these looks off to you, especially where you swipe the card, you should likely use a different
ATM or vending machine. It is important to check your account regularly and watch out for
unauthorized transactions, because the sooner you spot the problem, the easier it will be to
resolve.

What Is a Credit Card?

A credit card is a plastic card that lets you access the credit limit your credit card issuer gives
you. A credit limit is like a loan. However, instead of giving you the full loan in cash, the
bank lets you take as much of the credit as you want at a given time and then allows you to
reuse the loan over and over as long as you pay back what you've borrowed.
How Credit Cards Work
A lot goes on behind the scenes of a credit card transaction. When you swipe your credit card
to make a purchase, the merchant's credit card terminal asks your credit card issuer whether
the card is valid and if you have enough available credit.1 Your credit card issuer sends back
a message that the transaction is approved or declined. If it's approved, you can take your
goods and services and go on your way.
Each time you make a purchase, your available credit goes down by that same amount. If you
have a $100 credit limit and you make a $25 purchase, you’ll have $75 available credit

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remaining. You'll owe $25 to the bank. If you borrow another $50 before paying back the
$25 you borrowed, you would owe the bank a total of $75 and have $25 in available credit.
What makes a credit card different from a regular loan is that your credit limit is available
after paying down the balance on the card.2 In the earlier example, if you paid back the $75
that you owed, you'd have $100 of available credit again.
You can repeat the process of spending up to your credit limit and repaying the balance as
many times as you like provided you abide by the terms of the credit card. The terms would
include making your payments on time and not charging more than your credit limit.
You can continue borrowing against your credit limit over time, which is why credit cards
are referred to as revolving accounts or open-ended accounts.
The Cost of Charging a Credit Card Balance
The credit card issuer gives you a certain amount of time to pay back the entire amount that
you’ve borrowed before you're charged interest. The period of time before the interest is
charged is called the grace period, which is typically between 20 and 25 days. If you don’t
pay off your full balance before the end of the grace period, a fee or finance charge is added
to your balance. The finance charge is based on the interest rate and your outstanding
balance.34
The interest rate is the annual rate you pay for borrowing money on your credit card. Interest
rates are generally based on market interest rates, your credit history, and the type of credit
card you own.5 If you have a good history of paying back your credit card bills, you’ll
usually qualify for lower interest rates than what's typically charged.
You have to pay your balance in full before the end of the grace period if you want to avoid
paying interest.6 However, the credit card issuer usually doesn’t require you to pay back all
of what you owe at once, but you must pay at least the minimum payment by the due date to
avoid a late penalty. Paying only the minimum is the slowest and most expensive way to pay
off your credit card balance.6
It's important to always pay at least the minimum amount on time each month to maintain a
good credit history and to avoid late fees. As you build a stable credit history, you may
qualify for a lower interest rate on the card.7
Reviewing Your Credit Card Activity
Each month, the credit card issuer will send you a billing statement that includes your
minimum payment, the due date, and a list of the transactions that have been posted to your
account since your last billing statement. It’s a good idea to review these transactions to
make sure that all of the transactions were made by you and that there are no discrepancies.
You also want to make sure your last payment was correctly applied to your account. If any
fees have been added to your balance, make sure they are legitimate.
Other Types of Plastic

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Physically, a credit card is a piece of plastic measuring 3.370 inches by 2.125 inches.
Typically, there are 16 digits embossed on the front (15 digits for an American Express card).
Note that there are other types of cards that fit this description that aren't credit cards, but
mimic a credit card in that you swipe to make a purchase.89 For example, a check card or
debit card will also have 16 digits imprinted on the front. However, purchases on a debit
card are taken from your checking account. Also, a prepaid card looks and works very much
like a credit card, but purchases are deducted from the prepaid account balance. The same is
true for gift cards.

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9. Credit card V/s Debit Cards

Debit cards make it more difficult to overspend, since you're limited to only the
amount available in your checking account.

With a credit card, you run the risk of spending beyond your means. Just because your
credit limit is $1,000 doesn't mean you can afford that sort of spending in your
monthly budget.

Plus, debit cards offer the same convenience as credit without requiring you to borrow
money or pay interest or fees on your purchases. Choosing debit is great for managing
your money and helping you live within your means.

On the other hand, some credit cards offer additional insurance on purchases and can
make it easier to request a refund or a return, although many companies are reducing
or withdrawing these benefits.

Choosing the Best Card for the Situation

When trying to determine whether to use a credit card or a debit card, you should be
honest with yourself and your ability to handle credit.
If you have spending issues, it is better to use your debit card whenever possible, to
prevent yourself from falling into credit card debt.
Choosing the best card to use also depends on the purchase. Some rental car agencies
and hotels make using a debit card impossible, or at least inconvenient. For example,
they may require utility bills, personal references, pay stubs, or other proof of ability
to pay before they'll accept your booking.7 You may find using a credit card to be less
of a headache.
Using a credit card might also be the better option if you want to take advantage of
credit card reward programs. But this system only works in your favor if you pay off
the balance in full each month.

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 BASIS FOR
COMPARISON CREDIT CARD DEBIT CARD

Meaning Credit card is issued by a bank Debit card is issued by a bank

or any financial institution to to allow its customers to
allow the holder of the card to purchase goods and services,
purchase goods and services on whose payment is made
credit. The payment is made by directly through the
the bank on the customer's customer's account linked to
behalf. the card.

Implies Pay later Pay now

Bank Account The bank account is not The bank account is a must
prerequisite for issuing a credit for issuing a debit card.
card.

Limit The maximum limit of The maximum limit of

withdrawing money is withdrawing money will be
determined according to the less than the money lying in
credit rating of the holder. the saving bank account.

Bill The holder of the card has to There is no such bill, the
pay the credit card bill within 30 amount is directly deducted
days of every month. from the customer's account.

Interest Interest is charged when No interest is charged.

payment is not made to the bank
within a specified time period.

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10. Conclusion and Suggestions

 The use of Plastic cards is more and moraine rising for online payment.

 Around 50% of payments of the customers are done through credit/Debit

cards. Sample survey shows Debit cards are preferred over credit cards.
 The main reason for the increase in plastic money is that the customers are
not a victim of a fraud except 4%of them.
 The customers have rated that the telephonic payment option is average due
to long timeliness and security concern for CCV/PIN number.
 The survey and secondary data suggests that customers have hardly faced
any discrepancies with their bills.
 The introduction of ATM machines has changed the banking process also.
Customers are preferring the ATM machines now to days due to that
frequency of customers to visit the banks have become less.
 The use of plastic cards has also been increased because banking industries
has also provided the 24x7 customer service for their customers.
 The factors for adoption of plastic money over the cash and paper money are
mon- Discounts while shopping, No hassles of carrying cash, Security of
money, Hassle free EMI’s, Easy to use, Personal Loan on Credit Card .
 About 60% of the people are feeling that the plastic money will penetrate in
society. So we can conclude that the future of plastic money in India seem to
be bright.

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  Conclusion:

The rise in consumerism generated by economic reforms began in 1990’s

has also sparked robust demand for plastic cards. The arrival of malls, multiplexes,
online shopping stores and shopping complexes encourage the customers to make
use of plastic cards. The modern day, Indian customers find it easier to make
physical payment (credit card or debit card payments) rather than carrying too much
cash contributing to the growth of plastic money in the country. The prevalence of
intensifying competition has further fuelled the usage of plastic cards in the country
like never-before. It benefits the consumer through enhanced product offerings at a
lower cost and that too with lucrative deals delighted with rewards scheme, loyalty
bonus points, promotional campaigns etc. But some customers are not able to utilize
cards effectively due to its complex nature and they don’t actually know how to
operate it for a specific purpose.

Thus, the banks should give them some training regarding its usage. The
banks can also prov de them the facility to use plastic cards on trial basis so that
they can become more confident while using their own cards. The cost has also
remained an issue in the case of credit cards. The interest levied on the outstanding
amount is very high which sometimes takes the customers in debt trap ultimately
discouraging the potential customers to make use of it. However, all these hurdles
will diminish over time and positively influencing trends are expected to continue in
the near and far future. Also, the growth of plastic cards in future would depend
upon the capacity building of the banks to meet the challenges and make use of the
opportunities profitably. However, the kind of technology used and the efficiency of
operations would provide the much needed competitive edge for success in plastic
cards business. Furthermore, in all these customers’ interest is of paramount
importance.

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 The plastic money in the form of cards has been actively introduced by
banks in India in 1990's. But it was not very popular among Indian consumer at the
time of its introduction. The change in demographic features of consumers in terms
of their income, marital status, education level etc. and upgradation of technology
and its awareness has brought the relevant changes in consumers' preferences. These
changing preferences have also modified their outlook and decision regarding the
acceptance and non- acceptance of particular product and services in the market.
Thus, the plastic cards are gaining popularity among bankers as well as customers
and getting accepted in the market place. It can be well imagined from the
discussion that no doubt, the plastic cards market is growing at a large pace in India
yet it has long way to go as it lacks behind if compared to the usage trends of other
countries.

Hence, it has become important that the payment system in India has to be
modernized enough to be at par with the systems prevalent in other countries, since
our domestic financial markets are increasingly getting integrated with markets
abroad (Country Survey-India, 2005). RBI is also taking important steps in order to
enhance its usage and popularity through initiatives like regulating card market to
maintain the security levels and to build up confidence of bankers and customers.
Despite the strong advances in e-payments, an estimated 90 percent of personal
consumption expenditure in India is still made with cash (Country Survey-India,
2005), which indicates the tremendous growth potential of this business. So this can
be considered as mere beginning which indicates the bright future prospects of
plastic card market in India. In nutshell, we can say that the Indian banking sector is
accepting the challenge of information technology as all the groups of bankers have
now recognized it as essential requirement for their survival and growth in future.

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  Suggestion:

I have a suggestion to increase the use of plastic money. At present people

are being asked to pay extra to use cards in retail outlets. Is it possible to either
subsidize or incentive the use of card and reduce the use of cash. Government can
perhaps get into arrangements with companies like master card, visa or Ru pay to
achieve this. Today people avoid using cards only because they dont want to spend
that extra two percent by using a card.

Plastic money has today become the most common form of transactions in
the urban areas all over the world. In a few decades it will rule all transactions due
to increasing costs of printing currency notes and minting of coins. An attempt has
been made to map the history of credit cards, features, types, workings, frauds and
precautions to be taken while using the credit card giving valuable insight to readers
as well as to the credit card users.

Consolidating the results of the tests we can summarise that the needs and
expectations of the credit card users are satisfied with the services provided by the
issuers. the credit card holders are happy as they get proper bills on time, credit
cards are renewed and sent even before the old ones expire, points are redeemed
they are not misled by false promises and new charges or charges are revised only
after proper intimation is given. Some women respondents were please with the
points that would accumulate and the products they got in exchange from the
issuers. Whereas men on the other hand preferred money back to adjust the same
against charges or annual fees provided such a scheme was available. Moreover the
‘Helplines’ are reachable day and night, lost or stolen credit cards get blocked and
problems get resolved by approaching these ‘Helplines’.

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 India being a patriarchal society it reflects upon the people who use the
credit cards. As compared to women the men have greater awareness about the
terms and conditions, interest rates and details about other charges levied by the
issuers. However the usage of credit card does not depend upon the marital status of
the credit card user, as married as well as singletons show the same preference
towards credit cards.

The correlation results establish the fact that the frequency of usage of
credit cards and the number of credit cards possessed by an individual go hand in
hand. Mathew L. and Slocum J. had established in 1969 - 1970 that there is a
correlation between the spending habits and the different social classes. Even after
40 – 42 years some things have continued to remain the same as even today people
who have more money and belong to the higher economic class have multiple credit
cards and use their credit cards more frequently than those from the middle or lower
economic classes.

The credit cards are popular because of the conveniences it offers rather
than for its snob value. Initially when they were introduced it was a matter of pride
to own a credit card. But today even the average man on the streets is using the
credit card to make purchases of daily use, to make reservations on trains and
planes, swiping it at restaurants and for petrol for his vehicle. In fact one of the
respondents Nitin Presswala stated that “in spite of a monetary loss I continue to use
the credit card for the convenience it offers although now I am a little careful”.

Looking at the overall situation and from the opinion from the respondents
we can say that the experiences of the credit card – users under the survey – has
been good and they are happy using the credit cards. If we convert the five scale
rating to three scale rating we find that 72.1% of the respondents have rated their
overall experience as ‘very good’ and ‘good’. Whereas only 1.5% of the
respondents have rated their experiences as poor and very poor with 20.9% having
no complains using their credit cards and have rated their experience as satisfactory.
The following can be clearly seen in the following graph.

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