Consumer Credit & Credit Cards

Outline -Consumer Credit

Consumer

Credit Types of consumer Credit Sources Process Advantages Disadvantages

Consumer Credit
A consumer may obtain loan for the purchase of a vehicle, refrigerator, washing machines, etc., when a bank or any other financial agency provides loan to a consumer for the purchase of consumer durables it is called as consumer credit.

Reavis Cox, an authority on economics of consumer finance defines consumer finance as Business procedure through which the consumers purchase semi-durables and durables other than real estate, in order to obtain from them a series of payments extending over a period of three months to five years, and obtain possession of them when only a fraction of the total price has been paid.

TYPES
Revolving Fixed Cash

Credit Credit cards

Credit Monthly fixed installments Loan Banks , FIs Finance Collateral Finance No security

Secured

Unsecured

Sources
Traders Commercial Credit NBFCs Credit

banks

card institutions

Unions

Middleman Savings Mutual

& Loan associations savings banks

Process
Banker/Financier

Merchant

Customer

Advantages
Enjoying

Possession mode

Convenient Meeting

emergency revenue

Maximization Enhanced Effective Large

standard of living

stock management

scale production Economic Development

Promoting

Disadvantages
Thoughtless Insolvency Costly

buying

credit

Risk

to traders
boom

Artificial Bad

debt risk Instability

Economic

Outline Credit Cards

Basics Types

of Cards Card Terminologies Anatomy of a Credit Card Process Card Issuance Process Stakeholders Advantages Disadvantages

Basics
The commercial banks extends different functions to customers. The most important in the modern days are credit card facilities to customers. A credit card is given by the banker to the customer in which the name of the customer is embossed in block letters. The name of the bank and the date of issue and expiry are also mentioned on the face of the card. The reverse side of the card will bear the specimen signature of the customer.

TYPES
ATM

Card
Card (microchip & storage) Card (Amex , Diners Club) Card(Deposit)

Smart

Charge

Secured Debit

Card

Credit

Card(Primary,Add-on, Corporate,

Titatnium,Gold,Platinum,)

Credit Card Lifecycle

Card Issuance Process Flow

Terminologies
Debit

and Credit Transactions

Balance

Current Billing Cycle Grace

cycle

to Date Period Transfer

Balance

Anatomy of a Credit Card - Front

Anatomy of a Credit Card - Back

Cards - Parties Associated

Cardholder
Merchant

Acquirer
Card

association

Issuer

Cards Parties

Card Association

Authorization

Clearing and Settlement

Revenues
Interchange fee Fees charged to customers Interest on outstanding balances

Benefits -Merchant
Credit

card transaction is more secure than other forms of

payment, such as check -the issuing bank commits to pay the merchant the moment the transaction is authorized -regardless of whether the consumer defaults on the credit card payment
Cards

are even more secure than cash

-they discourage theft by the merchant's employees -reduce the amount of cash on the premises

Customer - Benefits
Buy

goods now and pay later

Incentives No

cash needed protection

Loss

Drawbacks
Thoughtless Spendthrift Expensive

buying

Interest rates issues

Repayment Metal

agony