(THE PLASTIC MONEY) Submitted in partial fulfillment of the requirement of Bachelor Of International Business !inance" Jamia #illia Islamia" $ni%ersit&" Ne' (elhi)**++,-
Submitted b&. /O!AI0 1ASSAN SESSION .) ,++2),+**
Submitted to: DEPARTMENT OF COMMERCE AND BUSINESS STUDIES AMIA MILLIA ISLIMIA UNI!ERSITY NE" DELHI#$$%%&' ACKNOWLEDGEMENT A project gains a lot of relevance as it on time activity serving a definite object. Practical experience in undertaking a project teaches many things which would otherwise elude observations. I am very indebted and obliged to have Ms. VA!"A #A$"I %lecturer& project guide and whose scholarly guidance and sustained interest in the progress of my project have been the major contributing factor in preparation of this project report. I am also placed my sincere thanks to all respondents and concerned people to this project. CONTENTS EXECUTIVE SUMMARY OF CREDIT CARD INDUSTRY INTRODUCTION TYPES OF CARDS SALIENT FEATURES OBJECTIVES & SCOPE OF THE STUDY RESEARCH METHODOLOGY INDIAN CREDIT CARD SCENARIO DECIDING ON THE RIGHT CREDIT CARD ANALYSIS COMPARISON OF CREDIT CARDS SUGGESTIONS OF THE STUDY LIMITATIONS OF THE STUDY CONCLUSION RECOMMENDATION BIBLIOGRAPHY QUESTIONNAIRE INTRODUCTION ORIGIN 'he credit card had its beginning in an embarrassing incident that took place in the early ()*+,s in America. 'he story goes that Mr. Mc-amara. a -ew /ork businessman took his friends out to dinner. At the end of meal he discovered that he had forgotten his wallet at home0 the proprietor was kind enough to allow him a later settlement of bill. As Mc-amara stepped out of the restaurant he had the brainwave for the introduction of credit cards 1 system of availing instant credit upon confirming the identity of cardholder. 'hus was born the !iners 2lub 2ards0 the pioneer of today,s multibillion1dollar plastic money business. !iners 2lub adopted a promising approach by recruiting various hotels and restaurants to act as member establishments for accepting the cards. -ot only did these establishments pay a commission on member,s purchases but the members also paid an annual subscription fee. !iners 2lub vetted its members for credit worthiness and guaranteed payment to participating establishment. 'hus was born the first 3'ravel and 4ntertainment 2ard,. It was followed by American 4xpress0 which is now a dominant force in the 'ravel and 4ntertainment cards industry0 and by ()*) by 2arte 5lanche0 after many vicissitudes is now a part of 2iti 5ank 4mpire 'ogether 6ith !iners 2lub. In the present time American 4xpress leads the travel and entertainment %'74& card industry. 'he next great leap1forward came from 5ank of America0 which in other banks. #uch cardholders could use their card ()88 offered to license its successful blue0 white and gold 5ank America card to at any accepting merchant establishments around the globe. 9ater in ():: all the national and international 5ank America licenses were pulled together under the single name of Visa. -ot to be outdone0 a rival group of American 5anks came together in ()88 under the name of Interbank0 later renamed Master 2harge and later still Master 2ard. 4ver since Master 2ard and Visa and their affiliates have carved the world credit card market. In the ();+s credit card concept was launched in India through the !iners 2lub card0 and soon0 within a couple of months both Visa and Master card entered into the Indian market. What i a C!"#it Ca!#$ Credit Cards - It's credit to you! A 2redit 2ard is referred to as <plastic money<. 2arrying a lot of cash on you can be cumbersome0 risky and sometimes0 you run short of it0 just when you most need it. %emember the #A94 at your favorite ready1mades store=&. A 2redit card is the smart solution to these problems. It is a convenient and safe alternative for cash. 5esides0 it says things about you. Most people associate a credit card with a prestige0 which it most certainly bestows on you0 but more importantly0 it says that you have taken the onus of being responsible 1 to be extended credit> #o0 when you get yourself a card0 remember that0 because your bank does> Before i go any further, why not become familiar with the various terms and jargons used by the credit card industry C!"#it Ca!# ? A credit card is a financial instrument0 which can be used more than once to borrow money or buy products and services on credit. 5anks0 retail stores and other businesses generally issue these. C!"#it %i&it ? 'he maximum amount of charges a cardholder may apply to the account. A''(a% )"" ? A bank charge for use of a credit card levied each year0 which ranges depending upon the type of card one possesses. 5anks usually take an initial fixed amount in the first year and then a lower amount as yearly renewal fees. R"*+%*i', Li'" O) C!"#it 1 An agreement to lend a specific amount to a borrower and to allow that amount to be borrowed again once it has been repaid. Most credit cards offer revolving credit. P"!+'a% I#"'ti)i-ati+' N(&."! /PIN0 1 As a security measure0 some cards re@uire a number to be punched into a keypad before a transaction can be completed. 'he cardholder can usually change the number. T"a"! Rat" 1 Aften called the introductory rate0 it is the below1 market interest rate offered to entice customers to switch credit cards. J+i't C!"#it 1 Issued to a couple based on both of their assets0 incomes and credit reports. It generally results in a higher credit limit0 but makes both parties responsible for repaying the debt. TYPES OF CARDS Mat"!Ca!# ? Master2ard is a product of Master2ard International and along with VI#A are distributed by financial institutions around the world. 2ardholders borrow money against a line of credit and pay it back with interest if the balance is carried over from month to month. BC0+++ financial institutions in BB+ countries and territories issue its products. In ());0 it had almost :++ million cards in circulation0 whose users spent D8*+ billion in more than (8.B million locations. VISA Ca!# ? VI#A cards are financial institutions around the world distribute a product of VI#A E#A and along with Master2ard. A VI#A cardholder borrows money against a credit line and repays the money with interest if the balance is carried over from month to month in a revolving line of credit. -early 8++ million cards carry one of the VI#A brands and more than (F million locations accept VI#A cards. A))i'it1 Ca!# 1 A card offered by two organiGations0 one a lending institution0 the other a non1financial group. #chools0 non1profit groups0 pro wrestlers0 popular singers and airlines are among those featured on affinity cards. Esually0 use of the card entitles holders to special discounts or deals from the non1financial group. Sta'#a!# Ca!# ? It is the most basic card %sans all frills& offered by issuers. C%ai- Ca!# ? 5rand name for the standard card issued by VI#A. G+%# Ca!#2E3"-(ti*" Ca!# ? A credit card that offers a higher line of credit than a standard card. Income eligibility is also higher. In addition0 issuers provide extra perks or incentives to cardholders. P%ati'(& Ca!# ? A credit card with a higher limit and additional perks than a gold card. Tita'i(& Ca!# ? A card with an even higher limit than a platinum card. S"-(!"# Ca!# ? A credit card that a cardholder secures with a savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. It is used by people new to credit0 or people trying to rebuild their poor credit ratings. S&a!t Ca!# ? #mart cards0 sometimes called chip cards0 contain a computer chip embedded in the plastic. 6here a typical credit card<s magnetic stripe can hold only a few doGen characters0 smart cards are now available with (8H of memory. 6hen read by a special terminal0 the cards can perform a number of functions or access data stored in the chip. 'hese cards can be used as cash cards or as credit cards with a preset credit limit0 or used as I! cards with stored1in passwords. Cha!," Ca!# ? fall between a debit and credit card. 6orks like the latter and you don<t have to be an accountholder. Iust pay up in full when the bill arrives with the mail. -o outstanding are allowed0 in other words0 no revolving credit facility either. American 4xpress and !iners are providers. R".at" Ca!# ? 'his is a card that allows the customer to accumulate cash0 merchandise or services based on card usage. C+4B!a'#"# Ca!# ? 'his is a marriage of convenience between two service providers who want a trade1off with the other<s strengths. #pecific facilities are made to members through these tie1ups. #o0 'imes 5ank and 2itibank have a co1branded card that allows concessional rates for add1on cards or telephone banking. #tan chart and "industan 9ever 9imited have a co1branded card to sell Aviance beauty products. #5I1$4 2apital has a co1branded card for retail loans. Cah Ca!# ? 2ash cards0 similar to pre1paid phone cards0 contain a set amount of value0 which can be read by a special cash card reader. Participating retailers will use the reader to debit the card in increments until the value is gone. 'he cards are like cash 11 they have no built1in security0 so if lost or stolen0 they can be used by anyone. T!a*"% Ca!# 5 these works mostly as debit cards for the limited purpose of travel. 2itibank !ollar 2ard0 American 4xpress0 5ob card $lobal and "ong bank 'homas 2ook International 2ard are among the players in this section. D".it Ca!# ? It is the accountholder<s mobile A'M. Apen an account with a bank that offers a debit card0 and payments for purchases are deducted from your bank account. 'he retailer swipes the card over an electronic terminal at his outlet0 you enter the personal identification number on a PI- pad and the money is immediately debited at the bank. 2itibank and a few domestic banks like 'imes 5ank offer this. SALIENT FEATURES A''(a% F""6 All credit card issuers charge an annual fee which is payable at the start of the year. 'he start of the year0 of course0 is your membership year0 and not the calendar year. #o0 if you got yourself a card in March0 you can expect to be billed the annual fee every March until you cancel your card. As a privilege0 this fee is sometimes waived the first time. 6hen the time comes for renewal of your card0 you can even use the reward points you have accumulated from using the credit card over the year to settle your annual fee. F+!7a!#i', Ba%a'-" /+! R"*+%*i',06 'he most attractive feature of a credit card is that you need not pay off your dues in whole. /ou can opt to pay *J of the total amount on or before the due date0 every month0 the rest is carried forward. 5ut there<s a price to pay for this extended credit 1 interest> -ormally0 interest varies between B.*J and CJ per month. APR +! A''(a% 8"!-"'ta," Rat"6 'he interest rate that reflects the yearly cost of the interest the outstanding on your card is called the annual percentage rate. 'his rate is charged to the cardholder on the amounts carried forward beyond the due date for the payment of balances. Most card issuers will tell you their monthly rate of interest. It might sound low at CJ0 but when you look at the interest rate over the year0 it turns out to be as high as FCJ. Cah A#*a'-"6 An important feature 1 lets you withdraw cash from designated A'Ms using your credit card. Ese discretion when withdrawing cash on your credit card because the charges for this facility are high0 around B.*J to CJ per transaction> BENEFITS6 C!"#it6 6hen you use a 2redit card to pay for anything0 you get an interest1free period of F* days. 5illing cycles are structured in such a way that you definitely get at least C+ days out of these as clean credit time0 which is especially beneficial to salaried people. 5etter still0 you can opt to pay your bill in full when you receive it or you can carry forward your payments by paying as little as *J of the total amount on or before the due date0 every month. /ou can spend now 0 pay later. C+'*"'i"'-"6 6ith a credit card on you0 you don<t need to run the risk of carrying a lot of cash. Cah A#*a'-"6 Another advantage of a 2redit card is that you can use it as an A'M card too> 5ut remember0 there<s a fee to it. It typically starts with a flat fee going up to a percentage1based fee on the amount of the withdrawal. DRAWBACKS6 G!""#9 Iust because you have credit being extended to you doesn<t mean that you should go on a rampage> Ese your card with discretion and caution. emember0 it is an extremely expensive way to borrow money> View it as a convenient and safe way to carry cash0 a timely help in an emergency or taking advantage of an opportunity that you would have otherwise lost out on0 like an investment> D+: & D+'t: !o not leave your 2redit 2ard lying around the house or on your desk at work. If your card is lost or stolen0 or you suspect it is being used fraudulently0 report it immediately to your bank. "old on to receipts from your transactions. In fact0 keep your receipts filed or in one place 1 you<ll find them easily0 should the need arise. And when you want to throw them away0 don<t just thrash into the bin0 shred or tear them before you do. -ever give your 2redit 2ard number over the phone0 unless you<ve made the call0 and it is to your bank or someone you trust0 and you really0 really need to> EXECUTIVE SUMMARY OF CREDIT CARD INDUSTRY 'he credit card industry in India has registered an encouraging growth in recent times0 but the usage pattern of credit cards remains a point of conc+ern0 those in the industry say. 'here has been a seven1fold increase0 with the number of cardholders touching over C; lakh. 'hese figures point towards the fact that the credit card industry in India is growing at a brisk annual rate of C+ per cent and is expected to grow at a similar rate in the coming years. 6hile issuing the cards may seem to be easy0 the challenge for the banks lies in being able to manage their portfolios by keeping the delin@uency levels at the lowest and customer satisfaction levels at the highest. 2ustomer satisfaction is the key to success. /ou want customers to be happy with the products and services you provide. If they feel they have received good value for their money0 your business will prosper. $etting your customers to tell you what,s good about your business0 and where you need improvement0 helps you to be sure that your business measures up to their expectations. Apart from attracting potential card users0 customer retention is also one of the most important factors influencing a card issuer,s success. 1111. 6ith the influx of new financial institutions in the card market0 people have started using cards on a more regular basis. 'he level of services provided by these organiGations is increasing day by day. In order to ensure that the existing customers stay loyal0 ArganiGation has to ascertain whether its existing customers are satisfied with its current service offerings. 'his research has tried to study the satisfaction levels of a sample of (++ credit card holders. 'hese respondents each hold credit cards0 which may be of different kinds. INDIAN CREDIT CARD SCENARIO 'he credit card industry in India has registered an encouraging growth in recent times0 but the usage pattern of credit cards remains a point of concern0 those in the industry say. #even years back0 India had a base of around five lakh credit cards. 'here has been a seven1fold increase0 with the number of cardholders touching over C; lakh. 'hese figures point towards the fact that the credit card industry in India is growing at a brisk annual rate of C+ per cent and is expected to grow at a similar rate in the coming years. 'his fortifies the view that conservative purchasing ideas are giving way to the big in1thing. 5ut it is the usability that raises doubts. According to a survey by the 2redit 2ard 7 Management 2onsultancy %22M2&0 :( per cent of first time credit card applicants in the country have expressed the need for advice on appropriate card selection despite the plethora of cards available in the market. 'hrough this survey it has come to realiGe a long felt need of potential and existing cardholders for advice on suitable selection of a credit cards. 'he whole idea behind the introduction of the credit cards was to increase the purchasing capacity of the cardholder. 6ith this in mind0 the foreign banks launched a credit card blitGkrieg on the Indian customer. 'he innovations have already begun to show their effect. 'he #tandard 2hartered 5ank has seen its credit card base shoot up after the launch of its $lobal upee 2ard in March last year. It has seen the fresh issuance of global card increase by more than one lakh0 and the bank now has a base of more than half a billion. 5ut the real challenge for the banks is to make the holder spend more on the card. $oing by estimates0 India has a long way to be anywhere near the matured markets. 'he markets like the Enited #tates and 4ngland have an average annual card spend of (0C++ and C08++ dollars respectively. 'he credit card players will have to think about simplifying the foreign exchange transactions. 6hen one uses the card0 it is entirely his responsibility to make sure that exchange controls have been complied with. 'he banks that issue the cards have made it abundantly clear that one has to look out for him. It is upon him to find out the facts of regulatory life. 'he real point of worry is the spending on the credit cards. According to estimates0 the average card spending in India is even less than that in Indonesia. 'hose in the credit card business say that per capita credit card spending in India is about five hundred dollars %s B(0*++&0 whereas in Indonesia0 it is about 8:; dollars %s B)0(*F&. At present there are over a doGen players in the credit card market in India0 and the fact is the foreign banks are clearly the leaders. 'he leaders will surely be identified by the innovations for the card users. 5ut the alarm has been raised for the banks by the figures that show that while the average usage in Malaysia is B: times annually0 in India it is only (( times. #ome of the key factors impacting the cards business in India are limited credit0 wide geographical spread0 limited telecommunication infrastructure and emerging regulatory controls. 'he other players feel that the card acceptance base in India has to be widened. #uggestions include credit card usage at petrol pumps and railway bookings. 'hey also point out that though the cards business has been in the country for long0 but even today the insurance premium cannot be paid by card. 'hough 9I2 is talking about the introduction of this facility to customers0 but its turning into reality may take time. 'here is talk of widening the card business with new features0 but the present scenario does not paint a positive picture0 with many loopholes remaining to be plugged. Af the twenty million taxpayers in India0 more than ten per cent of them are cardholders. 'hose in the industry point out that this figure is not bad0 considering the fact that. the cards business is still in its initial stages. "owever0 the players feel that the business has not reached an optimum level to say that they are making money. 4ven the largest player in the Indian market does not still have the economies to make the card business really profitable in India0 despite the fact that it has more than one million credit card holders. 9ess than two per cent of private consumption spending in India is done on cards. 6hile issuing the cards may seem to be easy0 the challenge for the banks lies in being able to manage their portfolios by keeping the delin@uency levels at the lowest. "uge investments in systems and infrastructure are0 therefore0 a necessity. 'he increase is being attributed to new ideas such as round1the1clock functioning of card issuing banks and pulling out all stops even at a loss0 to grab a siGeable share of the expanding pie. -ot to be left behind in this race0 even the big brother0 the #tate 5ank of India in association with $4 2apital entered the card business. 'he spurt in the card business has gathered momentum during the past couple of years. Kor instance0 the "ong Hong 7 #hanghai 5anking 2orporation %"#52&0 was in the credit cards business since seven years0 but from *+0+++ card holders in ()):0 it has about three lakh card holders now. India,s fastest growing credit card company 1 #5I 2ards B.* lakh credit cardsLB* citiesL(8 months. 'he joint venture between India,s largest bank ? #tate 5ank of India and one of the world,s leading financial services companies ? $4 2apital0 #5I 2ards 7 Payment #ervices %#5I 2ards& has issued B.* lakh credit cards across B* cities %the largest distribution network in the payment card industry& within (8 months. 'hereby achieving the target in the fastest period seen in India,s payment card industry. #5I 2ards 7 Payments #ervices attributed this success to #5I,s enormous brand e@uity0 and unparalleled retail branch network coupled with $4 2apital,s payment card process and technology expertise. "e also highlighted #peed0 #implicity and #ervice as the key drivers of growth for the #5I 2ard. #peed Eni@ue and exclusive (F1day average turnaround time0 coupled with availability of the #5I 2ard in B* cities in just (8 months. #implicity #imple application process with minimum documentation. #ervice BF hours a dayM: days a week local call access to the #5I 2ard "elp line across B* cities. As a result of the focus on the #peed0 #implicity and #ervice growth platform0 #5I 2ards today offers the largest distribution and widest cash advance network for India,s middle class customers. #5I 2ardholders can access cash for emergency purposes from over (*; #5I branches across 8; locations in India. INTERMEDIARIES6 In their attempt to increase their market share0 credit card companies are opting for !irect #ales Agents. 'hese !#As are paid a flat rate against the approved applications. 'he !#A team comprises aggressive salesmen who visit different organiGations and professionals. 'hey collect filled forms and produce them to the bank for approval. After cards are issued they also deliver the same to the individuals. DECIDING ON THE RIGHT CREDIT CARD !ow much is the joining fee and the annual fee" $enerally0 a card with a higher annual fee enjoys more benefits like higher credit limit0 higher accident insurance cover0 accessibility to airport lounges0 travel discounts etc. AK at least the used to be the case. 6ith cutthroat competition between the card issuing banks0 players are ready to waive joining fees and also one1year membership fees for anyone. $rab these offers0 or negotiate this for yourself. !ow much is the #dd-on card fee" If you are interested in buying add1on cards for your children0 spouse or friend0 ask for the add1on card fee. emember that you will be settling the bills on the add1on card that you so touchingly gift to someone dear to you 1 the statement will come to you0 and the responsibility for payment is yours %as far as the credit card company is concerned& $hat is the interest rate" 'his is actually a @uestion that you should be asking fairly soon in the discussion. emember0 while the up front one off fees are bread and butter for the credit card 2ompany0 this is the jam> If you are the sort who forgets to pay on time0 or likes to live it up and live off credit0 the interest rate would be of paramount importance. Most credit card companies charge anywhere between BJ to C J per month. %ead a whopping C*J to FCJ per year&. 'hat<s where they make their gravy0 and that<s where you pay> It is always advisable to pay off the entire amount on due date0 or0 if you have a large bank balance0 look for card companies that provide the transfer balance facility. 'he balance transfer rate is lower for a certain period %say six months& and then the normal rates apply. 5ut again this is a temporary solution to a chronic problem. % $hat is the reach" -ot an important @uestion 1 most outlets in India accept both the Master card and the Visa card0 and most credit card companies provide Visa or Master cards. #o its fairly simple0 and doesn,t need much head scratching 1 they<re all more or less the same. Ane thing you could do is to check out for the Automated 'eller Machines nearest to your house or work place %A'Ms 1 almost all credit card companies now provide you the facility of withdrawing cash from machines 1 I guess for things that cards just cant buy. 'hese machines are called A'Ms0 and are helpfully scattered all over the cityMcountryMworld&. "aving more A'M outlets in 'hailand wouldn,t be of any relevance to a person who rarely travels abroad0 though it may certainly be a goal to work towards after buying the card. Please also remember that Amex credit cards are not part of the VisaM Master chain0 and have a separate chain of outlets where it,s accepted. 5.Is it a &lobal card" -ow this could be useful to you if you are an overseas traveler. A $lobal card can be used for paying expenses in foreign currency just like you use a credit card to pay in rupees. -owadays0 a $lobal card is being issued at the same cost as for a similar domestic one. It is better to have a global card0 especially if there is no premium attached. 6.!ow useful are branded or affinity cards" A partnership between a card issuer and the non1profit0 social or lifestyle association is what results in an affinity card. 'his is for providing financial rewards to the group or association. 4.g. 2itibank 6omen,s card0 2itibank 66K cards. 2itibank 66K Visa card donates a percentage of the transaction value made through the card to the 66K fund for its environmental conservation activities. A subscription to such cards helps ease the conscience though it provides no monetary value. A partnership between a bank card issuer and a commercial partner result in a co1branded card. 'his entitles the cardholder to lots of freebies0 priGes0 discounts on co1branded products. 9ogicN If a customer is loyal to one brand0 he will want to purchase the other. #o if you were loyal to a particular brand0 it would make sense going for those co1branded cards. e.g. 2itibank and IA20 5ank of India and 'aj group of hotels etc. 7. $hat's the lost card liability? Most 2ard issuers mention in the brochures that lost card liability is s (+++. 5e careful0 that is actually AK'4 it is reported to the 5ank. 'he liability is actually unlimited before reporting %in cases like this0 you would actually thank the credit limit because though the liability is unlimited0 the ceiling should logically be your credit limit0 and the outlets accepting your stolen card should actually check that you %or the person who stole your card& haven,t exceeded your credit limit&. Avoid banks that make you liable for card misuse for a single minute after reporting it. 8. #re there any freebies" 2itibank gives a Pond,s gift hamper free on subscription to its 2itibank 6omen card. Personal accident insurance for Air0 oad or Atherwise is packaged along with the subscription. Also 5aggage cover0 Purchase Protection cover and credit shield is bundled free of cost along with the card. If you feel one these parameters are important0 and then settle for the one that gives a higher cover. 9. Is immediate cash withdrawal (ossible" 2heck out if the 5ank has any A'Ms near your house or workplace. 'his surely helps in times of emergency. 'he cost component for a cash withdrawal could be classified as followsN #ervice fee %transaction fee& each time you pull out money0 and Interest rate for the period for which you have used the money 1 until settlement date. If you are going to withdraw cash fre@uently0 better watch out for this cost. 10. !ow long is the free credit (eriod" 'he days of credit one gets depends on the statement date and the date of transaction. An an average0 you could assume you<d get around B+ days of free credit. "owever0 if you buy just after the statement date0 you could end up getting unto *+ days of credit. 9ook for cards that give you the highest free credit period> 11. Is a !el(line available" A BF1hour "elpline service from the 2ard 2ompany helps the cardholders during the non1banking hours. eporting of theft0 checking of available credit limit and other en@uiries can be made by the cardholder round1the1clock. In the end0 like everything else in life0 the card you want is really up to you 1 what matters the most to you 1 credit0 reach0 the freebees0 international reach or a combination of parameters. Ese our card category on the left bar to simply list out the names of the cards0 or choose by bank name and see the cards they offer. Ar look for cards offering the lowest interest rate. Af the lowest charges on cash withdrawal %believe me0 it gets to be a serious consideration as one goes along&. $o to our shortlist card section0 and search for cards based on any criteria that you want. "appy hunting0 and stay careful 1 you may like to use our section on how to use the card carefully to minimiGe the chance of its misuse by someone else. OBJECTIVES OF THE STUDY #tudy is the one of the important parts of any study. Kollowing are the objectives of the studyN 1 'o find the scope of the credit cards industry in India. 'o know the customer awareness regarding credit cards. 'o analysis the benefits of credit cards. 'o know how it is beneficial to manage the cash risk. 'o understand the market potential of credit card in !elhi. SCOPE OF THE STUDY 'he study on 2redit card1 increase the volume of profit of this industry. 6e have considered geographical Enit of !elhi. It in we analysis the comparison of different credit cards and their detail reports their branches and values.
RESEARCH METHODOLOGY 2onfining our study to the geographical limits of !elhi0 we chose a sample of (++ people 1 *+ cardholders and *+ non1card users0 using the probability sampling techni@ue where every individual fulfilling the above criteria had an e@ual chance of being selected for the survey. Kollowing are some of the facts that were revealed through the survey. S+(!-" a'# M"th+# +) Data C+%%"-ti+' 'he data on the present study will be collected by the investigator himself. It<s customary to distinguish data between primary and secondary. C+%%"-ti+' +) P!i&a!1 Data6 'he collection of primary data done with the help of personal meet with the Managing !irector and #upervisory and Afficial #taff after #ecuritiGation of records maintained. A personal survey and surprise check are prompt to be carried out to ascertain the fact on the basis of survey of credit card at personal interest. C+%%"-ti+' +) S"-+'#a!1 Data6 -ews papers0 Press Media MagaGines 'elecommunication R""a!-h T++%6 esearch design N 4xploratory #ampling Enit N Area of !elhi #ampling #iGe N (++ people1 *+ 2ash holder0 *+ non1 cash user #ampling techni@ue N Probability #ampling ANALYSIS It was found that for the fre@uent travelers acceptability was the most important criteria and was given the highest weightage Kollowing attributes have been analyGed as per the consumer survey conducted 'he attributes are as followsN A224P'I5I9I'/ 24!I' 9IMI' 24!I' P4IA! M4!I2A9 A-! "A#PI'A9 #4VI24# A'"4# PROMOTION STRATEGIES 'he changing trends in the payment systems are global and even in India revolve around the change in customer needs and the evolution of financial markets. 'raditionally Indians like to pay in cash or at the most avail the services of a bank. As a result credit card companies had to educate the consumers and spread awareness of the uses of its products. 'he companies have tried to address this issue through promotional campaignsN Placing of take away firms of credit card at more than a thousand merchant establishments. Appointing of !#As Esing business magaGines and newspapers for advertisement. Mailing of forms along with contests to professionals and middle management executives etc. 'apping the get member route educing their minimum eligibility criteria and changing income documentation structure. Introduction of photo cards. 'ying up with durable consumer goods manufacturer % e.g. Anida0 +Philips & to sell their products. Providing A'M facility to their card holders 'ravel assistance via tele1banking. COMPARISON OF CREDIT CARDS 2ard Issuers 5rand 2ard 'ype Acceptance 2itibank -A $oldMPreferred Master International 2itibank -A $oldMPreferred Visa International 2itibank -A Indian Ail Master !omestic 2itibank -A #ilverM2lassic Master International 2itibank -A #ilverM2lassic Visa International 2itibank -A 6omen Visa !omestic 2itibank -A 66K Visa !omestic I2I2I #olid $old Visa International I2I2I #terling #ilver Visa !omestic I2I2I 'rue 5lue Visa !omestic #5I 2lassic Visa !omestic #tandard 2hartered 2lassic Master International #tandard 2hartered $old Visa International 6ith the credit card truly becoming an international citiGen0 issuers have begun highlighting the value1added features offered along with the basic product. 6hile some of them are offering attractive interest rates0 others are luring customers by their reward schemes. 6ith a plethora of choices on offer it is not easy to come to a decision on any particular card.
TIP;S FROM CITIBANK TO SAVE CHARGES F""4h"a*1 )+!"i,' t!a'a-ti+' Many major credit card issuers charge a fee for card transactions in foreign countries. 'he cost of cash advances is particularly onerous. 6hen traveling abroad0 carry a mix of plastic0 cash0 debit cards and traveler<s checks. Wa't a ."tt"! !at"$ Iust ask for Ac@uiring new credit card customers is expensive and time1consuming0 so issuers don<t want to lose creditworthy individuals. If you<ve had a year of on1time payments0 call your credit card issuer and ask for a cut on your interest rate. C(t -!"#it -a!# -+t Make payments on time0 avoid cash advances and don<t exceed your credit limit. 2ash advances are more costly as there<s no grace period0 so you pay interest from the day you take the money. I#"'tit1 th")t 'he -o. ( identity theft is credit card fraud. -ew card accounts are opened or existing accounts are taken over. 'he Kederal 'rade 2ommission offers a hotline and 6eb site for advice and tips. Sa*" t!" 7ith %" #".t 'he stress of credit card debt has been directly linked to physical problems like heart attacks0 insomnia0 explosive emotions0 smoking0 overeating and lack of concentration. Sh+8 +'%i'" 7ith+(t th" 7+!!1 2redit card companies are switching to Gero liability. If your credit card is misused on the Internet0 you won<t be liable for online transactions charged by an unauthoriGed user. 5ut Gero liability doesn<t mean Gero responsibility 11 you<ll have to meet certain re@uirements. F!a(# a%"!t Placing a fraud alert on your credit files prevents an imposter opening credit in your name. 'he downside is that you give up the convenience of Oinstant credit.O /ou can<t sign up for a new credit card and go shopping with it three minutes later. T""' -+'(&"! 2redit card companies are targeting the increasingly powerful teen consumer. 'eens get the credit card and the bill0 but parents are legally responsible. -onprofit organiGations caution that teens lack personal finance teaching0 and aren<t ready for plastic. B" -a!")(% 7h"' 1+( #+ th" -a!# h+8 2hanging credit cards for a better deal may net attractive teaser rates0 but many cards now deter balance transfers with tough terms and high costs. ead the fine print carefully. Si%"'-i', 8h+'" +%i-it+!6 /ou can pull the plug on telemarketers calling your home. 'he 'elephone 2onsumer Protection Act re@uires telemarketers to record your <do1not1call< re@uest and refrain from dialing you for (+ years. C!"#it -+!" !uring and after a divorce0 you need to make a clean financial break to keep your credit report accurate. A first step is to cancel credit card accounts0 even if you were only an authoriGed user0 and reapply for new accounts. Di,ita% 7a%%"t !igital wallets0 or e1wallets0 are extensions of a consumer<s credit cards. 5asic e1wallets store cardholder information0 filling in account and personal information at cyber stores. 'hey are convenient0 secure solution to shopping online. D+':t )i%% (8 +' ,a+%i'" -!"#it -a!# $as company cards offering rebates on purchases can be worthwhile when gas prices are high. 5ut the annual percentage rate and the annual fee charged are higher than normal cards. People who carry a revolving balance will find these cards much less rewarding. C!"#it ('i+' -a!# 2redit unions usually have lower interest rates and fees than banks0 though they tend to have fewer choices than bankcards. St(#"'t -!"#it -a!# -h+i-" #tudents and their families looking for the best student credit card need to focus primarily on annual fees and interest rates. $enerally0 students with a work and credit history will find a regular credit card is the best deal. Va!ia.%"4!at" -a!# 'he cost of using credit cards has increased. Variable1rate cards0 the most common type in the nation0 tend to rise in step with the prime rate. 'he prime rate has gone in the Ked<s efforts to cool the red1hot economy0 but spending hasn<t been significantly reduced. Fi'a'-i', *a-ati+' Most people finance vacations with their credit cards. 4ven the average credit card interest rate can turn your vacation into a financial strain if you spend above your means and take up to a year to pay it off. E&"!,i', -!"#it 'weeners ? people with emerging credit or recovering credit 11 can find good credit card deals. 'o get the best deal they need to compare annual percentage rates0 grace periods0 credit limits0 and fees0 and avoid credit cards with hefty application and processing fees. A))i'it1 -!"#it -a!# Affinity credit cards %aka OcharityO cards& may give you a sense of purpose to your spending0 but can cost more than your actual donation. Affinity cards carry high interest rates and annual fees. 'hey have more value if you don<t carry a card balance. Pa1i', )+! *a-ati+' /ou can enjoy that vacation even after it<s over by limiting your credit card use. 2onsider planning ahead0 setting a budget and saving for your vacation. If you<re still short1 funded0 a home1e@uity loan offers a better interest rate than a credit card. St(#"'t %+a' #".t $raduating college students face an average loan debt of more than DC*0+++0 and it needs to be attacked aggressively. Kirst0 concentrate on paying down credit card debt0 and then tackle your student loan debt.
Citi.a'< = -!"#it -a!# #".t "%i&i'ati+' t!at",i" In addition to encouraging credit card competition through promoting the most attractive cards in the country0 2itibank help consumers cope with credit card debt by teaching various debt reduction strategies. 6e hope that you find the following tips beneficial. I't"!"t Rat" A7a!"'"6 6e cannot stress enough the importance of being aware of interest rates when using your card%s&. Please utiliGe the lists above>>> "igh rate cards can be put a 5I$ dent in your pocketbook. 'o illustrate our point again0 a cardholder with an average balance of DB0*++ and a ().))J purchase rate will pay D(+++.++ in interest alone in just two years> 'he same cardholder would pay only DF++.++ in interest if the rate were lowered to ;.++J0 a difference of D8++.++> Also0 be aware of cash advance rates. 2ash advance rates are typically much higher than purchase rates and usually there is no grace period for cash advances %not to mention cash advance fees&. 'herefore0 avoid cash advances if at all possible. Ta<i', A#*a'ta," +) P!+&+ Rat" 6hile introductory or Oteaser ratesO are generally short lived and are intended strictly to entice consumers0 savvy consumers can benefit a great deal from promotional rates. 9ook for cards that offer longer term introductory rates and longer term promotional rates on balance transfers %81(B months&. #ome cards even offer very attractive long term promotional rates on balance transfers...rates that are good until the dollar amount transferred is entirely paid off> 2onsumers that have more than one card with available credit can transfer balances between cards in order to take advantage of promo. 'ransfer rates %a ploy known as Ocard dumpingO&. Kinally0 when the promo. rate period ends %for transfers&0 it is a good idea to call the card company and re@uest an extension of the rate. 2onsumers with a good payment history often get extensions. /ou must be aggressive when dealing with credit card companies> /ou can also negotiate to have your regular interest rate lowered. 'hreatening to pay off a given card often puts consumers in a bargaining position when dealing with credit card cos. A*+i#i', th" Mi'i&(& Pa1&"'t Pit)a%%6 Ane of the greatest card pitfalls is making only the minimum payment each month. Make every effort to pay over the minimum each month0 even if it is only a few dollars over. 'he long1term impact of making Ojust the minimum paymentO is devastating. According to 2onsumer 2redit 2ounseling #ervices0 paying the D8+ minimum payment on a DC0+++ credit card balance would take eight years to pay off and would translate into DB0:;+ in interest> 5y paying only D*+ more a month0 however0 the debt would be paid off in three years and result in a savings of D(0;++ in interest charges> G!a-"%" G!a-" P"!i+#6 Avoid cards that begin computing their grace period at the time of purchases0 rather than billing. Anly a few cards still use this method of interest computing0 but there are still some out there. Heep your eyes peeled> CONCLUSION 6henever Internet transactions are discussed0 immediately the thought of credit card comes to everybody,s mind. 'his is because in E# the payments by credit a card is @uite common. 4ven before online purchases have become popular0 normally purchases are made through credit cards only. 'herefore in E# there was no problem in making people to switch over to online purchases as this mode of payment is already in vogue. 4ven in E#0 much discussion is going on as to how to avoid frauds0 misappropriation0 etc of credit cards once the card number is given online to a merchant. 4ncryption technologies. #ecure socket layers0 etc are being introduced to avoid such things In spite of all these measures0 still reports keep coming regarding credit card frauds here and there. In other words0 there is no (++J foolproof to make credit card payment a safe mode of payment. In other countries0 where credit cards payment system is not as popular as E#0 online shopping through credit cards resulted in great failures. At least in #ingapore0 a mega shop had experienced a fraud of huge magnitude and decided to suspend immediately their online business. #imilar stories are not uncommon in other countries too. S-"'a!i+ i' I'#ia In India the situation is far from satisfactory to use the credit cards as a means of making payments for online purchases for the following reasons. (.Ese of credit cards is popular to only a few thousands of executives0 businessmen0 etc from big cities. B.'hat any person using credit card is liable to declare I' made many people surrendering their cards. In other words if credit card is made the payment mechanism0 only I' payers will be eligible to buy goods online. C.#till many leading credit card companies are yet to install their infrastructure to process the online payments. F.'hen there is the @uestion of sales tax laws 4ach #tate has its own rate of tax structure for each and every commodity. "ow to charge tax when a transaction takes place online and at what rate will pose problems of billing. *.Many establishments do not like to offer credit card facility due to the service charges to be paid to cr card companies. 'hey get the payment only after a certain period of time once the goods are sold. 5oth of them make the profit margin less. As mentioned earlier0 the fraud element is applicable to India also. In view of all these factors0 in India. Ese of credit cards cannot be expected to boost the sales of online sales0 particularly business to customer )hen what is the way out" 'here are other methods of payments for Indian online business0 which are given belowN Payments by electronic cashM che@ue may be made legally valid including electronic signature .I believe once the cyber laws are passed by $AI0 this is possible. 4ach merchantMshopper can allot a secret code number to the existing clients %customers&. An receipt of this code number0 the goods can be dispatched by VPP and other modes of dispatch0 which will ensure collection of payment against delivery. "owever0 this facility can be extended only to existing customers. 5anks should be asked to immediately create necessary facilities for any of the aMc holders to operate the aMc through online. Ance a purchase is made0 the aMc holder can transfer the re@uired amount to the merchant AM2 online. 'he M42"A-' 5A-H 2A- I-'IMA'4 the shopper about the transaction. All these activities can be carried out instantly though proper programming. Activity can be made part of the ordering activity. 9arge organiGations can issue authoriGation letters to each of their employee who wants to avail the online purchasing facility and device a mechanism through which the company itself pays the merchant his dues. 'his would re@uire installation of transaction servers in the companies or can be integrated with their online business activity. #imilarly all government establishments can device a mechanism to enable their employees make online purchases. 'hese are all some of the ideas to making the online purchases easier and smoother without affecting the payment due to the shoppers. 'hey may look difficult to achieve but with proper programming techni@ues and the use of appropriate servers0 they can be easily achieved. In conclusion0 payment through credit cards will not result in increasing the online shopping as generally believed. 6e need to device different mechanisms taking into account Indian laws0 shopper,s re@uirements0 banking practices prevalent in our country. RECOMMENDATIONS HOW TO PROTECT 4 'he following are my recommendations. 'here may be other options available as well. (. -ever give your credit card to the company. Make payment by che@ue instead. B. Monitor your credit card statements. C. If there is an unauthoriGed charge0 report it to Micro Korecasts immediately and demand a charge reversal. 6ait several days and then check with your credit card company to see if you received the credit. !o not wait for your next statement to see if the credit appears. F. If the refund is not there0 call Micro Korecasts again. Most importantly0 deny the charge immediately with your credit card company. Kor this to be effective0 it must be done in writing0 and must be done within 8+ days from the date you received the statement on which the disputed charge appeared. 'his time frame is as per federal law. I believe you are much more likely to get your money back if the credit card company is involved. *. eport your credit card as lostMstolen so that no further charges can occur. /ou will get a new card within a couple of week. Many people have done this0 including myself. 8. eport the problem to authorities as per the next section is= Very likely #omewhat likely -ot sure #omewhat unlikely Very unlikely 'o what extent does credit card service exceed your expectations= Very great extent $reat extent #ome extent 9ittle extent Very little extent 6hich of the following statements0 according to you most representative of your credit card service provider= 'hey are "elpful and Kriendly. 'hey are polite0 cheerful and are knowledgeable operators In tune with the needs of its clients Prompt in dealing with customer complaints Enwilling to go the extra mile for its customers Poor customer phone support /ou are often put on hold for a long time "ow satisfied are you with the efficiency of call handling when placing calls to credit card service provider= Very satisfied #omewhat satisfied -eutral #omewhat dissatisfied Very dissatisfied 2redit card service provider understands my service needs. #trongly agree Agree -eutralM-ot sure !isagree #trongly disagree. 6hat are the added benefits you wish to ac@uire from the card= Acceptability 9onger credit period "igher credit limit 9esser charges 5etter offers Please rank the services of the following card issuers in order of your preference. 2itibank "#52 5ank of 5aroda 5ank Af India #tandard 2hartered A-P $rindlays 'imes card I2I2I #5I Personal detailsN AgeN Profession IncomeN (*0+++1B*0+++ B*0+++1F+0+++ F+0+++18+0+++ Above 8+0+++ )han* you for ta*ing the time to com(lete this survey BIBLIOGRAPHY Marketing managementN Philip Hotler Kinancial ManagementN Hhan 7 jain 5usiness #tatisticsN H.H.Hhanna 7 Iagjit #ingh Annual report #5I Annual report I2I2I Annual report 2itibank Annual report KI22I Ph!. "ouse library IAMIA MI99IA I#9IMIA library $oogle search /ahoo search AltaVista search M#- search India infoline.com MAMA search 2itibank.com #bi.com Icici.com Indiatimes.com A7m.com 5usiness today 5usiness week 'imes of India 5usiness world 5usiness India Autlook India today A7m magaGine #trategic marketing magaGine 4conomic times Kinancial times 'imes of India "industan times Indian express 'he "indu "ome trade search #trategic managementN P.H.$hosh 5rand managementN /..Morthi SUGGESTIONS OF THE STUDY 'he banks battle today is more with cash than with other banks. 2onsidering the huge potential of the Indian market0 it is in the interest of the issuers to educate the consumers about the benefits of holding credit card. 'he campaigns must also be convincing enough to clear the myth that credit cards increase spending. Kocus should be on changing non1card related spending to card related spending. 'he issuers must focus on service and pricing and must recogniGe the importance of the billing and payment process to retain credit card holders. 'he credit cards schemes would be successful only if they meet the customer,s re@uirement of wider acceptability rather than fringe benefits like non1crisis credit or prestige proposition. 4mphasis should be on offering a wider basket of services through credit cards enabling purchases for a wide variety of products along with A'M usage0 backed by much more comprehensive merchant establishment network. 'he banks must also increase the number of cardholders by reducing the initial1one time subscription fee. 'he banks should step up advertising that will help to build a brand image and create a higher brand recall like that of 2itibank. 6ith more and more people willing to adopt to credit cards0 banks should undertake innovative strategies to increase card spends. #imultaneously0 to cater to high net worth customers and those with niche needs0 banks should provide more of premium plastic and 2A1cards that piggyback on the existing infrastructure0 but provide holders with exclusive add1ons. Kuture promotions could includeN 'elemarketing0 direct sales0 direct mail0 promotional advertising through media0 common A'M services between banks %to reduce cost of operations&0 schemes like card carnival and sales executives contests and a plethora of augmented services should be introduced to induce greater number of people to adopt to plastic money. LIMITATIONS OF THE STUDY 'he study is confined to -2 only. Most of the information is subjective data collected through personal interaction with people transacting in the plastic money market. As a result the personal biases of individuals could affect the study. "owever0 to counter this the data has been verified from a number of different sources to give it a measure of authenticity. #tudy was constrained by limited availability of data. -ot all banks could reveal their confidential marketing strategies and statistical information. INTRODUCTION TYPES OF CARDS SALIENT FEATURES OBJECTIVES & SCOPE OF THE STUDY RESEARCH METHODOLOGY EXECUTIVE SUMMARY OF CREDIT CARD INDUSTRY INDIAN CREDIT CARD SCENARIO DECIDING ON THE RIGHT CREDIT CARD ANALYSIS COMPARISON OF CREDIT CARDS LIMITATIONS OF THE STUDY SUGGESTIONS OF THE STUDY CONCLUSION RECOMMENDATION BIBLIOGRAPHY QUESTIONNAIR E