CONSUMER CRIDIT ANALYSIS

PRESENTENTED TO: Sir Shahanshah Alam Siddiqui PRESENTED BY: Khalid Siddiqui Saqib Shakeel Adeel Ahmed

(FA08-MB-0044) (FA08-MB-0078) (SP09-MB-0148)

PRESENTATION ON CREDIT CARDS

Basic Concept and History

A credit card is a small plastic card issued to users as a system of payment. In 1921, Western Union had begun issuing charge cards. In 1950, Ralph Schneider and Frank McNamara, introduced the Diners Club Card. In September 1958, Bank of America launched the BankAmericard. It became the first successful recognizably modern credit card.

Benefits and Detriments

Benefits to customers Detriments to customers

High interest and bankruptcy Weakens self regulation Inflated pricing for all consumers

Benefits to merchants

Card Structure and Calculation

Credit card numbering

This is the first six digits for MasterCard and Visa cards. The next nine digits are the individual account number. The final digit is a validity check code.

Interest Rate Calculation

Typical credit cards have interest rates between 7 and 36%. The general conversion factor for APR to EAR is

Transactions Steps Involved

Authorization. Batching. Clearing and Settlement. Funding. Charge backs.

Pictorial View of Transactions Steps

Parties Involved

The The The The The

cardholder. card issuer. merchant. acquirer. card Association.

How Credit Cards Works

Credit cards are issued by a credit card issuer, such as a bank or credit union. When a purchase is made, the credit card user agrees to pay the card issuer. Electronic verification systems allow merchants to verify about the card. The verification is performed using a credit card payment terminal or point-of-sale (POS). For card not present transactions (e.g., e-commerce, mail order, and telephone sales) requires the security code, expiry date and billing address.

Card Holder

Charges Rs 1,000
Card Issuer Merchant

Credit Card Association

Merchant Acquirer

Card Holder

Card Issuer

Merchant

Charges Rs 1,000
Credit Card Association Merchant Acquirer

Card Holder

Card Issuer

Merchant

Credit Card Association

Merchant Acquirer

Charges Rs 1,000

Card Holder

Card Issuer

Merchant

Charges Rs 1,000
Credit Card Association Merchant Acquirer

Bills Rs 1,000

Card Holder

Card Issuer

Merchant

Credit Card Association

Merchant Acquirer

If Returns Bill in 45 Time then 1k else 1k + interest

Card Holder

Card Issuer

Merchant

Credit Card Association

Merchant Acquirer

Card Holder

Card Issuer

Merchant

At 45 days Pays 9,850 Rs Keeps 150 Rs

Credit Card Association

Merchant Acquirer

Card Holder

Card Issuer

Merchant

Credit Card Association

Merchant Acquirer

Pays 9,800 Rs keeps 50 Rs

Card Holder

Card Issuer

Merchant

Credit Card Association

Merchant Acquirer

Pays 9,775 Rs keeps 25 Rs

Card Holder

Merchant Looses 225 Rs in Card Processing fees

Merchant

Card Issuer

Credit Card Association

Merchant Acquirer

An Example in a Pictorial View

Main traits of Faysal Bank mc2 Credit Card

MasterCard

Global Reach and Acceptability Cash Advance Facility of up to 50% of your credit limit 0% mark-up on 6 to 18 month installment plans mark-up rate of 2% per month Reward Point is earned for every PKR 50 offers variety of safety and coverage features.

Cash Advance Facility

Installment Plan

Instant Reward Redemption

Insurance Cover