plastic money -project
TRANSCRIPT
A PROJECT ON
"A STUDY ON CREDIT CARD" (THE PLASTIC MONEY)
Submitted in partial fulfillment of the requirement of Bachelor Of International Business & Finance,
Jamia Millia Islamia, University,New Delhi-110025
Submitted by: ZOFAIL HASSAN
SESSION :- 2009-2011
Submitted to:
DEPARTMENT OF COMMERCE AND BUSINESS STUDIES
JAMIA MILLIA ISLIMIA UNIVERSITY NEW DELHI-110025
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. VARDHA
SAGHIR (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
The credit card had its beginning in an embarrassing incident that
took place in the early 1950’s in America. The story goes that Mr.
McNamara; a New York businessman took his friends out to dinner.
At the end of meal he discovered that he had forgotten his wallet at
home, the proprietor was kind enough to allow him a later
settlement of bill. As McNamara stepped out of the restaurant he
had the brainwave for the introduction of credit cards - system of
availing instant credit upon confirming the identity of cardholder.
Thus was born the Diners Club Cards, the pioneer of today’s
multibillion-dollar plastic money business.
Diners Club adopted a promising approach by recruiting various
hotels and restaurants to act as member establishments for accepting
the cards. Not only did these establishments pay a commission on
member’s purchases but the members also paid an annual
subscription fee. Diners Club vetted its members for credit
worthiness and guaranteed payment to participating establishment.
Thus was born the first ‘Travel and Entertainment Card’. It was
followed by American Express, which is now a dominant force in
the Travel and Entertainment cards industry, and by 1959 by Carte
Blanche, after many vicissitudes is now a part of Citi Bank Empire
Together With Diners Club. In the present time American Express
leads the travel and entertainment (T&E) card industry.
The next great leap-forward came from Bank of America, which in
other banks. Such cardholders could use their card 1966 offered to
license its successful blue, white and gold Bank America card to at
any accepting merchant establishments around the globe. Later in
1977 all the national and international Bank America licenses were
pulled together under the single name of Visa.
Not to be outdone, a rival group of American Banks came together
in 1966 under the name of Interbank, later renamed Master Charge
and later still Master Card. Ever since Master Card and Visa and
their affiliates have carved the world credit card market.
In the 1980s credit card concept was launched in India through the
Diners Club card, and soon, within a couple of months both Visa
and Master card entered into the Indian market.
What is a Credit Card?
“Credit Cards - It's credit to you!”
A Credit Card is referred to as 'plastic money'. Carrying a lot of
cash on you can be cumbersome, risky and sometimes, you run
short of it, just when you most need it. (Remember the SALE at
your favorite ready-mades store?). A Credit card is the smart
solution to these problems. It is a convenient and safe alternative for
cash.
Besides, it says things about you. Most people associate a credit
card with a prestige, which it most certainly bestows on you, but
more importantly, it says that you have taken the onus of being
responsible - to be extended credit! So, when you get yourself a
card, remember that, 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.
Credit Card – A credit card is a financial instrument, which can be
used more than once to borrow money or buy products and services
on credit. Banks, retail stores and other businesses generally issue
these.
Credit limit – The maximum amount of charges a cardholder may
apply to the account.
Annual fee – A bank charge for use of a credit card levied each
year, which ranges depending upon the type of card one possesses.
Banks usually take an initial fixed amount in the first year and then
a lower amount as yearly renewal fees.
Revolving Line Of Credit - 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.
Personal Identification Number (PIN) - As a security measure,
some cards require a number to be punched into a keypad before a
transaction can be completed. The cardholder can usually change
the number.
Teaser Rate - Often called the introductory rate, it is the below-
market interest rate offered to entice customers to switch credit
cards.
Joint Credit - Issued to a couple based on both of their assets,
incomes and credit reports. It generally results in a higher credit
limit, but makes both parties responsible for repaying the debt.
TYPES OF CARDS
MasterCard – MasterCard is a product of MasterCard
International and along with VISA are distributed by financial
institutions around the world. Cardholders borrow money
against a line of credit and pay it back with interest if the
balance is carried over from month to month. 23,000 financial
institutions in 220 countries and territories issue its products.
In 1998, it had almost 700 million cards in circulation, whose
users spent $650 billion in more than 16.2 million locations.
VISA Card – VISA cards are financial institutions around
the world distribute a product of VISA USA and along with
MasterCard. A VISA 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. Nearly 600 million cards carry one of the VISA brands
and more than 14 million locations accept VISA cards.
Affinity Cards - A card offered by two organizations, one a
lending institution, the other a non-financial group. Schools,
non-profit groups, pro wrestlers, popular singers and airlines
are among those featured on affinity cards. Usually, use of the
card entitles holders to special discounts or deals from the
non-financial group.
Standard Card – It is the most basic card (sans all frills)
offered by issuers.
Classic Card – Brand name for the standard card issued by
VISA.
Gold Card/Executive Card – A credit card that offers a
higher line of credit than a standard card. Income eligibility is
also higher. In addition, issuers provide extra perks or
incentives to cardholders.
Platinum Card – A credit card with a higher limit and
additional perks than a gold card.
Titanium Card – A card with an even higher limit than a
platinum card.
Secured Card – 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 credit, or people trying to rebuild their poor
credit ratings.
Smart Card – Smart cards, sometimes called chip cards,
contain a computer chip embedded in the plastic. Where a
typical credit card's magnetic stripe can hold only a few dozen
characters, smart cards are now available with 16K of
memory. When read by a special terminal, the cards can
perform a number of functions or access data stored in the
chip. These cards can be used as cash cards or as credit cards
with a preset credit limit, or used as ID cards with stored-in
passwords.
Charge Card – fall between a debit and credit card. Works
like the latter and you don't have to be an accountholder. Just
pay up in full when the bill arrives with the mail. No
outstanding are allowed, in other words, no revolving credit
facility either. American Express and Diners are providers.
Rebate Card – This is a card that allows the customer to
accumulate cash, merchandise or services based on card
usage.
Co-Branded Card – This is a marriage of convenience
between two service providers who want a trade-off with the
other's strengths. Specific facilities are made to members
through these tie-ups. So, Times Bank and Citibank have a
co-branded card that allows concessional rates for add-on
cards or telephone banking. Stan chart and Hindustan Lever
Limited have a co-branded card to sell Aviance beauty
products. SBI-GE Capital has a co-branded card for retail
loans.
Cash Card – Cash cards, similar to pre-paid phone cards,
contain a set amount of value, 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. The cards
are like cash -- they have no built-in security, so if lost or
stolen, they can be used by anyone.
Travel Card – these works mostly as debit cards for the
limited purpose of travel. Citibank Dollar Card, American
Express, Bob card Global and Hong bank Thomas Cook
International Card are among the players in this section.
Debit Card – It is the accountholder's mobile ATM. Open an
account with a bank that offers a debit card, and payments for
purchases are deducted from your bank account. The retailer
swipes the card over an electronic terminal at his outlet, you
enter the personal identification number on a PIN pad and the
money is immediately debited at the bank. Citibank and a few
domestic banks like Times Bank offer this.
SALIENT FEATURES
Annual Fee:
All credit card issuers charge an annual fee which is payable at the
start of the year. The start of the year, of course, is your
membership year, and not the calendar year. So, if you got yourself
a card in March, you can expect to be billed the annual fee every
March until you cancel your card. As a privilege, this fee is
sometimes waived the first time. When the time comes for renewal
of your card, you can even use the reward points you have
accumulated from using the credit card over the year to settle your
annual fee.
Forwarding Balance (or Revolving):
The most attractive feature of a credit card is that you need not pay
off your dues in whole. You can opt to pay 5% of the total amount
on or before the due date, every month, the rest is carried forward.
But there's a price to pay for this extended credit - interest!
Normally, interest varies between 2.5% and 3% per month.
APR or Annual percentage Rate:
The interest rate that reflects the yearly cost of the interest the
outstanding on your card is called the annual percentage rate. This
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
3%, but when you look at the interest rate over the year, it turns out
to be as high as 43%.
Cash Advance:
An important feature - lets you withdraw cash from designated
ATMs using your credit card. Use discretion when withdrawing
cash on your credit card because the charges for this facility are
high, around 2.5% to 3% per transaction!
BENEFITS:
Credit:
When you use a Credit card to pay for anything, you get an
interest-free period of 45 days. Billing cycles are structured in
such a way that you definitely get at least 30 days out of these as
clean credit time, which is especially beneficial to salaried
people. Better still, 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 5% of the total amount on or before the due date, every
month. You can spend now , pay later.
Convenience:
With a credit card on you, you don't need to run the risk of
carrying a lot of cash.
Cash Advance:
Another advantage of a Credit card is that you can use it as an
ATM card too! But remember, there's a fee to it. It typically
starts with a flat fee going up to a percentage-based fee on the
amount of the withdrawal.
DRAWBACKS:
Greed!
Just because you have credit being extended to you doesn't mean
that you should go on a rampage! Use your card with discretion and
caution. Remember, it is an extremely expensive way to borrow
money! View it as a convenient and safe way to carry cash, a timely
help in an emergency or taking advantage of an opportunity that
you would have otherwise lost out on, like an investment!
Do's & Dont's
Do not leave your Credit Card lying around the house or on
your desk at work.
If your card is lost or stolen, or you suspect it is being used
fraudulently, report it immediately to your bank.
Hold on to receipts from your transactions. In fact, keep your
receipts filed or in one place - you'll find them easily, should
the need arise. And when you want to throw them away, don't
just thrash into the bin, shred or tear them before you do.
Never give your Credit Card number over the phone, unless
you've made the call, and it is to your bank or someone you
trust, and you really, really need to!
EXECUTIVE SUMMARY OF CREDIT CARD INDUSTRY
The credit card industry in India has registered an encouraging
growth in recent times, but the usage pattern of credit cards remains
a point of conc0ern, those in the industry say. There has been a
seven-fold increase, with the number of cardholders touching over
38 lakh. These figures point towards the fact that the credit card
industry in India is growing at a brisk annual rate of 30 per cent and
is expected to grow at a similar rate in the coming years.
While issuing the cards may seem to be easy, the challenge for the
banks lies in being able to manage their portfolios by keeping the
delinquency levels at the lowest and customer satisfaction levels at
the highest. Customer satisfaction is the key to success. You want
customers to be happy with the products and services you provide.
If they feel they have received good value for their money, your
business will prosper. Getting your customers to tell you what’s
good about your business, and where you need improvement, helps
you to be sure that your business measures up to their expectations.
Apart from attracting potential card users, customer retention is also
one of the most important factors influencing a card issuer’s
success. ----. With the influx of new financial institutions in the
card market, people have started using cards on a more regular
basis. The level of services provided by these organizations is
increasing day by day. In order to ensure that the existing customers
stay loyal, Organization has to ascertain whether its existing
customers are satisfied with its current service offerings.
This research has tried to study the satisfaction levels of a sample of
100 credit card holders. These respondents each hold credit cards,
which may be of different kinds.
INDIAN CREDIT CARD SCENARIO
The credit card industry in India has registered an encouraging
growth in recent times, but the usage pattern of credit cards remains
a point of concern, those in the industry say. Seven years back,
India had a base of around five lakh credit cards. There has been a
seven-fold increase, with the number of cardholders touching over
38 lakh. These figures point towards the fact that the credit card
industry in India is growing at a brisk annual rate of 30 per cent and
is expected to grow at a similar rate in the coming years. This
fortifies the view that conservative purchasing ideas are giving way
to the big in-thing. But it is the usability that raises doubts.
According to a survey by the Credit Card & Management
Consultancy (CCMC), 71 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. Through this survey it has come to realize a long felt
need of potential and existing cardholders for advice on suitable
selection of a credit cards. The whole idea behind the introduction
of the credit cards was to increase the purchasing capacity of the
cardholder. With this in mind, the foreign banks launched a credit
card blitzkrieg on the Indian customer.
The innovations have already begun to show their effect. The
Standard Chartered Bank has seen its credit card base shoot up after
the launch of its Global Rupee Card in March last year.
It has seen the fresh issuance of global card increase by more than
one lakh, and the bank now has a base of more than half a billion.
But the real challenge for the banks is to make the holder spend
more on the card. Going by estimates, India has a long way to be
anywhere near the matured markets. The markets like the United
States and England have an average annual card spend of 1,300 and
3,600 dollars respectively.
The credit card players will have to think about simplifying the
foreign exchange transactions. When one uses the card, it is entirely
his responsibility to make sure that exchange controls have been
complied with. The 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. The real point of worry is the
spending on the credit cards. According to estimates, the average
card spending in India is even less than that in Indonesia. Those in
the credit card business say that per capita credit card spending in
India is about five hundred dollars (Rs 21,500), whereas in
Indonesia, it is about 678 dollars (Rs 29,154). At present there are
over a dozen players in the credit card market in India, and the fact
is the foreign banks are clearly the leaders. The leaders will surely
be identified by the innovations for the card users.
But the alarm has been raised for the banks by the figures that show
that while the average usage in Malaysia is 27 times annually, in
India it is only 11 times. Some of the key factors impacting the
cards business in India are limited credit, wide geographical spread,
limited telecommunication infrastructure and emerging regulatory
controls. The other players feel that the card acceptance base in
India has to be widened. Suggestions include credit card usage at
petrol pumps and railway bookings.
They also point out that though the cards business has been in the
country for long, but even today the insurance premium cannot be
paid by card. Though LIC is talking about the introduction of this
facility to customers, but its turning into reality may take time.
There is talk of widening the card business with new features, but
the present scenario does not paint a positive picture, with many
loopholes remaining to be plugged.
Of the twenty million taxpayers in India, more than ten per cent of
them are cardholders. Those in the industry point out that this figure
is not bad, considering the fact that; the cards business is still in its
initial stages. However, the players feel that the business has not
reached an optimum level to say that they are making money. Even
the largest player in the Indian market does not still have the
economies to make the card business really profitable in India,
despite the fact that it has more than one million credit card holders.
Less than two per cent of private consumption spending in India is
done on cards.
While issuing the cards may seem to be easy, the challenge for the
banks lies in being able to manage their portfolios by keeping the
delinquency levels at the lowest. Huge investments in systems and
infrastructure are, therefore, a necessity. The increase is being
attributed to new ideas such as round-the-clock functioning of card
issuing banks and pulling out all stops even at a loss, to grab a
sizeable share of the expanding pie. Not to be left behind in this
race, even the big brother, the State Bank of India in association
with GE Capital entered the card business.
The spurt in the card business has gathered momentum during the
past couple of years. For instance, the Hong Kong & Shanghai
Banking Corporation (HSBC), was in the credit cards business
since seven years, but from 50,000 card holders in 1997, it has
about three lakh card holders now.
India’s fastest growing credit card company - SBI Cards 2.5 lakh
credit cards…25 cities…16 months. The joint venture between
India’s largest bank – State Bank of India and one of the world’s
leading financial services companies – GE Capital, SBI Cards &
Payment Services (SBI Cards) has issued 2.5 lakh credit cards
across 25 cities (the largest distribution network in the payment
card industry) within 16 months. Thereby achieving the target in the
fastest period seen in India’s payment card industry.
SBI Cards & Payments Services attributed this success to SBI’s
enormous brand equity, and unparalleled retail branch network
coupled with GE Capital’s payment card process and technology
expertise. He also highlighted Speed, Simplicity and Service as the
key drivers of growth for the SBI Card. Speed Unique and
exclusive 14-day average turnaround time, coupled with availability
of the SBI Card in 25 cities in just 16 months. Simplicity Simple
application process with minimum documentation. Service 24 hours
a day/7 days a week local call access to the SBI Card Help line
across 25 cities. As a result of the focus on the Speed, Simplicity
and Service growth platform, SBI Cards today offers the largest
distribution and widest cash advance network for India’s middle
class customers. SBI Cardholders can access cash for emergency
purposes from over 158 SBI branches across 68 locations in India.
INTERMEDIARIES:
In their attempt to increase their market share, credit card
companies are opting for Direct Sales Agents. These DSAs are paid
a flat rate against the approved applications. The DSA team
comprises aggressive salesmen who visit different organizations
and professionals. They 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
How much is the joining fee and the annual fee?
Generally, a card with a higher annual fee enjoys more benefits like
higher credit limit, higher accident insurance cover, accessibility to
airport lounges, travel discounts etc. OF at least the used to be the
case. With cutthroat competition between the card issuing banks,
players are ready to waive joining fees and also one-year
membership fees for anyone. Grab these offers, or negotiate this for
yourself.
How much is the Add-on card fee?
If you are interested in buying add-on cards for your children,
spouse or friend, ask for the add-on card fee. Remember that you
will be settling the bills on the add-on card that you so touchingly
gift to someone dear to you - the statement will come to you, and
the responsibility for payment is yours (as far as the credit card
company is concerned)
What is the interest rate?
This is actually a question that you should be asking fairly soon in
the discussion. Remember, while the up front one off fees are bread
and butter for the credit card Company, this is the jam! If you are
the sort who forgets to pay on time, or likes to live it up and live off
credit, the interest rate would be of paramount importance. Most
credit card companies charge anywhere between 2% to 3 % per
month. (Read a whopping 35% to 43% per year). That's where they
make their gravy, and that's where you pay! It is always advisable
to pay off the entire amount on due date, or, if you have a large
bank balance, look for card companies that provide the transfer
balance facility. The balance transfer rate is lower for a certain
period (say six months) and then the normal rates apply. But again
this is a temporary solution to a chronic problem.
4. What is the reach?
Not an important question - most outlets in India accept both the
Master card and the Visa card, and most credit card companies
provide Visa or Master cards. So its fairly simple, and doesn’t need
much head scratching - they're all more or less the same. One thing
you could do is to check out for the Automated Teller Machines
nearest to your house or work place (ATMs - almost all credit card
companies now provide you the facility of withdrawing cash from
machines - I guess for things that cards just cant buy. These
machines are called ATMs, and are helpfully scattered all over the
city/country/world). Having more ATM outlets in Thailand
wouldn’t be of any relevance to a person who rarely travels abroad,
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 Visa/ Master chain, and have a separate chain of outlets where
it’s accepted.
5.Is it a Global card?
Now this could be useful to you if you are an overseas traveler. A
Global card can be used for paying expenses in foreign currency
just like you use a credit card to pay in rupees. Nowadays, a Global
card is being issued at the same cost as for a similar domestic one. It
is better to have a global card, especially if there is no premium
attached.
6.How useful are branded or affinity cards?
A partnership between a card issuer and the non-profit, social or
lifestyle association is what results in an affinity card. This is for
providing financial rewards to the group or association. E.g.
Citibank Women’s card, Citibank WWF cards. Citibank WWF Visa
card donates a percentage of the transaction value made through the
card to the WWF 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 co-branded card. This entitles the cardholder to lots of
freebies, prizes, discounts on co-branded products. Logic: If a
customer is loyal to one brand, he will want to purchase the other.
So if you were loyal to a particular brand, it would make sense
going for those co-branded cards. e.g. Citibank and IOC, Bank of
India and Taj group of hotels etc.
7. What’s the lost card liability?
Most Card issuers mention in the brochures that lost card liability is
Rs 1000. Be careful, that is actually AFTER it is reported to the
Bank. The liability is actually unlimited before reporting (in cases
like this, you would actually thank the credit limit because though
the liability is unlimited, the ceiling should logically be your credit
limit, 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. Are there any freebies?
Citibank gives a Pond’s gift hamper free on subscription to its
Citibank Women card. Personal accident insurance for Air, Road or
Otherwise is packaged along with the subscription. Also Baggage
cover, Purchase Protection cover and credit shield is bundled free of
cost along with the card. If you feel one these parameters are
important, and then settle for the one that gives a higher cover.
9. Is immediate cash withdrawal possible?
Check out if the Bank has any ATMs near your house or workplace.
This surely helps in times of emergency. The cost component for a
cash withdrawal could be classified as follows: Service fee
(transaction fee) each time you pull out money, and Interest rate for
the period for which you have used the money - until settlement
date. If you are going to withdraw cash frequently, better watch out
for this cost.
10. How long is the free credit period?
The days of credit one gets depends on the statement date and the
date of transaction. On an average, you could assume you'd get
around 20 days of free credit. However, if you buy just after the
statement date, you could end up getting unto 50 days of credit.
Look for cards that give you the highest free credit period!
11. Is a Helpline available?
A 24-hour Helpline service from the Card Company helps the
cardholders during the non-banking hours. Reporting of theft,
checking of available credit limit and other enquiries can be made
by the cardholder round-the-clock. In the end, like everything else
in life, the card you want is really up to you - what matters the most
to you - credit, reach, the freebees, international reach or a
combination of parameters. Use our card category on the left bar to
simply list out the names of the cards, or choose by bank name and
see the cards they offer. Or look for cards offering the lowest
interest rate. Of the lowest charges on cash withdrawal (believe me,
it gets to be a serious consideration as one goes along). Go to our
shortlist card section, and search for cards based on any criteria that
you want. Happy hunting, and stay careful - you may like to use our
section on how to use the card carefully to minimize the chance of
its misuse by someone else.
OBJECTIVES OF THE STUDY
Study is the one of the important parts of any study. Following
are the objectives of the study: -
To find the scope of the credit cards industry in India.
To know the customer awareness regarding credit cards.
To analysis the benefits of credit cards.
To know how it is beneficial to manage the cash risk.
To understand the market potential of credit card in Delhi.
SCOPE OF THE STUDY
The study on Credit card- increase the volume of profit of this
industry. We have considered geographical Unit of Delhi. It in we
analysis the comparison of different credit cards and their detail
reports their branches and values.
RESEARCH METHODOLOGY
Confining our study to the geographical limits of Delhi, we chose
a sample of 100 people - 50 cardholders and 50 non-card users, using the
probability sampling technique where every individual fulfilling the
above criteria had an equal chance of being selected for the survey.
Following are some of the facts that were revealed through the survey.
Sources and Method of Data Collection
The data on the present study will be collected by the
investigator himself. It's customary to distinguish data between
primary and secondary.
Collection of Primary Data:
The collection of primary data done with the help of personal
meet with the Managing Director and Supervisory and Official Staff
after Securitization 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.
Collection of Secondary Data:
News papers,
Press Media
Magazines
Telecommunication
Research Tools:
Research design : Exploratory
Sampling Unit : Area of Delhi
Sampling Size : 100 people- 50 Cash holder, 50
non- cash user
Sampling technique : Probability Sampling
ANALYSIS
It was found that for the frequent travelers acceptability was the
most important criteria and was given the highest weightage
Following attributes have been analyzed as per the consumer survey
conducted
The attributes are as follows:
ACCEPTIBILITY
CREDIT LIMIT
CREDIT PERIOD
MEDICAL AND HOSPITAL SERVICES
OTHERS
PROMOTION STRATEGIES
The 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. Traditionally 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. The companies have tried to address this
issue through promotional campaigns:
Placing of take away firms of credit card at more than a
thousand merchant establishments.
Appointing of DSAs
Using business magazines and newspapers for advertisement.
Mailing of forms along with contests to professionals and
middle management executives etc.
Tapping the get member route
Reducing their minimum eligibility criteria and changing
income documentation structure.
Introduction of photo cards.
Tying up with durable consumer goods manufacturer ( e.g.
Onida, 0Philips ) to sell their products.
Providing ATM facility to their card holders
Travel assistance via tele-banking.
COMPARISON OF CREDIT CARDS
Card Issuers Brand Card Type Acceptance
Citibank NA Gold/Preferred Master International
Citibank NA Gold/Preferred Visa International
Citibank NA Indian Oil Master Domestic
Citibank NA Silver/Classic Master International
Citibank NA Silver/Classic Visa International
Citibank NA Women Visa Domestic
Citibank NA WWF Visa Domestic
ICICI Solid Gold Visa International
ICICI Sterling Silver Visa Domestic
ICICI True Blue Visa
Domestic
SBI Classic Visa
Domestic Standard Chartered Classic Master
International
Standard Chartered Gold Visa International
With the credit card truly becoming an international citizen, issuers
have begun highlighting the value-added features offered along
with the basic product. While some of them are offering attractive
interest rates, others are luring customers by their reward schemes.
With 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
Fee-heavy foreign transactions
Many major credit card issuers charge a fee for card transactions in
foreign countries. The cost of cash advances is particularly onerous.
When traveling abroad, carry a mix of plastic, cash, debit cards and
traveler's checks.
Want a better rate?
Just ask for Acquiring new credit card customers is expensive and
time-consuming, so issuers don't want to lose creditworthy
individuals. If you've had a year of on-time payments, call your
credit card issuer and ask for a cut on your interest rate.
Cut credit card costs
Make payments on time, avoid cash advances and don't exceed your
credit limit. Cash advances are more costly as there's no grace
period, so you pay interest from the day you take the money.
Identity theft
The No. 1 identity theft is credit card fraud. New card accounts are
opened or existing accounts are taken over. The Federal Trade
Commission offers a hotline and Web site for advice and tips.
Save stress with less debt
The stress of credit card debt has been directly linked to physical
problems like heart attacks, insomnia, explosive emotions, smoking,
overeating and lack of concentration.
Shop online without the worry
Credit card companies are switching to zero liability. If your credit
card is misused on the Internet, you won't be liable for online
transactions charged by an unauthorized user. But zero liability
doesn't mean zero responsibility -- you'll have to meet certain
requirements.
Fraud alert
Placing a fraud alert on your credit files prevents an imposter
opening credit in your name. The downside is that you give up the
convenience of "instant credit." You can't sign up for a new credit
card and go shopping with it three minutes later.
Teen consumers
Credit card companies are targeting the increasingly powerful teen
consumer. Teens get the credit card and the bill, but parents are
legally responsible. Nonprofit organizations caution that teens lack
personal finance teaching, and aren't ready for plastic.
Be careful when you do the card hop
Changing credit cards for a better deal may net attractive teaser
rates, but many cards now deter balance transfers with tough terms
and high costs. Read the fine print carefully.
Silencing phone solicitors:
You can pull the plug on telemarketers calling your home. The
Telephone Consumer Protection Act requires telemarketers to
record your 'do-not-call' request and refrain from dialing you for 10
years.
Credit score
During and after a divorce, you need to make a clean financial
break to keep your credit report accurate. A first step is to cancel
credit card accounts, even if you were only an authorized user, and
reapply for new accounts.
Digital wallets
Digital wallets, or e-wallets, are extensions of a consumer's credit
cards. Basic e-wallets store cardholder information, filling in
account and personal information at cyber stores. They are
convenient, secure solution to shopping online.
Don't fill up on gasoline credit cards
Gas company cards offering rebates on purchases can be
worthwhile when gas prices are high. But 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.
Credit union cards
Credit unions usually have lower interest rates and fees than banks,
though they tend to have fewer choices than bankcards.
Student credit card choices
Students and their families looking for the best student credit card
need to focus primarily on annual fees and interest rates. Generally,
students with a work and credit history will find a regular credit
card is the best deal.
Variable-rate cards
The cost of using credit cards has increased. Variable-rate cards, the
most common type in the nation, tend to rise in step with the prime
rate. The prime rate has gone in the Fed's efforts to cool the red-hot
economy, but spending hasn't been significantly reduced.
Financing vacations
Most people finance vacations with their credit cards. Even 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.
Emerging credit
Tweeners – people with emerging credit or recovering credit -- can
find good credit card deals. To get the best deal they need to
compare annual percentage rates, grace periods, credit limits, and
fees, and avoid credit cards with hefty application and processing
fees.
Affinity credit cards
Affinity credit cards (aka "charity" cards) may give you a sense of
purpose to your spending, but can cost more than your actual
donation. Affinity cards carry high interest rates and annual fees.
They have more value if you don't carry a card balance.
Paying for vacations
You can enjoy that vacation even after it's over by limiting your
credit card use. Consider planning ahead, setting a budget and
saving for your vacation. If you're still short-funded, a home-equity
loan offers a better interest rate than a credit card.
Student loan debt
Graduating college students face an average loan debt of more than
$35,000, and it needs to be attacked aggressively. First, concentrate
on paying down credit card debt, and then tackle your student loan
debt.
Citibank ‘s credit cards debt elimination strategies
In addition to encouraging credit card competition through
promoting the most attractive cards in the country, Citibank help
consumers cope with credit card debt by teaching various debt
reduction strategies. We hope that you find the following tips
beneficial.
Interest Rate Awareness:
We cannot stress enough the importance of being aware of interest
rates when using your card(s). Please utilize the lists above!!! High
rate cards can be put a BIG dent in your pocketbook. To illustrate
our point again, a cardholder with an average balance of $2,500 and
a 19.99% purchase rate will pay $1000.00 in interest alone in just
two years! The same cardholder would pay only $400.00 in interest
if the rate were lowered to 8.00%, a difference of $600.00! Also, be
aware of cash advance rates. Cash 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). Therefore, avoid
cash advances if at all possible.
Taking Advantage of Promo Rates
While introductory or "teaser rates" are generally short lived and are
intended strictly to entice consumers, savvy consumers can benefit a
great deal from promotional rates. Look for cards that offer longer
term introductory rates and longer term promotional rates on balance
transfers (6-12 months). Some 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! Consumers that
have more than one card with available credit can transfer balances
between cards in order to take advantage of promo. Transfer rates (a
ploy known as "card dumping"). Finally, when the promo. rate
period ends (for transfers), it is a good idea to call the card company
and request an extension of the rate. Consumers with a good
payment history often get extensions. You must be aggressive when
dealing with credit card companies! You can also negotiate to have
your regular interest rate lowered. Threatening to pay off a given
card often puts consumers in a bargaining position when dealing
with credit card cos.
Avoiding the Minimum Payment Pitfall:
One of the greatest card pitfalls is making only the minimum
payment each month. Make every effort to pay over the minimum
each month, even if it is only a few dollars over. The long-term
impact of making "just the minimum payment" is devastating.
According to Consumer Credit Counseling Services, paying the $60
minimum payment on a $3,000 credit card balance would take eight
years to pay off and would translate into $2,780 in interest! By
paying only $50 more a month, however, the debt would be paid off
in three years and result in a savings of $1,800 in interest charges!
Graceless Grace Period:
Avoid cards that begin computing their grace period at the time of
purchases, rather than billing. Only a few cards still use this method
of interest computing, but there are still some out there. Keep your
eyes peeled!
CONCLUSION
Whenever Internet transactions are discussed, immediately the
thought of credit card comes to everybody’s mind. This is because
in US the payments by credit a card is quite common. Even before
online purchases have become popular, normally purchases are
made through credit cards only. Therefore in US there was no
problem in making people to switch over to online purchases as this
mode of payment is already in vogue. Even in US, much discussion
is going on as to how to avoid frauds, misappropriation, etc of
credit cards once the card number is given online to a merchant.
Encryption technologies. Secure socket layers, etc are being
introduced to avoid such things In spite of all these measures, still
reports keep coming regarding credit card frauds here and there. In
other words, there is no 100% foolproof to make credit card
payment a safe mode of payment.
In other countries, where credit cards payment system is not as
popular as US, online shopping through credit cards resulted in
great failures. At least in Singapore, a mega shop had experienced
a fraud of huge magnitude and decided to suspend immediately
their online business. Similar stories are not uncommon in other
countries too.
Scenario in India
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;
1.Use of credit cards is popular to only a few thousands of
executives, businessmen, etc from big cities.
2.That any person using credit card is liable to declare IT made
many people surrendering their cards. In other words if credit card
is made the payment mechanism, only IT payers will be eligible to
buy goods online.
3.Still many leading credit card companies are yet to install their
infrastructure to process the online payments.
4.Then there is the question of sales tax laws Each State has its own
rate of tax structure for each and every commodity. How to charge
tax when a transaction takes place online and at what rate will pose
problems of billing.
5.Many establishments do not like to offer credit card facility
due to the service charges to be paid to cr card companies. They get
the payment only after a certain period of time once the goods are
sold. Both of them make the profit margin less.
As mentioned earlier, the fraud element is applicable to India also.
In view of all these factors, in India; Use of credit cards cannot be
expected to boost the sales of online sales, particularly business to
customer
Then what is the way out?
There are other methods of payments for Indian online business,
which are given below:
Payments by electronic cash/ cheque may be made legally valid
including electronic signature .I believe once the cyber laws are
passed by GOI, this is possible.
Each merchant/shopper can allot a secret code number to the
existing clients (customers). On receipt of this code number, the
goods can be dispatched by VPP and other modes of dispatch,
which will ensure collection of payment against delivery.
However, this facility can be extended only to existing
customers.
Banks should be asked to immediately create necessary facilities
for any of the a/c holders to operate the a/c through online. Once
a purchase is made, the a/c holder can transfer the required
amount to the merchant A/C online. The MERCHANT BANK
CAN INTIMATE 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.
Large organizations can issue authorization 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. This would require installation of
transaction servers in the companies or can be integrated with
their online business activity.
Similarly all government establishments can device a mechanism to
enable their employees make online purchases. These are all some
of the ideas to making the online purchases easier and smoother
without affecting the payment due to the shoppers.
They may look difficult to achieve but with proper programming
techniques and the use of appropriate servers, they can be easily
achieved. In conclusion, payment through credit cards will not
result in increasing the online shopping as generally believed. We
need to device different mechanisms taking into account Indian
laws, shopper’s requirements, banking practices prevalent in our
country.
RECOMMENDATIONS
HOW TO PROTECT -
The following are my recommendations. There may be other
options available as well.
1. Never give your credit card to the company. Make payment by
cheque instead.
2. Monitor your credit card statements.
3. If there is an unauthorized charge, report it to Micro Forecasts
immediately and demand a charge reversal. Wait several days and
then check with your credit card company to see if you received the
credit. Do not wait for your next statement to see if the credit
appears.
4. If the refund is not there, call Micro Forecasts again. Most
importantly, deny the charge immediately with your credit card
company.
For this to be effective, it must be done in writing, and must be
done within 60 days from the date you received the statement on
which the disputed charge appeared. This 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.
5. Report your credit card as lost/stolen so that no further charges
can occur. You will get a new card within a couple of week. Many
people have done this, including myself.
6. Report the problem to authorities as per the next section is?
Very likely
Somewhat likely
Not sure
Somewhat unlikely
Very unlikely
To what extent does credit card service exceed your expectations?
Very great extent
Great extent
Some extent
Little extent
Very little extent
Which of the following statements, according to you most
representative of your credit card service provider?
They are Helpful and Friendly.
They are polite, cheerful and are knowledgeable operators
In tune with the needs of its clients
Prompt in dealing with customer complaints
Unwilling to go the extra mile for its customers
Poor customer phone support
You are often put on hold for a long time
How satisfied are you with the efficiency of call handling when
placing calls to credit card service provider?
Very satisfied
Somewhat satisfied
Neutral
Somewhat dissatisfied
Very dissatisfied
Credit card service provider understands my service needs.
Strongly agree
Agree
Neutral/Not sure
Disagree
Strongly disagree.
What are the added benefits you wish to acquire from the card?
Acceptability
Longer credit period
Higher credit limit
Lesser charges
Better offers
Please rank the services of the following card issuers in order of
your preference.
Citibank
HSBC
Bank of Baroda
Bank Of India
Standard Chartered
ANZ Grindlays
Times card
ICICI
SBI
Personal details:
Age:
Profession
Income: 15,000-25,000 25,000-40,000
40,000-60,000 Above 60,000
Thank you for taking the time to complete this survey
BIBLIOGRAPHY
Marketing management: Philip Kotler
Financial Management: Khan & jain
Business Statistics: K.K.Khanna & Jagjit Singh
Annual report SBI
Annual report ICICI
Annual report Citibank
Annual report FICCI
PhD. House library
JAMIA MILLIA ISLIMIA library
Google search
Yahoo search
AltaVista search
MSN search
India infoline.com
MAMA search
Citibank.com
Sbi.com
Icici.com
Indiatimes.com
A&m.com
Business today
Business week
Times of India
Business world
Business India
Outlook
India today
A&m magazine
Strategic marketing magazine
Economic times
Financial times
Times of India
Hindustan times
Indian express
The Hindu
Home trade search
Strategic management: P.K.Ghosh
Brand management: Y.R.Morthi
SUGGESTIONS OF THE STUDY
The banks battle today is more with cash than with other banks.
Considering the huge potential of the Indian market, it is in the
interest of the issuers to educate the consumers about the benefits of
holding credit card. The campaigns must also be convincing enough
to clear the myth that credit cards increase spending. Focus should
be on changing non-card related spending to card related spending.
The issuers must focus on service and pricing and must recognize
the importance of the billing and payment process to retain credit
card holders.
The credit cards schemes would be successful only if they meet the
customer’s requirement of wider acceptability rather than fringe
benefits like non-crisis credit or prestige proposition. Emphasis
should be on offering a wider basket of services through credit
cards enabling purchases for a wide variety of products along with
ATM usage, backed by much more comprehensive merchant
establishment network. The banks must also increase the number of
cardholders by reducing the initial-one time subscription fee.
The banks should step up advertising that will help to build a brand
image and create a higher brand recall like that of Citibank. With
more and more people willing to adopt to credit cards, banks should
undertake innovative strategies to increase card spends.
Simultaneously, to cater to high net worth customers and those with
niche needs, banks should provide more of premium plastic and
CO-cards that piggyback on the existing infrastructure, but provide
holders with exclusive add-ons.
Future promotions could include: Telemarketing, direct sales, direct
mail, promotional advertising through media, common ATM
services between banks (to reduce cost of operations), 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
The study is confined to NCR 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. However, to counter this the data has been verified
from a number of different sources to give it a measure of
authenticity.
Study was constrained by limited availability of data. Not 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
QUESTIONNAIRE