You are on page 1of 71

1.

INDUSTRY PROFILE

1.1 ORIGIN OF BANKING

Banks have a long history, and have influenced economies and politics for centuries.
Traditionally, a bank generates profits from transaction fees on financial services and
from the interest it charges for lending. In recent history, with historically low interest
rates limiting banks' ability to earn money by lending deposited funds, much of a bank's
income is provided by overdraft fees and riskier investments.

The name bank derives from the Italian word banco – desk, used during the Renaissance
by Florentines bankers, who used to make their transactions above a desk covered by a
green tablecloth. A bank is a business which provides financial services for profit.
Traditional banking services include receiving deposits of money, lending money and
processing transactions.

There are two dominant forms of banking, central and commercial. Commercial banks, of
which we have records dating from the 13th century, were originally agents to exchange
and validate coins and bullion. Banks began taking deposits because their customers,
international traders, held assets in many ports along their trade routes. These early
banks could also pay clients of their customers through signed chits: medieval checks.
Eventually, the convenience of checking systems drew customers to use checks to cover
increasingly large expenses, and this extensive checking eventually became borrowing.
Bankers would allow customers to overdraw checks to a certain point, which would then
be repaid, with interest. Thus they hold our money for us, they lend us money, and they
create money in the form of credit.

1.2 INTRODUCTION TO THE BANKING SECTOR IN INDIA

In India the banks are being segregated in different groups. Each group has their own
benefits and limitations in operating in India. Each has their own dedicated target market.

1
Few of them only work in rural sector while others in both rural as well as urban. Many
even are only catering in cities. Some are of Indian origin and some are foreign players.

Without a sound and effective banking system in India it cannot have a healthy economy.
The banking system of India should not only be hassle free but it should be able to meet
new challenges posed by the technology and any other external and internal factors.
For the past three decades India's banking system has several outstanding achievements
to its credit. The most striking is its extensive reach. It is no longer confined to only
metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even
to the remote corners of the country. This is one of the main reasons of India's growth
process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with
the nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting a
draft or for withdrawing his own money. Today, he has a choice. Gone are days when the
most efficient bank transferred money from one branch to other in two days. Now it is
simple as instant messaging or dial a pizza. Money has become the order of the day.
Banks are the most significant players in the Indian financial market. They are the biggest
purveyors of credit, and they also attract most of the savings from the population.
Dominated by public sector, the banking industry has so far acted as an efficient partner
in the growth and the development of the country. Driven by the socialist ideologies and
the welfare state concept, public sector banks have long been the supporters of agriculture
and other priority sectors. They act as crucial channels of the government in its efforts to
ensure equitable economic development.

The Indian banking can be broadly categorized into nationalized (government owned),
private banks and specialized banking institutions. The Reserve Bank of India acts a
centralized body monitoring any discrepancies and shortcoming in the system. Since the
nationalization of banks in 1969, the public sector banks or the nationalized banks have

2
acquired a place of prominence and has since then seen tremendous progress. The need to
become highly customer focused has forced the slow-moving public sector banks to
adopt a fast track approach. The unleashing of products and services through the net has
galvanized players at all levels of the banking and financial institutions market grid to
look anew at their existing portfolio offering. Conservative banking practices allowed
Indian banks to be insulated partially from the Asian currency crisis. Indian banks are
now quoting al higher valuation when compared to banks in other Asian countries (viz.
Hong Kong, Singapore, Philippines etc.) that have major problems linked to huge Non
Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble footed
in approach and armed with efficient branch networks focus primarily on the ‘high
revenue’ niche retail segments.

The Indian banking has finally worked up to the competitive dynamics of the ‘new’
Indian market and is addressing the relevant issues to take on the multifarious challenges
of globalization. Banks that employ IT solutions are perceived to be ‘futuristic’ and
proactive players capable of meeting the multifarious requirements of the large
customer’s base. Private Banks have been fast on the uptake and are reorienting their
strategies using the internet as a medium The Internet has emerged as the new and
challenging frontier of marketing with the conventional physical world tenets being just
as applicable like in any other marketing medium.

The Indian banking has come from a long way from being a sleepy business institution to
a highly proactive and dynamic entity. This transformation has been largely brought
about by the large dose of liberalization and economic reforms that allowed banks to
explore new business opportunities rather than generating revenues from conventional
streams (i.e. borrowing and lending). The banking in India is highly fragmented with 30
banking units contributing to almost 50% of deposits and 60% of advances. Indian
nationalized banks (banks owned by the government) continue to be the major lenders in
the economy due to their sheer size and penetrative networks which assures them high
deposit mobilization. The Indian banking can be broadly categorized into nationalized,
private banks and specialized banking institutions.

3
The Reserve Bank of India acts as a centralized body monitoring any discrepancies and
shortcoming in the system. It is the foremost monitoring body in the Indian financial
sector. The nationalized banks (i.e. government-owned banks) continue to dominate the
Indian banking arena. Industry estimates indicate that out of 274 commercial banks
operating in India, 223 banks are in the public sector and 51 are in the private sector. The
private sector bank grid also includes 24 foreign banks that have started their operations
here.

The liberalize policy of Government of India permitted entry to private sector in the
banking, the industry has witnessed the entry of nine new generation private banks. The
major differentiating parameter that distinguishes these banks from all the other banks in
the Indian banking is the level of service that is offered to the customer. Their focus has
always centered around the customer – understanding his needs, preempting him and
consequently delighting him with various configurations of benefits and a wide portfolio
of products and services. These banks have generally been established by promoters of
repute or by ‘high value’ domestic financial institutions.

The popularity of these banks can be gauged by the fact that in a short span of time, these
banks have gained considerable customer confidence and consequently have shown
impressive growth rates. Today, the private banks corner almost four per cent share of
the total share of deposits. Most of the banks in this category are concentrated in the
high-growth urban areas in metros (that account for approximately 70% of the total
banking business). With efficiency being the major focus, these banks have leveraged on
their strengths and competencies viz. Management, operational efficiency and flexibility,
superior product positioning and higher employee productivity skills.

The private banks with their focused business and service portfolio have a reputation of
being niche players in the industry. A strategy that has allowed these banks to
concentrate on few reliable high net worth companies and individuals rather than cater to
the mass market. These well-chalked out integrates strategy plans have allowed most of
these banks to deliver superlative levels of personalized services. With the Reserve Bank

4
of India allowing these banks to operate 70% of their businesses in urban areas, this
statutory requirement has translated into lower deposit mobilization costs and higher
margins relative to public sector banks.

1.3 CURRENT SCENARIO OF INDIAN BANKING

Currently, overall, banking in India is considered as fairly mature in terms of supply,


product range and reach-even though reach in rural India still remains a challenge for the
private sector and foreign banks. Even in terms of quality of assets and capital adequacy,
Indian banks are considered to have clean, strong and transparent balance sheets-as
compared to other banks in comparable economies in its region. The Reserve Bank of
India is an autonomous body, with minimal pressure from the government. The stated
policy of the Bank on the Indian Rupee is to manage volatility-without any stated
exchange rate-and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-
especially in its services sector, the demand for banking services-especially retail
banking, mortgages and investment services are expected to be strong.

India has 88 Scheduled Commercial Banks (SCBs) - 28 public sector banks (that is with
the Government of India holding a stake), 29 private banks (these do not have
government stake; they may be publicly listed and traded on stock exchanges) and 31
foreign banks. They have a combined network of over 53,000 branches and 17,000
ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks
hold over 75 percent of total assets of the banking industry, with the private and foreign
banks holding 18.2% and 6.5% respectively.

5
2. COMPANY PROFILE

2.1 ICICI BANK

ICICI Bank India is the largest private sector bank. It’s banking products and financial
services are some of the superior ones. The reach and market of ICICI Bank is unmatched
in India as yet. It offers a countrywide network of 950 branches and 3, 500 ATM's
reaching out to your doorstep.

ICICI Bank is India's second-largest bank with total assets of Rs. 3,767.00 billion (US$
96 billion) at December 31, 2007 and profit after tax of Rs. 30.08 billion for the nine
months ended December 31, 2007. ICICI Bank is second amongst all the companies
listed on the Indian stock exchanges in terms of free float market capitalisation. The Bank
has a network of about 955 branches and 3,687 ATMs in India and presence in 17
countries. ICICI Bank offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and through its
specialised subsidiaries and affiliates in the areas of investment banking, life and non-life
insurance, venture capital and asset management.

Among its highly accomplished banking and financial services are their credit cards.
ICICI credit card is one of the top-rated ones in India. With a wide range of offers, ICICI
Bank credit cards come as:
• Premium Cards
• Classic Cards
• Value For Money Cards
• Co Branded Cards
• Affinity Cards
• EMI Cards

6
ICICI Bank Credit Cards give the facility of cash, convenience and a range of benefits,
anywhere in the world. These benefits range from life time free cards, Insurance benefits,
global emergency assistance service, discounts, utility payments, travel discounts, etc.
2.1.1 Applicable fees and charges on credit cards

Finance charges on extended 0.99% (Monthly) 12.55% (Annually) for Easy


credit Deposit Card
1.75% (Monthly), 23.14% (Annually) for Spouse
Card
1.99% (Monthly), 26.68% (Annually) for Home
Card
2.75% (monthly),38.48%(Annually) for Platinum
card w.e.f March 1st 2008
3.15% (monthly),45.09%(Annually) for Platinum
Premier credit card w.e.f March 1st 2008
2.75% (Monthly) 38.48% (Annually) for ICICI Bank
Signature Credit Card
3.15% (monthly),45.09%(Annually) for Platinum
Premier credit card w.e.f March 1st 2008
3.15% (Monthly) 45.09% (Annually) for all other
cards
0% (with Annual fee) /1.49%/1.99% (monthly) for
EMI Card. Applicable from the day of transaction.
Finance charges on cash 1.99%(Monthly), 26.68% (Annually) for Cash Card.
advances 2.75% (Monthly), 38.48% (Annually) for ICICI
Bank Signature Credit Card.
3.15% (Monthly), 45.09% (Annually) for all other
cards.
0% (with Annual fee) /1.49%/1.99% (monthly) for
EMI Card (as per applicable Finance Charges on
Retail transaction).
Cash Advance - Transaction On Easy Deposit Card - Nil for ICICI Bank ATM
fees withdrawals.
Rs 151/- per transaction for cash card.
2.50% on advanced amount, subject to a minimum
of Rs. 300.
2.99% on advanced amount, subject to a minimum
of Rs. 299 on EMI Card.
Dial a draft – Transaction Fee 3% w.e.f. Feb 01, 2008 of the draft value amount
subject to a minimum of Rs.300.
2.99% on draft value amount, subject to a minimum
of Rs. 299 on EMI Card.
Minimum Ticket Size Rs 1000

7
Late Payment Charges 30% of minimum amount outstanding (subject to
min. of Rs. 350 and max. of Rs. 600).
Charges in case of excess Rs. 199 for every payment above the EAD.
payment over EMI Amt Due
(EAD)
Transaction fee Rs. 149 per transaction on EMI Card.
Over Limit Charges 2.5% on over limit amount (subject to a min. of Rs.
500).
Return of Cheque Rs. 250
Outstation Cheque processing 1% on the Cheque value, subject to a minimum of
fee Rs. 100.
Non ICICI Bank ATMs access Rs. 30
charges / Balance Enquiry
charges
Duplicate statement request Rs. 100
(beyond 3 Months)
Replacement card Replacement card
Charge-slip request Rs. 100
Railway Booking - surcharge 1.80% for Internet transactions and 2.5% for other
bookings.
Fuel Surcharge 2.5% or Rs.10 whichever is higher (Nil on selected
cards).
0% at select HPCL pumps on select cards (max of
Rs.3000 per transaction).
Services charges - Utility Bill Nil
Payment
Foreign Currency 3.50%
Transactions
Service Tax As may be applicable from time to time, presently @
12.36% (Applicable on all fees, interest and other
charges only)
Annual Fee For 0% finance rate and EAD of Rs.2000, the annual
fee would be Rs.2000. For 0% finance rate and EAD
of Rs.4000, the annual fee would be Rs.3500,
Rs.2500 (For ICICI Bank Signature Credit Card).

8
2.2 STANDARD CHARTERED BANK

With a banking heritage of 150 years. The Standard Chartered Group was formed in 1969
through a merger of two banks: The Standard Bank of British South Africa founded in
1863 and the Chartered Bank of India, Australia and China, founded in 1853.
From the early 1990s, Standard Chartered has focused on developing its strong franchises
in Asia, the Middle East and Africa using its operations in the United Kingdom and North
America to provide customers with a bridge between these markets. Secondly, it would
focus on consumer, corporate and institutional banking and on the provision of treasury
services areas in which the Group had particular strength and expertise.

Standard Chartered has a network of over 1,400 branches in more than 50 countries
across the Asia Pacific Region, South Asia, the Middle East, Africa, Europe and the
Americas. One of the world's most international banks, employ over 65,000 people,
representing more than 100 nationalities. This diversity lies at the heart of the values and
supports the strong organic growth.

The key businesses of Standard Chartered Bank in India include consumer banking -
primarily credit cards, mortgages, personal loans and wealth management - and -
wholesale banking, where the Bank specializes in the provision of cash management,
trade, finance, treasury and custody services.

Standard Chartered Credit Card is accepted in over 19 million VISA and MasterCard
establishments across the globe. This makes Standard Chartered Bank Credit Cards most
widely accepted cards. Along with this the Standard Chartered Credit Cards Rewards
System allows you to earn reward points with more and more usage of your SCB credit
card. The available SCB Credit Cards include:
• Emirates Platinum
• Emirates Titanium
• Platinum Card
• Super Value Titanium Card

9
• Bajaj Allianz Super Value Titanium Card
• Gold Card
• Classic Card
• Executive Card
• Emi Card
• Rotary Card
• Wild Life Card
• Sapnay Card

2.2.1 Applicable fees and charges on credit cards

10
11
12
13
2.3 STATE BANK OF INDIA

SBI State Bank of India is the largest Bank in India and in the entire Indian Sub-continent
with far flung Branches. In fact, in regards to its employees and branches, the State Bank
of India is the largest bank in the world. Founded in 1806, SBI has evolved to be a major
Bank in India to provide financial assistance, with the most extensive Networking all
over the world and many leading SBI Associate Banks. Not Just the SBI Branches but
also the SBI ATMs are found in the nook and corner of India. The State Bank of India
has been instrumental in carrying out innovations in personal banking to make the
transactions easy for its customers. The extensive reach of SBI Branches in the rural
areas in India has made it touch the lives of the millions. In fact, The State Bank of India
is a leading Credit Card Bank that introduced the facility of ATM Cards and Internet
Banking to all its Branches in the interiors of India. In the true sense of the term, the State
Bank of India has been a visionary Bank with the incorporation of all the modern and
contemporary trends.

The Bank is actively involved since 1973 in non-profit activity called Community
Services Banking. All the branches and administrative offices throughout the country
sponsor and participate in large number of welfare activities and social causes. Their
business is more than banking because they touch the lives of people anywhere in many
ways.

SBI Credit Card or State Bank of India Credit Card offers the exclusive deals and
convenience of cashless shopping with complete online payments and balance transfer
solutions and all this come with redeemable reward points system.

SBI Credit Card is acceptable over 1, 05,000 merchants in India and Nepal. The SBI
Credit Card is accepted to 117 cash point locations in 57 cities from Leh to Port Blair.
The daily withdrawal limit is Rs. 10,000.

14
The available SBI Credit Cards are:
• SBI Silver, Gold & Platinum Card
• SBI partnership cards that include Go Air, Hero Honda, LG
• SBI Advantage Card
• SBI Card For Doctors
• Employee Card
• Lifestyle Card
• Railway Card
• Vishal Mega Mart Card
• Social Card
• UBI Cards
• Spice Jet SBI Card and more.

2.3.1 Applicable fees and charges on credit cards

Card Name SBI- Silver Card SBI-Gold Card SBI-Platinum Plus


Card
Joining Fee Free Free Free
Annual Fee Free for life Free for life Free for life
Add On Card - Issue Free Free Free
Fee
Interest Rate -on 44.25% p.a from 44.25% p.a from 44.25% p.a from
revolving Credit Transaction date Transaction date Transaction date
Interest Rate -on 44.25%p.a 44.25%p.a 44.25%p.a
Cash Withdrawal
Interest Rate - on As per the New As per the New As per the New
Balance Transfer scheme 0% for the scheme 0% for the scheme 0% for the
first 3 months first 3 months first 3 months
Reward points 2% Cash back at 2% Cash back at Earn 1 power point
selected merchants selected merchants on every Rs 40 spend
Surcharge on Fuel 0% surcharge for 0% surcharge for 0% surcharge for
single transaction single transaction single transaction
spend between Rs. spend between Rs. spend between Rs.

15
400/- and Rs. 3,000/- 400/- and Rs. 3,000/- 400/- and Rs. 3,000/-
Cash Withdrawal 2.5% or Rs 250 2.5% or Rs 250 2.5% or Rs 250
Fee whichever is whichever is whichever is
high(Domestic high(Domestic high(Domestic
ATMs) and 3% or Rs ATMs) and 3% or Rs ATMs) and 3% or Rs
250 whichever is high 250 whichever is high 250 whichever is high
(International ATMs) (International ATMs) (International ATMs)
Late Payment NA NA NA
Charges
Late Payment Fee 30% of minimum 30% of minimum 30% of minimum
amount due (Min. of amount due (Min. of amount due (Min. of
Rs. 350 & Max. Rs. Rs. 350 & Max. Rs. Rs. 350 & Max. Rs.
600) 600) 600)
Over limit Charges 2.5% of over limit 2.5% of over limit 2.5% of over limit
amount or Rs. 500 amount or Rs. 500 amount or Rs. 500
whichever is higher whichever is higher whichever is higher
Maximum Credit Up to 50 days Up to 50 days Up to 50 days
Free Period

16
2.4 CITI BANK

Citibank Being the largest financial services company in the world, it offers specialized
banking and financial products for world-class customer service. Citibank is one of the
leading private sector banks in India. Its counterpart in the USA is the largest bank in the
country in terms of holdings. Founded in 1812 as City Bank of New York, Citibank today
enjoys a clientele comprising of the biggest corporate giants.

Citibank India is since 1902. Citibank India was the first bank to lend actively to
individuals. Citibank is the largest Consumer Finance lender in the world. Citibank India
follows the following principles while dealing to its customers:
• Truth in Lending
• Superior Products and Services
• Quick and Transparent Credit Decisions
• Lending is not a transaction, but a relationship
• Custodian of Public Funds

Citibank cards are available in a range of flexible and personalized credit. Under
mentioned are few types of Citibank Credit Cards in India.

• Diners Club (Charge) Cards


• Diners Club (Flexi/ Revolving credit) Cards
• Ultima Cards
• Platinum Cards
• Citibank Classic & Preferred Cards
• Citibank Hutch & Maruti Cards

17
2.4.1 Applicable fees and charges

Particulars Diners Club Diners Club Ultima Cards Platinum, Citibank Hutch
(Charge) Cards (Flexi/ Citibank & Maruti Cards
Revolving Classic &
credit) Cards Preferred
Cards

Joining & Fees applicable for both Primary and Additional Card members will be communicated
Annual Fees at the time of sourcing.
Over Credit Not Applicable 2.5 % over the 2.5% of the 2.5% of the 2.5% of the
Limit Charge Credit Limit amount over the amount over the amount over the
Credit Limit Credit Limit Credit Limit
(sub. to a min. (sub. to a min. of
of Rs. 500) Rs. 500)
Cheque Bounce Rs. 250 per Rs. 250 per Rs. 250 per Rs. 250 per Rs. 250 per
Charge returned cheque returned cheque returned cheque returned cheque returned cheque
Petrol 2.5% (sub. to a 2.5% (sub. to a 2.5% (sub. to a 2.5% (sub. to a 2.5% (sub. to a
Transaction min. of Rs. 10) min. of Rs. 10) min. of Rs. 10) min. of Rs. 10) min. of Rs. 10)
Charge
Railway Ticket 2.5% (sub. to a 2.5% (sub. to a Not Applicable 2.5% (sub. to a 2.5% (sub. to a
Purchase Fee min. of Rs. 25) min. of Rs. 25) min. of Rs. 25) min. of Rs. 25)
Card Rs. 100 Rs. 100 NIL Rs. 100 Rs. 100
Replacement
Charge
Statement Rs. 100 Rs. 100 NIL Rs. 100 Rs. 100
Request
(beyond 3 mth)
Outstation Rs. 100 per Rs. 100 per Rs. 100 per Rs. 100 per Rs. 100 per
Cheque Charge cheque cheque cheque cheque cheque
Foreign Mark up of 3% Mark up of 3% Mark up of Mark up of Mark up of 3.5%
Currency 3.5% 3.5%

18
Transaction
Late Payment 2.95% - Rs. 300 for bills Rs. 100 per Rs. 300 for bills Rs. 300 for bills
Charge (per payments up to Rs.10000 month up to Rs.10000 up to Rs.10000
month) overdue by 30 Rs. 600 for bills Rs. 600 for bills Rs. 600 for bills
days (sub. to a from Rs. 10001 from Rs. 10001 from Rs. 10001 –
min. of Rs. 500) – 25000 – 25000 25000
5% - payments Rs. 700 for bills Rs. 700 for bills Rs. 700 for bills
overdue by 30 above Rs. 25000 above Rs. 25000 above Rs. 25000
days or more
(sub. to a min.
of Rs. 500)
Cash Advance 3% on advanced 3% on advanced 2.0% on 2.0% on 2.0% on
Fee amount (sub. to amount (sub. to advanced advanced advanced amount
a min. Rs. 250) a min. Rs. 250) amount (sub. to amount (sub. to (sub. to a min.
a min. Rs. 300) a min. Rs. 300) Rs. 300)
Interest Not Applicable 2.5% (monthly) In the first 6 In the first 6 In the first 6
Rate/Service or 30% (annual). months of Card months of Card months of Card
Charge issuance is fixed issuance is fixed issuance is fixed
at 3.15% at 3.15% at 3.25%
(monthly) (monthly) (monthly)
The max. int. The max. int. The max. int.
rate, in the event rate, in the event rate, in the event
of default, is of default, is of default, is
3.5% (mthly) 3.5% (mthly) 3.5% (mthly)
Service Tax of 12.36% will be applicable on all fees, interest & other charges.

19
2.5 HDFC BANK

HDFC Bank was incorporated in August 1994, and, currently has a nationwide network
of 746 Branches and 1647 ATM's in 329 Indian towns and cities. The Housing
Development Finance Corporation Limited (HDFC) was amongst the first to receive an
'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the
private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994.
The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its
registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled
Commercial Bank in January 1995.

HDFC India deals in varieties of products like home loan, standard life insurance, mutual
fund, securities, credit cards, etc. HDFC has branch offices in all major cities in India like
Calcutta, Chennai, Delhi, Bangalore, Hyderabad, Ahmedabad apart from HDFC Mumbai.

The following are the main types of credit cards offered by HDFC Bank.

• Silver Card
• Value plus Cards
• Health plus Card
• Idea Silver Card
• Gold Card
• Idea Gold card
• Women’s Gold Card

20
2.5.1 Applicable fees and charges

21
2.6 ABN - AMRO BANK

With assets over US $504 billion and an AA credit rating, ABN AMRO Bank ranks
among the top 10 banks in the world in size and strength. Their international network
comprises 3,568 branches and offices in over 320 cities and 76 countries and territories,
with over 100,000 highly qualified staff. As a global bank, they can handle the most
complicated cross-border transactions, yet they also understand the subtleties of local
markets. Traditionally known as a strong diamond financing bank, ABN AMRO today
offers unparalleled suite of client services in India. ABN AMRO Bank in India enjoys a
strong image as a corporate bank with comprehensive Global Transaction Services.
It has also launched its microfinance program. The program is aimed at delivering credit
to the poor women of India, especially in the rural areas, through Microfinance
Institutions (MFIs).
The services of Abn Amro Bank are organized globally in three business lines:
• Wholesale Clients
• Consumer & Commercial Clients
• Private Clients & Asset Management

Credit Card Service:-


The ABN AMRO Credit Cards are specially designed for someone with discerning
lifestyle. The different varieties of credit cards are below:
• Smart Gold Card
• Wellness Card
• Wellness Gold Card
• Freedom/ Good life/ One Card
• Gold Card
• Barista/Ad labs Card
• Titanium One Card
• Platinum Card

22
2.6.1 Applicable fees and charges

Particulars Smart Gold, Wellness Card Wellness Gold Freedom/Good Gold Card Barista/Ad labs
Titanium One Card life/One Card Card
Card
Joining Fee Rs. 500 p.a. Rs. 295 p.a. Rs. 500 p.a. Rs. 295 p.a. Rs. 500 p.a. Rs. 199 p.a.
Annual/ Rs. 2,000 p.a. Rs. 750 p.a. Rs. 1,200 p.a. Rs. 595 p.a. Rs. 1,000 p.a. Rs. 299 p.a.
Renewal Fee
Add-on Card Rs. 750 p.a. Rs. 395 p.a. Rs. 600 p.a. Rs. 295 p.a. Rs. 750 p.a. Rs. 299 p.a.
Fee
Finance upto 3.5% (42% upto 3.5% (42% upto 3.5% (42% upto 3.5% (42% upto 3.5% (42% upto 3.5% (42%
Charges p.a.) p.a.) p.a.) p.a.) p.a.) p.a.)
Balance 1.49% p .m. 1.49% p.m. 1.49% p.m. 1.49% p.m. 1.49% p.m. 1.49% p.m.
Transfer (17.88% p.a) (17.88% p.a.) (11.88% p.a.) (17.88% p.a.) (17.88% p.a.) (17.88% p.a.)
Charges
Cash Advance 2.5%(Min. 2.5% (Min. 2.5% (Min. Rs. 2.5% (Min. Rs. 2.5% (Min. Rs. 2.5% (Min. Rs.
Transaction Rs.300) of the Rs.300) of the 300) of the cash 300) of the cash 300) of the cash 300) of the cash
Fee cash amount cash amount amount amount amount amount
Call-a-Draft 2.5%(Min. 2.5% (Min. 2.5% (Min. Rs. 2.5% (Min. Rs. 2.5% (Min. Rs. 2.5% (Min. Rs.
Fee Rs.300) of the Rs.300) of the 300) of the cash 300) of the cash 300) of the cash 300) of the cash
cash amount cash amount amount amount amount amount
Card Repla- Rs. 200 Rs. 100 Rs. 100 Rs. 100 Rs. 200 Rs. 200
cement Fee
Emergency $ ( US ) 148 $ ( US ) 148 $ ( US ) 148 $ ( US ) 148 $ ( US ) 148 $ ( US ) 148
Card Repla-
cement Fee
when overseas
Duplicate Rs. 100 Rs. 100 Rs. 100 Rs. 100 Rs. 100 Rs. 100
Statement Fee
Overdue 15% of Total 15% of Total 15% of Total 15% of Total 15% of Total 15% of Total
Penalty/Late Amt.Due Amt.Due Amt. Due Amt. Due Amt.Due Amt.Due

23
Payment Fee (Min. Rs. 350, (Min. Rs. 350, (Min. Rs. 350, (Min. Rs. 350, (Min. Rs. 350, (Min. Rs. 350, Max.
Max. Rs. 600) Max. Rs. 600) Max. Rs. 600) Max. Rs. 600) Max. Rs. 600) Rs. 600)
Over Limit Rs. 600 Rs. 600 Rs. 600 Rs. 600 Rs. 600 Rs. 600
Penalty
Retrieval Fee Rs. 100 Rs. 100 Rs. 100 Rs. 100 Rs. 100 Rs. 100
Outstation Rs. 100 Rs. 100 Rs. 100 Rs. 100 Rs. 100 Rs. 100
Cheque Fee
Cheque return Rs. 500 Rs. 500 Rs. 500 Rs.500 Rs. 500 Rs. 500
/ dishonour
Fee
Surcharge on Rs.30/- plus Rs.30/- plus Rs.30/- plus Rs.30/- plus Rs.30/- plus Rs.30/- plus 2.5%
Railway 2.5% 2.5% 2.5% 2.5% 2.5% of transaction
Tickets of transaction of transaction of transaction of transaction of transaction amount
amount amount amount amount amount
Petrol 0% (2.5% on 0% (2.5% on 0% (2.5% on 0% (2.5% on 0% (2.5% on 0% (2.5% on
Transaction purchases purchases purchases purchases purchases purchases below Rs.
Charge below Rs. below Rs. below Rs. below Rs. below Rs. 100/-)
100/-) 100/-) 100/-) 100/-) 100/-)
Foreign 3% 3% 3% 3% 3% 3%
Currency
Transaction
Premier Club Rs.75 per Rs.75 per Rs.75 per Rs.75 per Rs.75 per Rs.75 per quarter
Program quarter quarter quarter quarter quarter
(Optional)
Smart Bill Pay Rs.20 p.m. Rs.20 p.m. Rs.20 p.m. Rs.20 p.m. Rs.20 p.m. Rs.20 p.m.
(Optional)
Service Tax of 12.36% will be applicable on all fees, interest & other charges.

24
3. LITERATURE REVIEW

The research is based on the credit cards. The Indian economy is growing by leaps and
bounds since the past few years. The credit cards play a significant in this rapid increase
of the economy. Credit cards provide benefits to consumers and merchants not provided
by other payment instruments as evidenced by their explosive growth in the number and
value of transactions over the last 20 years.

A good number of studies have been propounded by many authors like researcher
Ausubel, Lawrence M (1991) examined The Failure of Competition in the Credit Card
Market and states that the bank credit card market, containing 4,000 firms and lacking
regulatory barriers, casually appears to be a hospitable environment for the model of
perfect competition. Nevertheless, this research reports that credit card interest rates have
been exceptionally sticky relative to the cost of funds. Moreover, major credit card
issuers have persistently earned from three to five times the ordinary rate of return in
banking during the periods 1983-88. The failure of the competitive model appears to be
partly attributable to consumers making credit card choices without taking account of the
very high probability that they will pay interest on their outstanding balances.

Another body of literature by Brito, Dagobert L & Hartley, Peter R (1995) is on


Consumer Rationality and Credit Cards analyzing the borrowing on credit cards at high
interest rates might appear irrational. However, even low transactions costs can make
credit cards attractive relative to bank loans. Credit cards also provide liquidity services
by allowing consumers to avoid some of the opportunity costs of holding money. The
effect of alternative interest rates on the demand for card debits can explain why credit
card interest rates only partially reflect changes in the cost of funds. Credit card interest
rates that are inflexible relative to the cost of funds are not inconsistent with a
competitive equilibrium that yields zero profits for the marginal entrant.

One more literature by Sujit Chakravorti & William R. Emmons (2001) studied the
concept of who pays for credit cards? In which the two researchers had model side

25
payments in a competitive credit-card market. If competitive retailers charge a single
(higher) price to cover the cost of accepting cards, banks must subsidize convenience
users to prevent them from defecting to merchants who do not accept cards. The side
payments will be financed by card users who roll over balances at interest if their
subjective discount rates are high enough. Despite the feasibility of cross subsidies
among cardholders, price discrimination without side payments is Pareto preferred
because of the costliness of the card network--unless banks have other motives, such as
purchasing options on future borrowing by convenience users.

Another research carried out by Sivakumar Kulasekaran and Sherrill Shaffer (2002)
on cost efficiency among credit card banks which states that credit card banks produce a
single, relatively homogeneous output, permitting exceptionally clean empirical tests of
cost efficiency. The high net interest margins and fees on credit card loans also suggests a
large potential for managerial slack or expense preference behavior, possibly fostering a
wider range of cost efficiency than observed for general-purpose banks. The research
presents estimates of cost efficiency for a sample of mono line credit card banks over the
period 1984–1993. Researcher also explores empirical correlates of the estimated cost
efficiency.

Sujit Chakravorti (2003) studied the costs and benefits of credit cards to network
participants. Focusing on interrelated bilateral transactions, several theoretical models
have been constructed to study the implications of several business practices of credit
card networks.

Literature on credit and the no-surcharge rule by Cyril Monnet & William Roberds
(2006) states a controversial aspect of payment cards has been the “no-surcharge
rule.” This rule, which is part of the contract between the card provider and a
merchant, states that the merchant cannot charge a customer who pays by card
more than a customer who pays by cash. In this paper we consider the design of an
optimal card-based payment system when cash is available as an alternative means

26
of payment. We find that a version of the no-surcharge rule emerges as a natural
and advantageous feature of such a system.
One more research is An Empirical Study of Credit Scoring Model for Credit Card
by Hui-Chung Yeh, Min-Li Yang, Li-Chuen Lee (2007) ant the purpose of the study is
to propose an optimal credit scoring model to reassess the default risk of credit card
holders for credit card issuing banks in Taiwan. This sudy adopted four credit scoring
models which are the linear discriminant analysis, decision tree, back-propagation neural
network, and a hybrid method to evaluate the default risk. By comparing the evaluation
results of these models, it shows that the decision tree method has the best classification
performance in terms of accuracy and sensitivity. These results of this empirical study
will be provided to credit card issuing banks for achieving efficient automatically credit
reassessment of default risk.

Recent literature is on Credit Card Fraud Detection Using Hidden Markov Model
analyzed by Abhinav Srivastava, Amlan Kundu, Shamik Sural, Arun Majumdar
(January-March 2008) states that the internet has taken its place beside the telephone and
the television as an important part of people's lives. Consumers rely on the Internet to
shop, bank and invest online. Most online shoppers use credit cards to pay for their
purchases. As credit card becomes the most popular mode of payment, cases of fraud
associated with it are also increasing. In this paper, researcher model the sequence of
operations in credit card transaction processing using a Hidden Markov Model (HMM)
and show how it can be used for the detection of frauds. An HMM is trained with normal
behavior of cardholder. If an incoming credit card transaction is not accepted by the
HMM with sufficiently high probability, it is considered to be fraudulent. Researcher
presents detailed experimental results to show the effectiveness of his approach.

There is substantial body of literature related to frauds through credit cards and their
protection methods, but the relative dearth of research related to hidden cost on credit
cards charged by banks combined with the awareness among the users regarding such
costs, prompt this study. Using the conceptual and empirical literature as a base, the
researcher estimates the cost and awareness of cost among the users of credit card.

27
28
4. RESEARCH METHODOLOGY

4.1 Need and Significance of the study:

Many researches had been conducted on credit cards like Sujit Chakravorti (2003)
studied the costs and benefits of credit cards to network participants. Focusing on
interrelated bilateral transactions, several theoretical models have been constructed to
study the implications of several business practices of credit card networks. Another
research carried out by Sivakumar Kulasekaran and Sherrill Shaffer (2002) on cost
efficiency among credit card banks which states that credit card banks produce a single,
relatively homogeneous output, permitting exceptionally clean empirical tests of cost
efficiency.

As so many researches has been carried out but researcher was interested in studying the
hidden cost awareness among the users of credit cards and so to bring out these costs to
notice of the users the researcher is motivated to carry out this research.

4.2 Problem Statement:

This research is conducted to understand the awareness of various hidden cost charged on
credit cards among the credit card holders.

4.3 Research Objective:

Every project is started with keeping in mind specific objectives. The following points
reflect the core of the objectives and the essence, which also directly focuses on the scope
of the project work undertaken.

Primary Objective:
• The primary objective of the research is to study the awareness of hidden cost
among the users of credit cards of Surat city.

29
Secondary Objectives:
• To study the awareness level of hidden cost on the basis of age, gender,
occupation and qualification.
• To study whether the credit card was enforced on the holder or purchased by will.
• To study whether the variables have any impact on awareness of credit card cost.
• To study the consequences of the hidden costs faced by the credit card users.

4.4 Research Hypothesis:

H1 – Gender of the respondents influences awareness level of hidden cost.


H2 – Age of the respondents influences awareness level of hidden cost.
H3 – Qualification of the respondents influences awareness level of hidden cost.
H4 – Occupation of the respondents influences awareness level of hidden cost.
H5 – Duration of the usage of the card influences awareness level of hidden cost.
H6 – Enforceability by the bank influences the usage of bank’s credit card.

4.5 Research Design:

In this step the methods used for conducting this research is specified. There are different
categories of research design available. In the research descriptive research design is
adopted.

4.6 Sources of Data:

The next step followed after choosing the research design is to determine the sources of
data to be used in research process. This decision has to be taken from the following two
options:
• Primary Data: Major part of data collection is through primary data collection,
which has been done by approaching the users of credit cards directly through
questionnaire.

30
• Secondary Data: Here while using the data the researcher has to be very careful
regarding the time and spare boundaries, objectives, as well as the errors of the
data. Regarding the study of the research the researcher has used various sources
like books and material from internet.

4.7 Sample Design:

Population that has been studied Customers of credit cards of Surat city.

Non probability sampling - Convenient


Sampling Method
Sampling.

Sample Size 200

Instrument used Questionnaire

4.7.1 Composition of Sample:-

Demographic characteristics of Sampled Respondents


Characteristics Number of Respondents Percentage
Gender
Male 140 70
Female 60 30
Age (Years)
20 – 29 105 52.5
30 – 39 40 20.0
40 – 49 42 21.0
50 – 59 10 5.0
60 – 69 3 1.5

Qualification
Illiterate 0 0.0
SSC 2 1.0

31
HSC 14 7.0
Graduate 131 65.5
Post Graduate 51 25.5
PhD 2 1.0
Others 0 0.0
Occupation
Student 41 20.5
Housewife 25 12.5
Service People 58 29.0
Businessman 73 36.5
Retired 2 1.0
Unemployed 1 0.5
Others 0 0.0

4.7.2 Instrument Development:

The instrument used is Questionnaire, which has Dichotomous, Free Response, Multiple
Choice single response and Multiple Choice multiple response questions.
The questions of the questionnaire were developed after having a discussion with
a focused group of people comprising of credit card executives of various banks
and number of cost were highlighted.

4.8 Processing and analysis of the data:

The data analysis will be done as follows:-


• The researcher has prepared table of various variables, analyzed them by putting
the values in Microsoft Excel (Auto filters) and accordingly interpreting the
values.
• The researcher has used the chi- square analysis to analyze the collected data.

4.9 Presentation of the study:

32
All the efforts in collection of data and its analysis are ultimately shown in the form of
report so report writing is a very important part of any project. Moreover the way of
writing the report enhances the quality of work and conveys the message.

The researcher has followed the sequence shown below in writing this report.

1. Industry Details
2. Company profile
3. Literature Review
4. Research Methodology
5. Theoretical framework
6. Data Analysis
7. Conclusion
Bibliography
Annexure

4.10 Benefits of the study:

Research always has some benefits in some senses to somebody. This study has helped
the researcher as well as can benefit others too like users of credit card, students, banks,
etc.
4.10.1 Benefits to the Researcher:

• The research has helped in getting practical exposure to the industry.


• An overview of the banks issuing credit cards is availed.
• To understand the various cost on credit cards.
• To understand the effect of various variables used to study the hidden cost of
credit cards.
• To understand that whether the variables effect the hidden cost awareness of
credit card holders.

33
4.10.2 Benefits to Others:

• To users as they can understand the various cost on credit cards.


• To students for the reference of how these various costs effects the decision of the
credit card holders.

4.11 Limitations of the Study:

As every study has some benefits, limitations are not exemptions to the study. The
limitations here are:

• Sample size considered here is very small so there are chances that conclusion
drawn may be misleading.
• The data collected are all at a particular point of time and therefore the results
may not be relevant over a period of time.
• The time period of the research was limited and hence a thorough research could
not be done.
• Some respondents were hesitant to share their personal information.
• Some respondents were not able to understand the purpose of this study so their
responses might be biased.
• Unable to cover all the varieties of cards as the area under study was limited to
credit cards with basic facilities.
• Due to lack of expertise on researcher’s side there is an element of human error.

34
4.12 Scope of the study:

The scope study is states as under:


• The respondents of only Surat city are being reviewed.
• The study is restricted only to credit cards and not the other varieties of cards.
• The variables taken into consideration are gender, age, qualification and
occupation.

35
5. THEORETICAL ASPECTS

5.1 ORIGIN OF CREDIT CARD:

Long before the first credit cards were issued, an American visionary of the nineteenth
century Edward Bellamy imagined them. Not only that, he envisioned that a cashless
society, using credit cards for purchases, would exist at the end of the twentieth century.

Credit card originated in the United States during 1920s when individual companies such
as hotel chains and oil companies began issuing them to customers for purchase made at
their business units. The use increased after Second World War. Diners club introduced
the first universal credit card that can be used at a variety of stores and business. In 1958,
the American express company established another universal card called `don't leave
home without it` only after such development bank credit came into existence.

We have a long way to go before reaching Bellamy's vision of a cashless society, and we
are farther than ever from his vision of a society without banks, retailers, and advertising,
but the end of the twentieth century has put credit cards in nearly everyone's hands, with
accounts immediately accessible by computer almost anywhere in the world.

The design of the credit card itself has become a major selling point in recent years. The
value of the card to the issuer is related to the Customer's usage of the card. This has led
to the rise of Co-Brand and Affinity cards.

5.2 CREDIT CARDS IN INDIA:

In India the foreign banks and organizations forayed first into the credit card market the
pioneer in the Indian field is the City Bank's Diner's Club Card, which entered in 1969.
Recognizing the potentiality of the credit cards, few Indian banks took early initiative to
introduce them. However it was only during 1981 when Andhra Bank introduced its own
credit card did the Indian bank constructively enter the field central bank of Indian in

36
association with Vysya Bank, United Bank, of India issued the central card. In 1985 the
bank of Baroda along with Allahabad Bank launched the bob card. The mercantile credit
corporation limited merchant came in 1986 the Canara Bank made later entry into the
credit card business in 1987 and the bank of India issued its own card, India card in 1988.
Among the foreign banks the ANZ Grindlays Bank came with visa classic card by 1989.
The state bank of India has also introduced state bank cheque card. In 1992 the hongs
Kong bank entered the field with its visa international card and master card international
and recently it has launched the Hyatt regency preferred gold card.

The total credit card market in the country is now at around 17million cards and is
growing at a rate of 30-35per cent per annum. The size of the Indian credit cards market
is estimated to be around $4bn.

The market is expected to grow by about 30-35% p.a. This would still be a very low
penetration of a potential market of 60 million cardholders. The credit card business is a
low-margin, high volume business. Thus, given the low income per card and the high
initial investments by the bank, large volumes in terms of cards issued and the
transactions financed are required to make the operations profitable.

Credit cards are gaining ground in India at a rapid pace with increasing urbanization and
awareness of plastic money. Besides the various freebies and rewards doled out,
customers feel it very convenient to carry a plastic card rather than bundles of currency.
The expected growth rate of credit card business in India is 30-35%. With the advent of
globalization and privatization, the concept of credit cards is gaining popularity. Most of
the bill payments including utility payments can be taken care by credit cards. Further, in
India at least, people perceive the card as a status symbol.

In India, ICICI Bank, Citibank, HDFC Bank, SBI, Standard Chartered and HSBC are the
main players. However, various Indian banks, both public and private, are entering into
Joint Ventures. Recently, BOBCARDS has launched a credit card, PARAS, in
association with the MasterCard International. ICICI Bank is the largest card issuer in the

37
country with the total of 4 million cards issued. As the corporate banking margins are
falling, the banks are focusing more on the retail segment. SBI and ICICI are capturing
the market at a very fast pace.

The main service providers to credit cards issuers are MasterCard and Visa. They are
typically paid 0.025% of the transaction by the issuing bank.
• 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. Its products are issued by 23,000 financial
institutions in 220 countries and territories.
• VISA Card – VISA cards is a product of VISA USA and along with MasterCard
is distributed by financial institutions around the world. 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.
Apart from Master and Visa there are few more service providers like American
Express, Discover and Diner etc.

5.3 WHAT IS A CREDIT CARD?

A credit card is a plastic card with magnetic strip with cardholder's information that
allows card holders to purchase goods and services without using cash. The credit card
holds transaction information of every time credit and the amount of money consumed.

Credit card is given by the banker to the customers in which the name of the customer is
embossed in blocks letters, the name of the bank of issues and expiry are also mentioned
on the field the reverse side of the card will bear the specimen signature of the customers.
A list of vendors or sellers will be given by the banker to the customers.

38
A credit card is used to pay for products and services at over 20 million locations around
the world. All one need to do is produce the card and sign a charge slip to pay for
the purchases. The institution, which issued the card, makes the payment to the
outlet on customer’s behalf and would be reimbursed at a later date by the
customer.

5.4 TERMS RELATED TO CREDIT CARDS

Grace period
A credit card's grace period is the time the customer has to pay the balance before
interest is charged to the balance. Grace periods vary, but usually range from 20 to 30
days depending on the type of credit card and the issuing bank. Usually, if a customer
is late paying the balance, finance charges will be calculated and the grace period
does not apply.

Interest Rate (APR)


The APR is a measure of the cost of credit, expressed as a yearly rate. It also must be
disclosed before you become obligated on the account and on your account
statements. Interest is the agreed annual percentage fee rate the credit card issuers
charge the card holder on the amount of credit borrowed, this interest amount is
added every month to your balance.

5.5 TYPES OF CREDIT CARDS

Debit card
Debit cards are substitutes for cash or check payments much the same way that credit
cards are. However, banks only issue them to customers who hold an account with them.
When a debit card is used to make a payment, the total amount charged is instantly
reduced from your bank balance. A debit card is accepted only at outlets with electronic
swipe-machines that can check and deduct amounts from your bank balance online.

39
Charge Card
A charge card carries all the features of credit cards. However, after using a charge card,
you will have to pay off the entire amount billed by the due date. If you fail to do so, you
are likely to be considered a defaulter and will usually have to pay up a steep late
payment charge. Unlike other credit cards, here dues are not allowed to carry forward.

American Express and Diners are providers of Charge card however not very popular in
India.

Standard Card
It is the most basic card which carries limit on transactions, according to the credit
worthiness of the card holder.

Affinity card
The card issuer ties up with popular organizations/institutions which are often non-profit
organizations (e.g. Citi-WWF card or the Standard Chartered-Cricket cards) to offer an
affinity card. When the card is used, a certain percentage is contributed to the
organization/institution by the card issuer.

Smart card
A smart card contains an electronic chip, which is used to store cash. This is most useful
when you have to pay for small purchases, for example, bus fares and coffee. No
identification, signature or payment authorization is required for using this card. The
exact amount of purchase is deducted from the smart card during payment and is
collected by the smart card reading machine. No change is given. Currently, this product
is available only in very developed countries like the United States and is used only
rarely in India.

Classic Card
A credit card issued by visa, carrying the logo of visa.

40
Gold Card
A credit card that offers a higher line of credit than a standard card is termed as gold
cards. Income eligibility is also higher. In addition, issuers provide incentives to
cardholders like access to Airport Lounges

Platinum Card
A credit card with a higher limit and additional perks than a gold card is known as
platinum card.

Titanium Card
A card with an even higher limit than a platinum card is termed as titanium card.

Secured card
A credit card is given to a card holder who has savings deposit which will take care of his
outstanding balance, in case of his default on payment.

Rebate Card
This is a card that allows the customer to accumulate cash, merchandise or services based
on card usage. Example 5% cash back on ICICI Credit card on purchases.

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, Standard Chartered 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 and
likewise American express and Indian Airlines.

Diners Club Card


Diners Club is a branded charge card. There is a wide variety of special privileges offered
to the Diners Club cardholder. For instance, as a Diners Club cardholder, you can set
your own spending limit. Besides, the card has its own merchant establishment tie-ups

41
and does not depend on the network of MasterCard or Visa. However, since this card is
typically meant for high-income group categories, it may not be acceptable at many
outlets. It would be a good idea to check whether a member establishment accepts the
card or not in advance.

Global Card
Global cards allow you the flexibility and convenience of using a credit card rather than
cash or traveler’s cheque while traveling abroad for business or personal reasons.

5.6 PARTIES INVOLVED IN CREDIT CARD

• Cardholder: The owner of the card who used to make a purchase; the consumer.
• Card-issuing bank: The financial institution or other organization that issued the
credit card to the cardholder. This bank bills the consumer for repayment and
bears the risk that the card is used fraudulently.
• Merchant: The individual or business accepting credit card payments for
products or services sold to the cardholder
• Acquiring bank: The financial institution accepting payment for the products or
services on behalf of the merchant.
• Merchant account provider: This could refer to the acquiring bank, but in
general is the organization that the merchant deals with.
• Credit Card association: An association of card-issuing banks such as Visa,
MasterCard, etc. that set transaction terms for merchants, card-issuing banks, and
acquiring banks.
• Transaction network: The system that implements the mechanics of the
electronic transactions. May be operated by an independent company, and one
company may operate multiple networks. Transaction processing networks
include: Cardnet, Omaha, NDC Atlanta, Nova, Vital, Concord EFSnet, and
VisaNet.
• Affinity partner: Some institutions lend their name to an issuer to attract
customers that have a strong relationship with that institution, and get paid a fee

42
or a percentage of the balance for each card issued using their name. Examples of
typical affinity partners are sports teams, universities and charities.

5.7 ADVANTAGES OF USING CREDIT CARDS

The fastest, easier and most cost-effective payment system is the credit card. This system
is very popular all over the world and will be developed further in the future. Banks firms
are offering new and spectacular features yearly. The future credit card owner has only
the dilemma of choice. All credit cards have built-in safety features like signatures and
personal identification numbers.

The advantages and acceptability of credit cards from the customer's viewpoint vary from
that of banker or member establishments.

5.7.1 To Cardholder:
• Wide acceptance reduces the risk of carrying cash during travel.
• They allow customers to make purchases on credit without carrying around a lot
of cash.
• Flexible payment scheme allow the cardholder to successfully manage his cash
• Fringe benefits like ATM’s insurance's cover, cash back, air miles and discounts
on holidays.
• They allow accurate record-keeping by consolidating purchases into a single
statement.
They allow convenient remote purchasing - ordering/shopping online or by
phone. They allow paying for large purchases in small, monthly installments.
• Under certain circumstances, they allow customers to withhold payment for
merchandise which proves defective.
• Credit cards are cheaper for short term borrowing - interest is only paid on the
remaining debt, not the full loan amount.

43
• Many cards offer additional benefits such as additional insurance cover on
purchases.
5.7.2 To Banks:
• More customers will avail the banking facility
• The bank, by extending credit to customer, retailer, wholesaler and manufactures
is able to earn interest on the credit.
• The profile of the bank will also increase due to the extension of credit to
different parties.

5.7.3 To Merchant Establishment:


• Helps to increase business turnover.
• Reduce the possibility of customer bad debts.
• Certain free advertising promotions from credit card comparisons or banks.

5.8 DISADVANTAGES OF USING CREDIT CARDS

• One may become an impulsive buyer and tend to overspend because of the ease of
using credit cards. Cards can encourage the purchasing of goods and services you
cannot really afford.
• Credit cards are a relatively expensive way of obtaining credit if you don't use
them carefully, especially because of the high interest rates and other costs.
• Lost or stolen cards may result in some expense and inconvenience.
• The use of multi-credit cards can get you even further into debt.
• Using a credit card, especially remotely, introduces an element of risk as the card
details may fall into the wrong hands resulting in fraudulent purchases on the
card. Fraudulent or unauthorized charges may take months to dispute, investigate,
and resolve.

5.9 HOW DOES A CREDIT CARD WORK?

44
A credit card is safer and more convenient to use than cash. But the simple act of paying
for products and services with a credit card is supported by an elaborate behind-the-
scenes system.

When one apply for a credit card, the application is carefully screened by the bank in
which a person apply. A credit limit is worked out for applicant, based on his financial
capability, educational qualifications, age etc. The bank that issues the credit card is
called the issuing bank.

At the heart of the credit card business is a mutually beneficial arrangement between the
issuing bank and a host of businesses called merchant establishments through
international networks such as Visa and MasterCard. Merchant establishments could be
hotels, shops, travel agents or any place where transactions are made. Banks that enroll
merchant establishments are called acquiring banks.

The credit card is valid in any merchant establishment that accepts your network (i.e.
MasterCard or Visa) even if it has been enrolled by an issuing bank other than yours.
Most Indian card issuing banks are part of either MasterCard network or Visa network or
both. There are other credit card networks like American Express and Diners Club too.

This network is at the heart of any credit card activity. When one use a card at an
establishment to purchase a product or service, the card is swiped on a swipe-machine.
The swipe machine is connected to a central computer belonging to the network, which,
in turn, is connected to all issuing banks. The system verifies with person’s issuing bank
whether the person has sufficient credit to cover the purchase in a few seconds and
approves or rejects the transaction. As soon as the approval comes through, the users are
asked to sign the charge slip. The merchant then verifies the signature with the one at the
back of the card.

The charge slip is then forwarded to the acquiring bank, which in turn settles the

45
transaction with the merchant. The issuing bank also proceeds to bill user for payment as
per the cardholder agreement. The acquiring bank will settle the transaction with user’s
issuing bank through the network.
From the merchant establishment's point of view too, the credit card is a safe and
efficient payment mode, and brings more business. The merchant establishment pays a
fee to the bank that enrolled it for the service. From the bank's point of view, credit cards
benefit in two ways: Banks make money through fees from merchant establishments and
the higher than normal interest rate paid by card holders for the balance in their card.

One can save on the interest cost if they are prompt in paying the balance by the due date.
Credit card users get a free period of credit before they reimburse the credit card issuing
bank. This may vary from 15 days to 50 days depending on the issuing banks. When we
use a credit card, we have the option to pay only a part of the total amount spent and
carry forward the balance. But in such a case, we will have to pay interest on all our
purchases without any free credit period.

Not surprisingly, credit card is the most popular form of card because it guarantees a free
period of credit and allows customers to defer total payment of bills as well.

5.10 VARIOUS COSTS ON CREDIT CARDS

Annual Fee- An annual (yearly) fee associated with having a credit card. This is a
separate fee from interest rate on purchases.

Joining Fees & Renewal fees- Joining fees and renewal fees are applicable on the
various credit cards issued by the Bank. Such fees vary from card member to card
member, and from particular description of credit card to credit card. The applicable fees
shall be as communicated to the card member at the time of applying for the credit card
and/or at the time of issuance of the said credit card.

46
Balance Transfer Fee - A fee charged by a credit card company to transfer a balance
from one account to another. This fee can be anywhere from 1%-5% of the balance
amount. However, many credit card companies do not charge this fee.
Cash Advance Fee - The fee that a credit card issuer charges a customer for accessing
the cash credit line on his or her account, either through an ATM, convenience check or
at a bank’s teller window. Most card issuers charge a hefty fee for a cash advance,
usually in the neighborhood of 2 to 4 percent of the amount. Then, many charge more
interest on cash advances than they do on purchases. And, on top of that, there’s usually
no grace period—so the higher interest starts piling up right away. Also, the payments
will be allocated to the lower-interest charges first, so the interest keeps building on the
cash advance amount.

• Transaction fee: - The fee is typically 3% of the amount withdrawn, with a


minimum amount charged for smaller transactions.
• Finance charges: - Finance charges typically accrue from the date of the advance,
without a normal grace period as with purchases.

Finance Charge - Fees and other costs billed to you on your statement for using the
credit cards.

Over limit Fee - Most revolving or open-end credit card come with a credit limit. A fee
charged when your balance goes over your credit limit is known as Over the Limit Fee.

Closed account fee - Charged for shutting down an account. Sometimes banks charge if
the account is closed before a certain time period has passed.

Charges on Revolving Credit Facility - This feature allows users to pay a minimum
amount, which is 5% (subject to a minimum amount of Rs.200) of the total bill amount or
any higher amount whichever is convenient for users. Users can then carry forward the
balance to a better financial month, for which they pay a charge of 2.95% around, per
month.

47
Add on Card Fees - Additional credit card or Add-on credit card mean a credit card
issued to the additional card member on the request of the primary card member. Banks
charge fees on such facilities which vary from banks to banks.

Credit Card Reissue and Replacement Fees - If user’s card become defective/gets
damaged, mutilated, lost or stolen, he may ask for a replacement card. All such
replacement credit cards shall be provided at the discretion of the bank upon such charges
prevailing at the time of replacement.

Late Payment Fee - Late Payment Fee is charged to the card member if there has been
no payment or a payment less than the minimum amount due is received by the payment
due date.

Balance Enquiry Charges - It means that charges are collected from users for enquiring
about the total amount billed in their billing statement.

Returned Cheque Fees or Payment Processing Fees - If sometimes the transaction


undertaken by the users is to be cancelled and the amount is to be again credited in the
account of the user then the banks also charge feed for such transactions (e.g. phone
payment fee)

Transaction Fee - Transaction fee is charged on each and every transaction undertaken
by the credit card holder through a credit card.

Non Respective Bank’s ATM Charges - This fee is charged when the credit card holder
is using his credit card to withdraw money from an ATM of the bank other than the bank
of which he is holding a credit card.

Duplicate Statement Request - Sometimes the credit card holders request for a duplicate
billing statement request and for that fee is charged from them which vary from bank to
bank.

48
Cash Processing Fee - If credit card holders are paying the amount of bills on credit card
by way of cash then banks charge the fee which is termed as cash processing fee.

Petrol Transaction Charges - Credit card holders are sometimes paying for their petrol
amount through the credit cards and for that banks charge the fee known as petrol
transaction charges or fuel surcharge.

Railway Ticket Purchase Fee - Railway ticket purchase fee is charged on card holders
when they pay for their ticket transaction charges through their credit cards. The charges
are different if internet booking option is used and different for other booking options.

Outstation Cheque Processing Fee - Whenever a card holder is paying the total bill of
credit card through a cheque which is not of the local bank of the holder the particular
credit card issuer will charge a fee for processing such cheque and that fee is termed as
outstation cheque processing fee.

Foreign Currency Transaction Charges - If a card holder is using his credit card for
conducting a transaction in foreign currency a fee is charged from the card holder for
using such facility as the issuer is taking the risk of frequent changes in the foreign
currency transactions.

Service Tax - Service tax @ 12.36% or any such rate as per the Government of India
guidelines that may be levied on the prescribed fees, finance charges, other fees/charges
etc. as may be applicable from time to time.

These are the various fees charged by the issuing bank from the credit card holders.
Credit card companies don't clearly disclose penalties, variable interest rates and other
fees, leaving consumers confused about the true cost of using plastic to pay for everyday
transactions and therefore these costs are termed as hidden costs.

49
6. ANALYSIS OF THE DATA

6.1 QUANTITATIVE ANALYSIS

For quantitative analysis various variables are taken into consideration to study the
awareness of hidden cost among the credit card user. The variables studied are gender,
age, qualification, occupation and duration of usage of card. The analysis in relation to
these variables is shown below.

6.1.1 On the basis of Gender:


Gender Males Female Total
Total Total Total
Hidden Cost 140 in % 60 in % 200 in %
57.8 41.6
Joining fee 81 6 25 7 106 53.00
59.2 53.3
Annual fee 83 9 32 3 115 57.50
35.7 33.3
Renewal fee 50 1 20 3 70 35.00
34.2 16.6
Add card fee 48 9 10 7 58 29.00
45.7 36.6
Transaction fee 64 1 22 7 86 43.00
36.4 26.6
Finance charges 51 3 16 7 67 33.50
38.5 23.3
Balance enquiry charges 54 7 14 3 68 34.00
22.1 11.6
Non respective bank’s ATM charges 31 4 7 7 38 19.00
35.0 25.0
Duplicate statement request 49 0 15 0 64 32.00
22.1 16.6
Charges on revolving credit 31 4 10 7 41 20.50
60.0 35.0
Late payment charges 84 0 21 0 105 52.50
18.5 13.3
Charges on over limit account 26 7 8 3 34 17.00
17.8 20.0
Payment return charges 25 6 12 0 37 18.50
Cash processing fee 36 25.7 5 8.33 41 20.50

50
1
30.0 26.6
Balance transfer charges 42 0 16 7 58 29.00
27.8 20.0
Petrol transaction charges 39 6 12 0 51 25.50
37.8 31.6
Railway ticket purchase fee 53 6 19 7 144 72.00
23.5 15.0
Reissue card fee 33 7 9 0 42 21.00
13.5 11.6
Outstation cheque processing fee 19 7 7 7 26 13.00
15.7
Retrieval fee 22 1 3 5.00 25 12.50
15.0 10.0
Foreign currency transaction charges 21 0 6 0 27 13.50
10.0
Cash advance - Transaction fee 14 0 1 1.67 15 7.50
Cash advance - Finance charges 9 6.43 0 0.00 9 4.50
65.7 56.6
Service tax 92 1 34 7 126 63.00
INTERPRETATION:

The above table indicates the awareness regarding the hidden cost amongst the males and
females.

From the above data it is interpreted that maximum awareness is of railway ticket
purchase fee that is 72% but from that the awareness level is more in males then females.
Next is service tax, annual fee, joining fee, etc. and in that also it’s evident that awareness
level is more in males compare to females.

The least known fees are cash advance transaction cost and cash advance finance charges
i.e., only 7.5% and 4.5% and looking to the data of males and females it can be said the
males are more aware.

Thus from variable gender it is seen that hidden cost awareness is more in males than
females.

51
Chi Square Test on the basis of Gender:

Here, all the hidden costs are denoted by symbol C.They are numbered in a chronological
order as they appear originally in the questionnaire. For Example, Joining fees is denoted
by C1, Annual fees by C2 and so on in the coming tables too.

Gender Actual Frequency Expected Frequency


Male Female Total Male Female
Hidden Cost
Joining fee C1 81 25 106 81.13 24.87
Annual fee C2 83 32 115 88.02 26.98
Renewal fee C3 50 20 70 53.58 16.42
Add card fee C4 48 10 58 44.39 13.61
Transaction fee C5 64 22 86 65.82 20.18
Finance charges C6 51 16 67 51.28 15.72
Balance enquiry charges C7 54 14 68 52.05 15.95
Non respective bank’s
ATM charges C8 31 7 38 29.08 8.92
Duplicate statement request C9 49 15 64 48.98 15.02
Charges on revolving credit C10 31 10 41 31.38 9.62
Late payment charges C11 84 21 105 80.37 24.63
Charges on over limit account C12 26 8 34 26.02 7.98
Payment return charges C13 25 12 37 28.32 8.68
Cash processing fee C14 36 5 41 31.38 9.62
Balance transfer charges C15 42 16 58 44.39 13.61
Petrol transaction charges C16 39 12 51 39.03 11.97
Railway ticket purchase fee C17 53 19 72 55.11 16.89
Reissue card fee C18 33 9 42 32.15 9.85
Outstation cheque processing
fee C19 19 7 26 19.90 6.10
Retrieval fee C20 22 3 25 19.13 5.87
Foreign currency transaction
charges C21 21 6 27 20.67 6.33
Cash advance - Transaction
fee C22 14 1 15 11.48 3.52
Cash advance - Finance
charges C23 9 0 9 6.89 2.11
Service tax C24 92 34 126 96.44 29.56
Total 1057 324 1381
INTERPRETATION:

52
For the above table Calculated Chi square is 0.71 which is to be compared with tabulated
chi square for (24-1)*(2-1) = 23 degrees of freedom at 5% level of significance i.e. 35.17.
As we can see that the computed value i.e. 0.71 is less than tabulated value null
hypothesis is rejected an alternative hypothesis is accepted.

So it is evident from the above calculation that the gender of the respondents influences
the hidden cost awareness among the credit card holders.

53
6.1.2 On the basis of Age:

AGE 20 – 29 30 – 39 40 – 49 50 – 59 60 – 69
Total Total Total Total Total
Hidden Costs 105 in % 40 in % 42 in % 10 in % 3 in %
57.1
Joining fee 54 51.43 23 57.50 24 4 5 50.00 0 0.00
59.5 100.0
Annual fee 59 56.19 21 52.50 25 2 10 0 0 0.00
28.5
Renewal fee 43 40.95 10 25.00 12 7 4 40.00 1 33.33
28.5
Add card fee 24 22.86 16 40.00 12 7 4 40.00 2 66.67
30.9
Transaction fee 46 43.81 19 47.50 13 5 6 60.00 2 66.67
38.1
Finance charges 34 32.38 13 32.50 16 0 3 30.00 2 66.67
Balance enquiry 38.1
charges 37 35.24 11 27.50 16 0 2 20.00 1 33.33
Non respective 16.6
bank’s ATM charges 18 17.14 8 20.00 7 7 5 50.00 0 0.00
Duplicate statement 30.9
request 34 32.38 14 35.00 13 5 3 30.00 0 0.00
Charges on revolving 16.6
credit 20 19.05 9 22.50 7 7 5 50.00 0 0.00
57.1
Late payment charges 51 48.57 24 60.00 24 4 6 60.00 0 0.00
Charges on over limit 19.0
account 18 17.14 4 10.00 8 5 3 30.00 1 33.33
Payment return
charges 20 19.05 7 17.50 2 4.76 8 80.00 0 0.00
23.8
Cash processing fee 17 16.19 8 20.00 10 1 5 50.00 1 33.33
Balance transfer 23.8
charges 35 33.33 8 20.00 10 1 5 50.00 0 0.00
Petrol transaction
charges 31 29.52 11 27.50 4 9.52 5 50.00 0 0.00
Railway ticket 26.1
purchase fee 42 40.00 14 35.00 11 9 4 40.00 1 33.33
19.0
Reissue card fee 23 21.90 6 15.00 8 5 4 40.00 1 33.33
Outstation cheque
processing fee 14 13.33 6 15.00 4 9.52 2 20.00 0 0.00
14.2
Retrieval fee 7 6.67 7 17.50 6 9 2 20.00 3 100.00

54
Foreign currency 16.6
transaction charges 11 10.48 6 15.00 7 7 3 30.00 0 0.00
Cash advance -
Transaction fee 6 5.71 4 10.00 1 2.38 4 40.00 0 0.00
Cash advance -
Finance charges 4 3.81 1 2.50 1 2.38 3 30.00 0 0.00
73.8 100.0
Service tax 53 50.48 29 72.50 31 1 10 0 3 100.00

INTERPRETATION:

The above table indicates the awareness regarding the hidden cost amongst the various
age groups.

From the above data it is interpreted that in the age group of 20-29 the maximum
awareness is of annual fee, joining fee and service tax. Whereas the minimum is of cash
advance transaction fee and cash advance finance charges.

In the age group of 30-39 maximum awareness is of service tax (72%) and late payment
charges (60%) whereas the minimum is of cash advance finance charges (2.5%).

In the age group of 40-49 maximum awareness is of service tax (73.81%) and late
payment charges (60%) whereas the minimum is of cash advance finance charges (2.5%).

In the age group of 50-59 maximum awareness is of service tax (100%) and annual fee
(100%) i.e. all people surveyed are aware of these costs whereas the minimum is of
balance enquiry charges, outstation cheque processing fee and retrieval fee (20%).

In the age group of 60-69 maximum awareness is of service tax (100%) whereas the
minimum is 0% and that is of so many fees.

So from all the above data it’s seen that service tax is the fees which many of the
respondents are aware off. And it’s also seen that the awareness is least in the age group
of 60-69.

55
56
Chi Square Distribution on basis of Age:

Hidden Actual Frequency Expected Frequency


Costs 20–29 30-39 40– 49 50– 59 60– 69 20– 29 3 – 39 40– 49 5 – 59 60– 69
C1 54 23 24 5 0 53.8 21.4 20.9 8.5 1.4
C2 59 21 25 10 0 58.4 23.2 22.7 9.2 1.5
C3 43 10 12 4 1 35.5 14.1 13.8 5.6 0.9
C4 24 16 12 4 2 29.4 11.7 11.4 4.7 0.8
C5 46 19 13 6 2 43.7 17.4 16.9 6.9 1.1
C6 34 13 16 3 2 34.5 13.7 13.4 5.5 0.9
C7 37 11 16 2 1 34.0 13.5 13.2 5.4 0.9
C8 18 8 7 5 0 19.3 7.7 7.5 3.1 0.5
C9 34 14 13 3 0 32.5 12.9 12.6 5.1 0.8
C10 20 9 7 5 0 20.8 8.3 8.1 3.3 0.5
C11 51 24 24 6 0 53.3 21.2 20.7 8.4 1.4
C12 18 4 8 3 1 17.3 6.9 6.7 2.7 0.4
C13 20 7 2 8 0 18.8 7.5 7.3 3.0 0.5
C14 17 8 10 5 1 20.8 8.3 8.1 3.3 0.5
C15 35 8 10 5 0 29.4 11.7 11.4 4.7 0.8
C16 31 11 4 5 0 25.9 10.3 10.0 4.1 0.7
C17 42 14 11 4 1 36.6 14.6 14.2 5.8 0.9
C18 23 6 8 4 1 21.3 8.5 8.3 3.4 0.5
C19 14 6 4 2 0 13.2 5.3 5.1 2.1 0.3
C20 7 7 6 2 3 12.7 5.1 4.9 2.0 0.3
C21 11 6 7 3 0 13.7 5.5 5.3 2.2 0.4
C22 6 4 1 4 0 7.6 3.0 3.0 1.2 0.2
C23 4 1 1 3 0 4.6 1.8 1.8 0.7 0.1
C24 53 29 31 10 3 64.0 25.5 24.8 10.1 1.6
Total 701 279 272 111 18 701 279 272 111 18

INTERPRETATION:

For the above table Calculated Chi square is 0.09 which is to be compared with tabulated
chi square for (24-1)*(5-1) = 92 degrees of freedom at 5% level of significance i.e.
115.38. As we can see that the computed value i.e. 0.09 is less than tabulated value null
hypothesis is rejected an alternative hypothesis is accepted.
So it is evident from the above calculation that the age of the respondents influences the
hidden cost awareness among the credit card holders.

57
6.1.3 On the basis of Qualification:

Qualification Illiter SSC HSC Graduat Post PhD Others


ate e Gradua
te
Hidden Costs % of 0 % of 2 % of 14 %of 131 % of 51 % of 2 % of 0
Joining fee 0 0 57.1 51.9 56.9 50 0
Annual fee 0 50 78.6 48.9 72.5 100 0
Renewal fee 0 0 14.3 35.9 39.2 50 0
Add card fee 0 0 28.6 31.3 25.5 0 0
Transaction fee 0 100 35.7 40.5 49.0 50 0
Finance charges 0 50 35.7 33.6 35.3 0 0
Balance enquiry charges 0 50 14.3 31.3 43.1 50 0
Non respective bank’s ATM
charges 0 0 28.6 19.8 15.7 0 0
Duplicate statement request 0 50 35.7 30.5 33.3 50 0
Charges on revolving credit 0 0 21.4 19.8 21.6 50 0
Late payment charges 0 50 50.0 48.9 64.7 0 0
Charges on over limit
account 0 50 14.3 16.8 17.6 0 0
Payment return charges 0 50 14.3 18.3 19.6 0 0
Cash processing fee 0 50 14.3 21.4 19.6 0 0
Balance transfer charges 0 0 14.3 27.5 39.2 0 0
Petrol transaction charges 0 0 21.4 22.9 35.3 0 0
Railway ticket purchase fee 0 0 21.4 35.9 39.2 100 0
Reissue card fee 0 50 7.1 19.8 27.5 0 0
Outstation cheque
processing fee 0 50 0.0 13.0 13.7 50 0
Retrieval fee 0 50 21.4 13.0 7.8 0 0
Foreign currency transaction
charges 0 0 7.1 14.5 13.7 0 0
Cash advance - Transaction
fee 0 0 7.1 7.6 5.9 50 0
Cash advance - Finance
charges 0 0 0.0 4.6 5.9 0 0
Service tax 0 100 71.4 59.5 68.6 50 0

INTERPRETATION:

58
The above table indicates the awareness regarding the hidden cost on the basis of
qualification. Of the sample selected no one is illiterate and nor are there any respondents
in the category of others.

From the above data it is interpreted that respondents with the SSC qualification are
having maximum awareness regarding service tax and transaction fee, whereas the
minimum is regarding many of the costs.

For the respondents with the HSC qualification the maximum awareness is of annual fee
(78.6%) and service tax (71.4%) and whereas the minimum is of cash advance finance
charges (0%).

Among the graduate respondents maximum awareness is of service tax (59.5%) and
joining fee (51.9%) and whereas the minimum is of cash advance finance charges (4.6%).

Among the post - graduate respondents maximum awareness is of annual fee (72.5%) and
service tax (68.6%), whereas the minimum is of cash advance finance charges and
transaction charges (5.9%).

Among the PhD respondents maximum awareness is of annual fee (100%) and railway
ticket purchase fee (100%), whereas the minimum is of many of the costs.

So from all the above data it is seen that service tax is the fees which many of the
respondents are aware off. And it is also seen that the awareness according to
qualification level is almost evenly distributed.

59
Chi Square Distribution on basis of qualification:

Actual Frequency Expected Frequency


Hidden SSC HSC Gradu Post PhD SSC HSC Gradua Post PhD
Costs ate Graduate te Graduate
C1 0 8 68 29 1.15 6.6 67.08 30.17 1.00 1.00
C2 1 11 64 37 1.25 7.16 72.78 32.73 1.08 1.08
C3 0 2 47 20 0.76 4.36 44.3 19.92 0.66 0.66
C4 0 4 41 13 0.63 3.61 36.71 16.51 0.55 0.55
C5 2 5 53 25 0.93 5.36 54.43 24.47 0.81 0.81
C6 1 5 44 18 0.74 4.23 43.04 19.35 0.64 0.64
C7 1 2 41 22 0.73 4.17 42.4 19.07 0.63 0.63
C8 0 4 26 8 0.41 2.37 24.05 10.81 0.36 0.36
C9 1 5 40 17 0.7 3.99 40.5 18.21 0.60 0.60
C10 0 3 26 11 0.45 2.55 25.95 11.67 0.39 0.39
C11 1 7 64 33 1.14 6.54 66.45 29.88 0.99 0.99
C12 1 2 22 9 0.37 2.12 21.52 9.68 0.32 0.32
C13 1 2 24 10 0.4 2.3 23.42 10.53 0.35 0.35
C14 1 2 28 10 0.45 2.55 25.95 11.67 0.39 0.39
C15 0 2 36 20 0.63 3.61 36.71 16.51 0.55 0.55
C16 0 3 30 18 0.55 3.18 32.28 14.51 0.48 0.48
C17 0 3 47 20 0.78 4.48 45.57 20.49 0.68 0.68
C18 1 1 26 14 0.46 2.62 26.58 11.95 0.40 0.40
C19 1 0 17 7 0.28 1.62 16.45 7.4 0.24 0.24
C20 1 3 17 4 0.27 1.56 15.82 7.11 0.24 0.24
C21 0 1 19 7 0.29 1.68 17.09 7.68 0.25 0.25
C22 0 1 10 3 0.16 0.93 9.49 4.27 0.14 0.14
C23 0 0 6 3 0.1 0.56 5.7 2.56 0.08 0.08
C24 2 10 78 35 1.37 7.85 79.74 35.86 1.19 1.19
Total 15 86 874 393 15 86 874 393 13 13

INTERPRETATION:

For the above table Calculated Chi square is 0.999 which is to be compared with
tabulated chi square for (24-1)*(5-1) = 92 degrees of freedom at 5% level of significance
i.e. 115.38. As we can see that the computed value i.e. 0.999 is less than tabulated value
null hypothesis is rejected an alternative hypothesis is accepted.
So it is evident from the above calculation that the qualification of the respondents
influences the hidden cost awareness among the credit card holders.

60
6.1.4 On the basis of Occupation:

Student Housew Service Business Retired Unem Other


OCCUPATION ife People man ployed s
Hidden Cost % of 41 % of 25 % of 58 % of 73 % of 2 % of 1 % of 0
Joining fee 41.5 40 62.1 54.8 100 100 0
Annual fee 56.1 60 58.6 57.5 50 0 0
Renewal fee 31.7 20 44.8 35.6 0 0 0
Add card fee 17.1 16 34.5 37.0 0 0 0
Transaction fee 41.5 36 39.7 50.7 0 0 0
Finance charges 26.8 28 29.3 43.8 50 0 0
Balance enquiry charges 34.1 24 41.4 30.1 50 0 0
Non respective bank’s
ATM charges 9.8 12 24.1 23.3 0 0 0
Duplicate statement
request 29.3 28 32.8 35.6 0 0 0
Charges on revolving
credit 14.6 24 17.2 23.3 50 100 0
Late payment charges 41.5 40 56.9 60.3 50 0 0
Charges on over limit
account 7.3 20 24.1 16.4 0 0 0
Payment return charges 17.1 28 17.2 17.8 0 0 0
Cash processing fee 9.8 4 27.6 26.0 0 100 0
Balance transfer charges 43.9 16 31.0 24.7 0 0 0
Petrol transaction charges 31.7 24 25.9 23.3 0 0 0
Railway ticket purchase fee 36.6 36 41.4 31.5 50 0 0
Reissue card fee 22.0 16 17.2 26.0 0 0 0
Outstation cheque
processing fee 9.8 12 15.5 12.3 0 100 0
Retrieval fee 0.0 4 15.5 20.5 0 0 0
Foreign currency
transaction charges 7.3 12 17.2 15.1 0 0 0
Cash advance - Transaction
fee 0.0 0 13.8 8.2 0 100 0
Cash advance - Finance
charges 0.0 0 8.6 5.5 0 0 0
Service tax 53.7 64 58.6 71.2 100 0 0

61
INTERPRETATION:

The above table indicates the awareness regarding the hidden cost on the basis of
occupation. Of the sample selected no one comes in the category of others.

From the above data it is interpreted that students are having maximum awareness
regarding service tax and annual fee, whereas the minimum is regarding cash advance
finance charges and transaction fees.

Among the housewives the maximum awareness is of service tax (64%) and annual fee
(60%) whereas the minimum is regarding cash advance finance charges and transaction
fees.

Among the service people maximum awareness is of joining fee, annual fee and service
tax whereas the minimum is of cash advance finance charges (8.6%).

Among the businessman maximum awareness is of service tax (71.2%), whereas the
minimum is of cash advance finance charges (5.5%).

Among the retired maximum awareness is of joining fee (100%) and service tax (100%),
whereas the minimum is of many of the costs.

Among the unemployed maximum and minimum awareness can be seen from the table.

So from all the above data it is seen that service tax is the fees which many of the
respondents are aware off. And it is also seen that the awareness according to occupation
is almost evenly distributed.

62
Chi Square Distribution on basis of Occupation:

Hidden Actual Frequency Expected Frequency


costs Stud House Servic Busi Reti Une Stud House Servic Busi Reti Unem
ent Wife e ness red mpl ent Wife e ness red ploye
People man oyed People man d
C1 17 10 36 40 2 1 18.3 10.8 33.6 42.1 0.8 0.4
C2 23 15 34 42 1 0 19.9 11.7 36.5 45.6 0.8 0.4
C3 13 5 26 26 0 0 12.1 7.2 22.2 27.8 0.5 0.3
C4 7 4 20 27 0 0 10.0 5.9 18.4 23.0 0.4 0.2
C5 17 9 23 37 0 0 14.9 8.8 27.3 34.1 0.6 0.3
C6 11 7 17 32 1 0 11.8 6.9 21.6 27.0 0.5 0.3
C7 14 6 24 22 1 0 11.6 6.8 21.3 26.6 0.5 0.2
C8 4 3 14 17 0 0 6.6 3.9 12.1 15.1 0.3 0.1
C9 12 7 19 26 0 0 11.1 6.5 20.3 25.4 0.5 0.2
C10 6 6 10 17 1 1 7.1 4.2 13.0 16.3 0.3 0.2
C11 17 10 33 44 1 0 18.2 10.7 33.3 41.7 0.8 0.4
C12 3 5 14 12 0 0 5.9 3.5 10.8 13.5 0.3 0.1
C13 7 7 10 13 0 0 6.4 3.8 11.7 14.7 0.3 0.1
C14 4 1 16 19 0 1 7.1 4.2 13.0 16.3 0.3 0.2
C15 18 4 18 18 0 0 10.0 5.9 18.4 23.0 0.4 0.2
C16 13 6 15 17 0 0 8.8 5.2 16.2 20.2 0.4 0.2
C17 15 9 24 23 1 0 12.5 7.4 22.8 28.6 0.5 0.3
C18 9 4 10 19 0 0 7.3 4.3 13.3 16.7 0.3 0.2
C19 4 3 9 9 0 1 4.5 2.7 8.3 10.3 0.2 0.1
C20 0 1 9 15 0 0 4.3 2.6 7.9 9.9 0.2 0.1
C21 3 3 10 11 0 0 4.7 2.8 8.6 10.7 0.2 0.1
C22 0 0 8 6 0 1 2.6 1.5 4.8 6.0 0.1 0.1
C23 0 0 5 4 0 0 1.6 0.9 2.9 3.6 0.1 0.0
C24 22 16 34 52 2 0 21.8 12.9 40.0 50.0 0.9 0.5
Total 239 141 438 548 10 5 239 141 438 548 10 5

INTERPRETATION:

For the above table Calculated Chi square is 0.46 which is to be compared with tabulated
chi square for (24-1)*(6-1) = 115 degrees of freedom at 5% level of significance i.e.
139.64. As we can see that the computed value i.e. 0.46 is less than tabulated value so
null hypothesis is rejected an alternative hypothesis is accepted.
So it is evident from the above calculation that the occupation of the respondents
influences the hidden cost awareness among the credit card holders.

63
6.1.5 On the basis of duration of usage:

Duration Less than 1 year 1 - 3 year 3 or more year


Hidden cost Total 87 in % Total 73 in % Total 40 in %
Joining fee 51 58.62 28 38.36 27 67.50
Annual fee 39 44.83 47 64.38 29 72.50
Renewal fee 31 35.63 24 32.88 15 37.50
Add card fee 26 29.89 19 26.03 13 32.50
Transaction fee 28 32.18 42 57.53 16 40.00
Finance charges 27 31.03 27 36.99 14 35.00
Balance enquiry charges 27 31.03 28 38.36 12 30.00
Non respective bank’s ATM
charges 17 19.54 12 16.44 9 22.50
Duplicate statement request 26 29.89 18 24.66 20 50.00
Charges on revolving credit 18 20.69 15 20.55 8 20.00
Late payment charges 40 45.98 43 58.90 22 55.00
Charges on over limit account 17 19.54 8 10.96 9 22.50
Payment return charges 12 13.79 20 27.40 5 12.50
Cash processing fee 12 13.79 17 23.29 12 30.00
Balance transfer charges 16 18.39 26 35.62 16 40.00
Petrol transaction charges 12 13.79 21 28.77 18 45.00
Railway ticket purchase fee 22 25.29 29 39.73 21 52.50
Reissue card fee 14 16.09 19 26.03 9 22.50
Outstation cheque processing fee 9 10.34 9 12.33 8 20.00
Retrieval fee 9 10.34 8 10.96 8 20.00
Foreign currency transaction
charges 7 8.05 11 15.07 9 22.50
Cash advance - Transaction fee 3 3.45 7 9.59 5 12.50
Cash advance - Finance charges 3 3.45 4 5.48 2 5.00
Service tax 53 60.92 47 64.38 26 65.00

64
INTERPRETATION:

The above table indicates the awareness regarding the hidden cost on the basis of
duration of usage.

From the above data it is interpreted that on the basis of duration of usage the maximum
awareness in the holders using the card from less than 1 year is regarding joining fee and
service tax whereas the minimum is regarding cash advance finance charges and
transaction fees.

Among the holders using the card from 1 – 3 years the maximum awareness is regarding
service tax, annual fee and late payment charges whereas the minimum is regarding cash
advance finance charges (5.48) and transaction fees (9.59).

Among the holders using the card from more than 3 years the maximum awareness is of
annual fee (72.5%) and joining fee (67.5) whereas the minimum is regarding cash
advance finance charges (5%) and transaction fees (12.5%).

So from all the above data it is seen that service tax is the fees which many of the
respondents are aware off. And it is also seen that the awareness according to duration of
usage the awareness level increases with the increase of usage time period.

65
Chi Square Distribution on basis of Duration of usage:

Hidden Actual Frequency Expected Frequency


Costs Less 1-3 3 or Total Less than 1-3 3 or
than 1 year more 1 year year more
year years years
C1 51 28 27 106 39.84 40.60 25.56
C2 39 47 29 115 43.22 44.05 27.73
C3 31 24 15 70 26.31 26.81 16.88
C4 26 19 13 58 21.80 22.22 13.99
C5 28 42 16 86 32.32 32.94 20.74
C6 27 27 14 68 25.56 26.05 16.40
C7 27 28 12 67 25.18 25.66 16.16
C8 17 12 9 38 14.28 14.56 9.16
C9 26 18 20 64 24.05 24.52 15.43
C10 18 15 8 41 15.41 15.71 9.89
C11 40 43 22 105 39.46 40.22 25.32
C12 17 8 9 34 12.78 13.02 8.20
C13 12 20 5 37 13.91 14.17 8.92
C14 12 17 12 41 15.41 15.71 9.89
C15 16 26 16 58 21.80 22.22 13.99
C16 12 21 18 51 19.17 19.54 12.30
C17 22 29 21 72 27.06 27.58 17.36
C18 14 19 9 42 15.78 16.09 10.13
C19 9 9 8 26 9.77 9.96 6.27
C20 9 8 8 25 9.40 9.58 6.03
C21 7 11 9 27 10.15 10.34 6.51
C22 3 7 5 15 5.64 5.75 3.62
C23 3 4 2 9 3.38 3.45 2.17
C24 53 47 26 126 47.35 48.27 30.38
Total 519 529 333 1381 519 529 333

INTERPRETATION:

For the above table Calculated Chi square is 0.44 which is to be compared with tabulated
chi square for (24-1)*(3-1) = 46 degrees of freedom at 5% level of significance i.e. 62.86.
As we can see that the computed value i.e. 0.44 is less than tabulated value so null
hypothesis is rejected an alternative hypothesis is accepted.
So it is evident from the above calculation that the duration of usage of the respondents
influences the hidden cost awareness among the credit card holders.

66
6.1.6 On the basis of Enforceability:

Enforceability Enforced Not Enforced Total Response


Total Total Total
Banks 69 in % 131 in % 200 in %
42.0 35.1
ICICI Bank 29 3 46 1 75 37.50
31.8 39.6
HDFC Bank 22 8 52 9 74 37.00
25.9
ABN – AMRO Bank 5 7.25 34 5 39 19.50
17.3 16.7
Citi – Bank 12 9 22 9 34 17.00
Standard Chartered 12.9
Bank 6 8.70 17 8 23 11.50
11.5 29.7
SBI 8 9 39 7 47 23.50
Other 2 2.90 6 4.58 8 4.00

INTERPRETATION:

The above table indicates the enforceability by the banks.

From the above data it is interpreted that the executives of ICICI Bank enforce the cards
on the people the most and the least is observed in the others category of banks.

The table shows that HDFC Bank scores the highest in the genuine issue of cards.

67
Chi Square Distribution on basis of Enforceability:

Enforceability Actual Frequency Expected Frequency


Not Not
Banks Enforced Enforced Total Enforced Enforced
ICICI Bank 29 46 75 21.00 54.00
HDFC Bank 22 52 74 20.72 53.28
ABN – AMRO
Bank 5 34 39 10.92 28.08
Citi – Bank 12 22 34 9.52 24.48
Standard
Chartered Bank 6 17 23 6.44 16.56
SBI 8 39 47 13.16 33.84
Other 2 6 8 2.24 5.76
Total 84 216 300 84.00 216.00

INTERPRETATION:

For the above table Calculated Chi square is 0.05 which is to be compared with tabulated
chi square for (7-1)*(2-1) = 6 degrees of freedom at 5% level of significance i.e. 12.592.
As we can see that the computed value i.e. 0.05 is less than tabulated value so null
hypothesis is rejected an alternative hypothesis is accepted.

So it is evident from the above calculation that the enforceability by the banks affects the
usage of banks credit cards

68
6.2 QUALITATIVE ANALYSIS:

For the purpose of qualitative analysis a question related to personal bad experiences of
holding a credit card to the people was asked because any one who is having a credit card
must have sweet bitter memories how Credit Card Company robe. It’s the greatest
robbery of all and most surprising thing is that there is no mechanism to address the
grievances.

The following results came out from the research so conducted:

The bank issuing the credit card assured the credit card holders that certain fees such as
annual fee, joining fee, reissuing card fees, renewal fee, etc. will not be charged to them
but actually it was found that such fees were included in their billing statement. So to
nullify the effect, they have to take certain steps which were time consuming and
expensive.

There is a scheme of add card in existence which is charge free for family members. But
it is observed that sometimes charges are levied even on such cards, for which the card
holder has to compulsorily pay the charges and consequently they prefer to terminate the
card because of the bitter experience.

Though there are some cards which promise no fees for lifetime but still charges are
levied later on. Some banks even charge fees two to three times higher than the actual
fees for a single transaction. Charges which are not clear to the holder are sometimes
shown in the billing statements. This results in to suspicion in the minds of the holder.

There are cases of enforcement of insurance policy on credit card holders. Even fee for
late cheque deposition was charged when the cheque was actually deposited on time.
Where it is specified that no cheque collection fee will be charged and when such fees are
charged the credit card holder feels shocked.

69
The mistakes such as costs of facilities not used are found in the billing statement.
Through conversation with the Bank these costs could be reduced but cannot be
eradicated.

The persons unaware of the methods of using cards and on which the cards are enforced
become the victims of heavy cost even without using the cards.

Many people have a nightmarish experience when it comes to credit cards. They owned a
credit card and then found that banks don't have a tie up for payment facility. Nor any
staffs from banks are willing to collect the cheques. Customers have to go around city to
deposit their cheques as cash payment was not an option. Then even though they drop the
cheque prior to the last date mentioned on the bill, they are charged with a late fee. If
customers are asking to revert the charges banks make threatening calls and finally the
customers end up with paying the charges.

There are even cases of amount blocked for services not yet rendered from the credit card
and later no explanation for such things are provided to the credit card holders.

The Credit card providing Banks many times deduct the amount for various facilities
such as balance enquiry, payment of bills, and transfer of balance directly from holders
Bank Account without their permission. There are charges such as over limit charges on
purchase of railway ticket which the customer is not aware of and are being charged.

70
7. CONCLUSION

• Based on the research it is evident that the awareness level among the credit
cardholders is very less. The holders are only aware of the general cost like
joining fee, annual fee, service tax, etc.

• The researcher rejects the null hypothesis and accepts the alternative hypothesis
and concludes that all the variables influence the awareness of hidden cost among
the credit card holders.

• The enforceability of credit cards by the banks influences the usage of credit cards
among the users.

• The bitter experiences of the people clearly show that credit card holders have to
suffer a lot because the various costs are not explained to them and this result in
the termination of card by the credit card holders.

• The average purchases done through credit card are decreasing and the major
reason for this is unawareness among the credit card holders about the cost
associated with the credit cards.

71

You might also like