PLASTIC MONEY

Introduction
Plastic money or polymer money, made out of plastic,
is a new and easier way of paying for goods and services. Plastic
money was introduced in the 1950s and is now an essential form
of ready money which reduces the risk of handling a huge
amount of cash. It includes debit cards, ATMs, smart cards, etc.
Credit cards, variants of plastic money, are used as substitutes
for currency. This book on plastic money is divided into two
sections titled Concepts and Experiences. The former covers
articles on the the emergence of plastic money, different types of
plastic cards and their growth in India and other related issues.
An experience discusses the experiences of banks like Standard
Chartered, Citibank, which deal with plastic money and their
growth in the market.

Meaning
Plastic money refers to credit cards, you use them
whenever you want and pay later (with interest, of course). It
makes it too easy for people to buy things they normally could
not afford, which makes it easier to get into debt.

Definition
A slang phrase for credit cards, especially when such
cards used to make purchases. The "plastic" portion of this term
refers to the plastic construction of credit cards, as opposed to
paper and metal of currency. The "money" portion is an
erroneous reference to credit cards as a form of money, which
they are not. Although credit cards do facilitate transactions,
because they are a liability rather than an asset, they are not
money and not part of the economy's money supply.

The History Of Credit Cards and Debit Cards In Plastic Money

2

Credit cards have evolved into a safe and secure manner

to purchase goods and services. The Internet has given credit
card users additional purchasing power. Banks have options like
cash-back rewards, savings plans and other incentives to entice
people to use their cards. Debit cards allow people the
convenience of cards without the worry of racking up debt. The
convenience, security and rewards offered by credit and debit
cards keep shoppers using their cards as opposed to checks or
cash.
Credit Card Origins
The first credit cards were issued by individual stores and
merchants. These cards were issued in limited locations and only
accepted by the businesses that issued them. While the cards
were convenient for the customers, they also provided a
customer loyalty and customer service benefit, which was good
for both customer and merchant. It was not until 1950 that the
Dinner's Club card was created by a restaurant patron who
forgot his wallet and realized there needed to be an alternative to
cash only.
Plastic Becomes the Standard
The first Diner's Club cards were made out of cardboard or
celluloid. In 1959 American Express changed all that with the
first card made of plastic. American Express created a system of
3

making an impression of the card presented at the register for

payment. Then that impression was billed to the customer and
due in full each month. Several American Express cards still
operate like this as of 2010. It was not until the late 1980s that
American Express began allowing people to pay their balance
over time with additional card options.

Bank Card Associations

In 1966, Bank of America created a card that was a general
purpose card or "open loop" card. These "closed loop"
agreements limited cards like Diners Club and American
Express to certain merchants, unlike the new "open loop" cards.
The new general purpose system required interbank cooperation
and additional regulations. This created additional safety
features and began building the credit card system of today.
The Visa association of cards took credit cards to a new
level in 1989 when they introduced debit cards. These cards
linked consumers to their checking accounts. Money was now
drawn from a checking account at the point of sale with these
4

new cards and replaced check writing. This helped the

merchants check that money was available and made it easier to
track the customer if the funds could not be obtained.
Consumers liked the convenience of not having to write checks
at the point of sale, which made debit cards a safe alternative to
cash and checks.

The Future
There were almost 29 million debit card users as of 2006,
with a projected 34.4 million users by 2016. However, online
services like PayPal are emerging as a way for people to pay
their debts in new, secure and convenient ways. Technology also
exists to have devices implanted into phones, keys and other
everyday devices so that the ability to pay at the point of sale is
even more convenient

TYPES OF PLASTIC MONEY

Different types:5

 Credit card
A credit card is plastic money that is used to pay for
products and services at over 20 Million locations around
the world. All you need to do is produce the card and sign a
charge slip to pay for your purchases. The institution which
issues the card makes the payment to the outlet on your
behalf; you will pay this 'loan' back to the institution at a
later date.

Debit card
Debit cards are substitutes for cash or check payments,
much the same way that credit cards are. However, banks
6

only issue them to you if you 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 only accepted at outlets with electronic
swipe-machines that can check and deduct amounts from
your bank balance online.
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.
When you use a credit card you are not declared a defaulter
even if you miss your due date. A 2.95 per cent late
payment fees (this differs from one bank to another) is
levied in your next billing statement.

 Amex card
Amex stands for American Express and is one of the wellknown charge cards. This card has its own merchant
establishment tie-ups and does not depend on the network
of MasterCard or Visa.
Credit cards: Remember these dos and don'ts.
This card is typically meant for high-income group
categories and companies and may not be acceptable at
many outlets. There are a wide variety of special privileges
offered to Amex cardholders.

 Dinner club card

Diners Club is a branded charge card. There are a wide
variety of special privileges offered to the Diners Club
cardholder. For instance, as a cardholder you can set your
own spending limit. Besides, the card has its own merchant
establishment tie-ups and does not depend on the network
of MasterCard or Visa.
However, since this card is typically meant for highincome group categories, it may not be acceptable at many
outlets. It would be a good idea to check whether a
member establishment does accept 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 travelers cheque
while traveling abroad for either business or personal
reasons.

Co-branded card
Co-branded cards are credit cards issued by card companies
that have tied up with a popular brand for the purpose of
offering certain exclusive benefits to the consumer.
A debit card with a difference
For example, the Citi-Times card gives you all the benefits
of a Citibank credit card along with a special discount on
Times Music cassettes, free entry to Times Music events,
etc.

10

 Master card & Visa

MasterCard and Visa are global non-profit organizations
dedicated to promote the growth of the card business across
the world.
They have built a vast network of merchant establishments
so that customers worldwide may use their respective credit
cards to make various purchases.

Smart card
11

 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 smart card reading
machines. No change is given. Currently this product is
available only in very developed countries like the United
States and is being used only sporadically in India.
Photo card:
If your photograph is imprinted on a card, then you have
what is known as a photo card. Doing this helps identify the
user of the credit card and is therefore considered safer.
Besides, in many cases, your photo card can function as
your identity card as well.

CREDIT CARD
12

INTRODUCTION
A credit card is a small plastic card issued to users as a
system of payment. It allows its holder to buy goods and
services based on the holder's promise to pay for these goods
and services. The issuer of the card grants a line of credit to the
consumer or the user) from which the user can borrow money
for payment to a merchant or as a cash advance to the user.
Usage of the term "credit card" to imply a credit card account is
a metonym.
When a purchase is made the user would indicate consent
to pay by signing a receipt with a record of the card details and
indicating the amount to be paid. Issuer agrees to pay the
merchant and the credit card user agrees to pay the card issuer.

13

DEFINITION:The credit card can be defined as A small plastic card that

allows its

holder to buy goods and services

on credit and to pay at fixed intervals through the card issuing

agency.
MEANING:A credit card is a card or mechanism which enables card
holder to purchase goods, travels and dine in a hotel without
making immediate payments. The holders can use the cards to
get credit from banks up to 45 days.
The credit card relieves the consumers from the botheration
of carrying cash and ensures safety. It is a convenience of
extended credit without formality. Thus credit card is a passport
to, safety, convenience, prestige and credit.

14

ADVANTAGES & DISADVANTAGES OF

CREDIT CARD

ADVANTAGES OF CREDIT CARD

The benefits of credit card can be grouped as follows:
(A) BENEFITS TO THE BANK :
a) A credit card is an integral part of banks major services these
days. The credit card provides the following advantages to the
bank: the system provides an opportunity to the bank to attract
new potential costumers.
b) To get new customers the bank has to employee special
trained staff. This gives the bank an opportunity to find the
latent talent from among existing staff that would have been
otherwise wasted.

15

c) The more important function of a credit card, however, is

simply to yield direct profit for the bank. There is a scope and a
potential for a better profitability out of income / commission
earned from the traders turn over.
d) This also provides additional customer services to the
existing clients. It enhances the customer satisfaction.
e) More use by the car holder and consequently the growth of
banking habits in general.
f) Better network of card holders and increased use of cards
means higher popularity and image of the bank
g) Savings of expense on cash holdings, i.e. stationery, printing
and man power to handle clearing transactions while
considerably is reduced. It increases

16

(B) BENEFITS TO CARD HOLDER

The principal benefits to a card holder are:
a) He can purchase goods and services at a large number of
outlets without cash or cheque. The card is useful in emergency,
and can save embarrassment.
b) The risk factor of carrying and storing cash is avoided. It is
convenient for him to carry credit card and he has trouble free
travel and may purchase his without carrying cash or cheque.
c) Months purchases can be settled with a single remittance,
thus, tending to reduce bank and handling charges.
d) The card holder has the period of free credit usually between
30-50 days of purchase
e) Cash can usually be obtained with the card, either on card
account or by using it as identification when encasings a cheque
at the bank.

17

(C) BENEFITS TO THE MERCHANT ESTABLISHMENT

The principal benefits offer credit card to the retailer is
a) This will carry prestigious weight to the outlets.
b) Increases in sale because of increased purchasing power of
the cardholder due to unbilled credit available to the card holder.
c) The retailers gain from the impulse buying and trading up the
tendency to buy the bigger or better article
d) Credit card ensures timely and certainly of payments.
e) Suppliers/sellers no longer have to send reminders of
outstanding debits.
f) Systematic accounting since sales receipts are routed through
banking channels.
g) Advertising and promotional support on national scale.
DISADVANTAGES OF CREDIT CARD
18

The following are the common disadvantages of the credit

card:

a) Some credit card transactions take longer time than

cash transactions because of various formalities.
b) The customer tends to overspend out of immerse
happiness.
c) Discounts and rebates can rarely be obtained.
d) The cardholder is responsible for charges due to loss or
theft of the card and the bank may not be party for loss
due to fraud or collusion of staff etc.
e) Customers may be denied cash discount for payment
through card.
f) It might lead to spending habits and cardholders may
end up in big debts
i) Avoid the entire cost and security problem involved in
handling cash.
MARKETING STRATEGIES

19

American companies spend billions of dollars each year on

marketing. As a matter of fact, in 2001, U.S. advertising
expenditures alone topped $230 billion, more than doubling the
$105.97

billion

spent

in

1980.

(Source: Advertising: Exposure and Statistics November

2003 newsletter of the Media Education Foundation)
Now, these figures may seem staggering to the independent
professional on a budget, but dont panic; there are lots of
effective strategies you can utilize that will help you grow your
business

fast.

Here

are

some

of

my

favorites:

Identify your niche.

One of the easiest ways to attract customers is to figure out
which group of prospective customers you get your very best
results for and go after them exclusively. Many professionals are
afraid to do this claiming that theyll be leaving someone out.
Position yourself as an expert.

20

Why? Experts make more money and get more media

attention and thats free advertising! Lets face it; its easier to
trust a specialist than a generalist whos trying to be everything
to everyone. Once youve identified your niche, let the world
know about how you can help. Provide free information
products, write articles and white papers about the problems
your clients face and how they can solve them.
Conduct workshops, seminars and tele-classes specifically
geared towards helping your prospective customers and before
long youll be regarded as an expert in your field. And, while
youre at it dont forget to, collect names, emails and addresses
of prospects to keep filling your pipeline.

Develop

ongoing

relationships

with

professionals and build your referral team.

21

complementary

These are other professionals who sell non-competing

services or products to the same niche customers you are
targeting. For instance, my clients often need the services of
bookkeepers, accountants and business attorneys. Likewise, they
refer business to me. Here are a couple of other examples:
Residential realtor, mortgage broker, real estate attorney, home
improvement contractor, architect and interior designer.
000000000
Commercial printer, copywriter, graphic designer.

Institute a system to keep track of all of the people who are

interested in your product or services, and find creative ways
of keeping in touch with them on a regular basis.
To start, go through your notes. Put together a list of all of
the people youve spoken to in the last 6-9 months whove
22

showed interest in you but havent become paying customers.

Follow up with them in a variety of ways: call them to touch
base, use email, ask them to subscribe to a newsletter, send them
interesting articles, or invite them to join you at events. It takes
numerous impressions to make the sale; thats why you see
commercials on TV over and over again for the same products.
By Keeping track of all of the people whove showed
interest and keeping your business on their radar screen youll
turn more of them into paying customers.

Let your satisfied customers help you sell your products or

services.
Here

are

couple

of

ways

to

do

this:

00000000000000000000000000
Ask them for referrals - right away (if you were a car salesman

23

you wouldnt wait for the new car to get dirty and
dented!)000000000000
Ask them to write testimonials for you, (also right away) and
compile a list of testimonials to use in your all of your marketing
collateral.
Create a marketing calendar and keep to it consistently.
Scheduling marketing activities that take place weekly, bi
monthly, monthly and quarterly will help you to avoid the feast
or famine syndrome that most independent professionals fall
prey to. And, by doing so, marketing will become easier since it
becomes a regular part of your business life
STEPS

FOLOWED

IN

CREDIT

CARD

TRANSACTION

1. AUTHORIZATION:
For Internet Merchants, the shopping card is connected to
or integrated with a Payment Gateway. For Retail
Merchants, the card is swiped through a magnetic reader on
24

the point of sale terminal the authorization is transmitted to

the appropriate card issuer for approval. The issuing bank
of card issuer authenticates the card holder and approves or
declines the transaction amount.
It is important to note that no money changes hands during
the

authorization.

Merchants

must

re-present

the

transaction to receive payment.

2. Merchant balancing
This is also known as batching out. Most pos terminals and all
payment gateway per firm an auto close functions at the and of
the day and batch out automatically.
3. Capture
The front end processor matches the authorization data to
the settlement data and transmits the card capture file to a
back end processor for V/MC transactions or to the
appropriate card issuer for other card types.
4. Clearing

25

 During this stage the back end processor performs

compliance checks and risk management procedures and
transmits the transaction to V/MC or to the appropriate card
issuer for other card types.

5. Interchange (VS/MC Only)

During this stage the V/MC Association sort the
transactions by issuing bank and transmit them to the
appropriate issuing banks for settlement.
6. Settlement
During this stage the Issuing Bank calculates fees and
deductions and routs the net funds to the appropriate Card
7. Merchant ACH
During this stage the acquiring bank or card issuer
transmits the merchant deposit to the merchants checking
account.
Transaction Processing
Transaction processing involves front-end processing and backend
26

processing: Front-end processing involves authorization and

data capture
services and message connections via various communication
networks to
pint of sale devices.
Back-end processing provides financial accounting for acquirers
and issuers
and prepares and submits clearing and settlement data into the
Visa and
MasterCard interchange networks.
24
1. Front End Processing
Authorization is the acknowledgement by the issuer that a
particular account may be charged for the amount of the sale.
The preferred
method to obtain an authorization and the one that will receive
the lower
interchange rate is to swipe a cards magnetic strip through the
point of sale
terminals card reader. If the card cannot be electronically read
by the
terminal for any reason, the information may be keyed into the
terminal in
order to get an electronic response. The request is then routed
through the
processors VAP or MIP to the issuers authorization center. The
response
is returned to the merchants terminal. The terminal records the
response
code which becomes part of the transaction and is included in
the clearing
27

data sent through interchange to the issuer

Authorization may also be obtain through other methods such as
voice authorization. The merchant can call an 800 number to
verbally
provide cardholder information and receive an operators
response. Other
methods such as electronically generated audio responses
(ARU) that permit
the merchant to use the telephone like a key pad to enter sale
information
25
can also be used. If for any reason the issuer or its authorization
center
cannot be reached, the card Associations will act as stand-in
processors to
provide authorizations.
Electronic Draft Capture
Draft capture is the process of transferring sales draft data into
electronic format so that it may be sent through the interchange
networks for
clearing and settlement. Data identifying the cardholder account
and
expiration date is put into the point of sales terminal, either by
swiping the
card thorough a card reader or manually keying the information
into the
terminals keypad. The amount of the sales is then entered and
an
authorization requested. Once an authorization code has been
received, the

28

terminal is prompted to store data on the completed sale in its

memory.
2. Back-End Processing
Back-end processing involves the various accounting functions
that
enable transactions to be recorded to the proper merchant or
cardholder
account. During back-end processing reports are created for
distribution to
the acquirers that include:
1) Settlement data
2) Security/fraud data
3) Retrieval/chargeback data
4) Funds disbursements data
Transactions for internet and other card not present
environments
work similarly but can have additional processing steps. Both
Visa and
MasterCard have Internet authentication programs (not to be
confused with
authorization) named Verified by Visa (By) and MasterCard
Secure Code
(MCSC) that do alter the transaction process somewhat. If the
cardholder is
registered with one of these programs, they must provide a preregistered
password at the time of purchase. This password is then passed
along as
27
29

part of the information flow of the transaction (these programs

and other
techniques for controlling fraud are discussed in more detail
later in this
section).
Visa and MasterCard offer both signature debit and credit cards
to
consumers. The primary difference between signature debit
transactions and
credit transactions are that debit cards are linked to a bank
account.
Rather than offering the cardholder 30 days of float and the
option to
finance ongoing balances, debit cards simply debit the
cardholders bank
account for authorized purchases. Signature debit transactions
(which are
sometimes also referred to as offline debit, a misleading
reference and not to
be confused with an offline EFT debit transaction) are different
from PIN.

Different Types of Credit Cards

Credit cars are of various types, every one has to select

credit cards on the basis of the pros and cons of each type of
credit card and at the same time the nature of use. This article

30

gives an insight into the several types of credit cards available in

the market
Today, credit card customers enjoy more options and choices
than ever before. To gain new customers, credit card companies
compete by offering new services and cards to customers. No
matter what your needs, chances are good that there is a card out
there that would be ideal for you. If you are looking for the right
card, you can begin by considering the many types of cards
available to you:
Low Interest Credit Cards
These types of credit cards offer very low interest. In some
cases, these cards just charge a few percent interests. The
reasons for this are numerous. In most cases, the low interest
rate is for a limited time only. After a set number of months, you
will begin paying higher interest rates. In some cases, low
interest credit cards are not really credit cards at all - they are
debit cards linked to a low-interest loan such as a line of credit.
Check your agreement to find out what type of card you have. If
you need to consolidate debts or if you like the idea of having
31

low interest for a while, this type of credit card can be perfect
for you.

Instant Approval Credit Cards

These cards are really a product of our fast-paced society.
The idea behind this type of credit card is that once you fill out
your application, you will be told whether you are approved or
not right away. The approval process only takes a few minutes.
Instant approval credit cards are very popular online and
applicants can apply via the internet or over the phone.
If you are very impatient or need credit right away, these
types of cards can be for you. However, you should be aware
that these cards do not guarantee that you will be approved right
away - sometimes, more time is needed to process your
application. Another drawback to these cards is that they rely
heavily on your credit score. If you have poor credit or any
extenuating financial circumstances, these types of cards may
not be for you.

32

Balance Transfer Cards

Balance transfer cards are a type of temporary low-interest
card that is meant to help you consolidate your debt. They work
this way: if you have several credit cards with a balance, you
can get a balance transfer card. You then transfer all your credit
card debt onto the new card and work to pay it off. Since the
new card has a low interest rate, you can quickly repay your
bills.
If you are in debt, a balance transfer card can be a great
way to get out of debt. It offers the convenience of one bill and
low rates. However, some cards have high fees. Also, if you run
up your other cards after consolidating your debts or if you are
unable to pay off your new card in the limited time before the
low interest rate increases, you may find yourself even more in
debt than before.
Rewards Credit Cards

33

Rewards credit cards offer you points, rewards, or

bonuses for every cash purchase made with your credit card over
time. As you accumulate rewards or points, you can redeem your
bonus for entertainment events, purchases, travel, and other fun
prizes. Some cards even offer customers extra automatic-enter
sweepstakes and draws. Each time you use your card, you are
entered

into

draw

to

win

specific

prizes.

These types of cards are really a marketing tool for card

companies. Companies know that customers love rewards and
prizes and so offer these
enticements to lure customers. The major advantage of these
cards is that they can help you get more cash value for your
money. They can also be fun and rewarding for almost any
credit card customer. However, not all reward credit cards are a
deal. Some charge high fees to offset the costs of the bonuses.
Some also have very low points systems, meaning that you need
to spend a lot with your credit card to get any rewards at all.
Read the fine print carefully before signing.
Cash Back Credit Cards

34

Cash back credit cards give you money rewards. When you
make a purchase with this type of credit card, you get some
points based on the amount of money you have spent with your
credit card. When you accumulate enough points, you get cash
back. On most cards, you can get back about 1% of your total
purchases.
These cards are great for those who are budget-conscious
as they give you some money back from your purchases.
However, there are several drawbacks to these types of cards.
Some cards have low cash-back percentage rates. Some charge
high fees or have limits on how much money you can get back
each year. Most cards only offer you cash back advantages on
purchases - not on your balance. If you decide this card is right
for you, do compare several card offers to find the best cash
back credit card option.

Airline Credit Cards

35

This type of card allows you to accumulate frequent flyer points

on all your credit card purchases. If you travel a lot or love to
travel, this card can help you accumulate points for a free trip or
for a discount ticket. In many cases, these cards are great
because they allow you to gather points for every purchase.
However, these cards can also charge high fees. In some cases,
your points will expire if you do not use them within a specified
time. Worse, some airline credit cards make use of a point
system that is not very user-friendly. You may have to slowly
accumulate an enormous amount of points to qualify for a trip. If
you do not love to travel and if you do not use your Credit card a
lot, then, your ability to get rewards you like may be very
limited.
Prepaid Debit Cards
These cards are sometimes called junior credit cards. They are
not truly credit cards at all, since you are not getting credit or
loans from the credit card company. Instead, these cards work by
having you deposit some money into the card account. You can
then use your card to charge any amount up to the amount in the
account. card.0000000000000000000000000000000000

36

Secured Credit Cards

Secured credit cards use collateral to ensure that the card
company will be paid back. Often, these cards are used by
people with no credit or bad credit. With secured credit cards,
you can enjoy credit card convenience even if you do not qualify
for traditional cards. However, you will also have to cope with
the additional fees and low credit limits that these credit cards
have.
Credit Cards for Bad Credit
Bad credit credit cards are designed for people with poor
credit histories. These cards generally have very low credit
limits and charge extra fees. This is because they are designed
for people who are considered far less likely to repay their debts.
If you have a bad credit rating, these types of credit cards can be
a great way to rebuild your credit history. These cards can also
allow you to have credit even if you would be rejected for most
other cards due to your credit history.

37

Student Credit Cards

Student credit cards are cards meant to attract college and
university students. These cards often offer sign-up bonuses for
students. They are also easier to apply for, since credit card
companies recognize that students have much shorter credit
histories

than

the

average

customer.000000000000

If you are a student, student credit cards can be a great

option. They are simple to use and can help you build a good
credit rating before you graduate. However, there are some
disadvantages to student credit cards. These cards may have no
reward programs and may have fewer benefits, including fewer
bonuses and services, than other cards.
Business Credit Cards
Business credit cards are created especially for business
use. They offer many of the same advantages as traditional
credit cards, but also offer services that can really help a

38

business. With some business credit cards, for example, you can
enjoy higher interest rates, extra cards for business employees,.
Types of Credit Cards offered by Indian Banks
Silver Cards
Silver credit cards rank lowest among the metal named
cards, and, because of lower prestige when compared to gold
and platinum cards, are commonly known as basic and standard
credit cards. Silver credit cards come with advantages such as
lower annual membership fees if there is any, and a lower
threshold salary which banks use to evaluate your application in
case you should apply.
Silver credit cards will provide you with almost the same
credit limit as other cards provided you have a good credit
history. You can also avail of 0% interest balance transfer
schemes which are made available for a period of 6-9 months
for silver card holders. There are also some disadvantages to
using silver credit cards. One would be the lower cash advance
limits, less rewards and promotional packages, and less travel
perks compared to gold and platinum cards. HDFC Bank, ICICI

39

offer silver credit cards through their HDFC Bank Silver cards
and ICICI Sterling Silver credit card
Gold and Platinum Cards
Gold and platinum credit cards are a status symbol for any
credit card holder, bringing prestige since getting gold and
platinum cards usually require that you have good credit rating
and a higher income levels. Gold and platinum cards offer
higher limit for cash advance withdrawals and sometimes can
provide higher credit limits as compared to standard or silver
cards.
If you have a gold or platinum card, you also get better
perks and privileges such as travel insurance, extended
warranties for appliance purchases and special deals on specific
products, and purchase protection insurance.
You can also engage in some loyalty schemes that are offered
for gold and platinum credit card holders which can sometimes
involve cash back promos and reward points systems.
Some popular gold and platinum cards available are the
American Express Gold card, and the ICICI Solid Gold Credit
Card.

40

It is not possible to cover them the exact offerings of these

cards but I will highly advice you to check all these websites of
the banks to get all the info about the credit cards they are
offering. Also try to talk to your friends who are having credit
cards to get more info.

41

Types of Credit
Cards offered
By
Indian Banks

42

 Credit Card Data

Credit Card is either Visa or MasterCard which is the Most

popular

and

in

some

instance

American

Express.000000000000000000000000000000
The Top 10 Credit Card Issuers in India are as follows,
ICICI

Bank

5.07

Mn

HDFC

Bank

4.42

Mn

SBI

Cards

2.65

Mn

2.54

Mn

Cards

1.3

Mn

Citibank
HSBC
ABN

Amro

0.78

Mn

Axis

Bank

0.57

Mn

0.495

Mn

Deutsche

Bank

American

Express

0.45

DEBIT CARD
43

Mn

A debit card (also known as a bank card or check card) is a

plastic card that provides an alternative payment method to cash
when making purchases. Functionally, it can be called an
electronic cheque, as the funds are withdrawn directly from
either the bank account or from the remaining balance on the
card. In some cases, the cards are designed exclusively for use
on the Internet, and so there is no physical card.
In many countries the use of debit cards has become so
widespread that their volume of use has overtaken the cheque
and, in some instances, cash transactions.
Like credit cards, debit cards are used widely for telephone
and Internet purchases and, unlike credit cards, the funds are
transferred immediately from the bearer's bank account instead
of having the bearer pay back the money at a later date.
Debit cards may also allow for instant withdrawal of cash,
acting as the ATM card for withdrawing cash and as a cheque
guarantee card. Merchants may also offer cash back facilities to
customers, where a customer can withdraw cash along with their
purchase.

Types of debit card systems

44

Online Debit System

Online debit cards require electronic authorization of every
transaction and the debits are reflected in the users account
immediately. The transaction may be additionally secured with
the personal identification number (PIN) authentication system
and some online cards require such authentication for every
transaction, essentially becoming enhanced automatic teller
machine (ATM) cards. One difficulty in using online debit cards
is the necessity of an electronic authorization device at the point
of sale (POS) and sometimes also a separate PIN pad to enter the
PIN, although this is becoming commonplace for all card
transactions in many countries. Overall, the online debit card is
generally viewed as superior to the offline debit card because of
its more secure authentication system and live status, which
alleviates problems with processing lag on transactions that may
only issue online debit cards. Some on-line debit systems are
using the normal authentication processes of Internet banking to
provide real-time on-line debit transactions. The most notable of
these are Ideal and POL.
Offline Debit System
45

Offline debit cards have the logos of major credit cards

(e.g. Visa or MasterCard) or major debit cards (e.g. Maestro in
the United Kingdom and other countries, but not the United
States) and are used at the point of sale like a credit card (with
payer's signature). This type of debit card may be subject to a
daily

limit,

and/or

maximum

limit

equal

to

the

current/checking account balance from which it draws funds.

Transactions conducted with offline debit cards require 23 days
to be reflected on users account balances. In some countries and
with some banks and merchant service organizations, a "credit"
or offline debit transaction is without cost to the purchaser
beyond the face value of the transaction, while a small fee may
be charged for a "debit" or online debit transaction (although it
is often absorbed by the retailer). Other differences are that
online debit purchasers may opt to withdraw cash in addition to
the amount of the debit purchase (if the merchant supports that
functionality); also, from the merchant's standpoint, the
merchant pays lower fees on online debit transaction as
compared to "credit" (offline) debit transaction.

46

Electronic Purse Card System

Smart-card-based electronic purse systems (in which value
is stored on the card chip, not in an externally recorded account,
so that machines accepting the card need no network
connectivity) are in use throughout Europe since the mid-1990s,
most notably in Germany (Geldkarte), Austria (Quick), the
Netherlands (Chipknip), Belgium and Switzerland (CASH). In
Austria and Germany, all current bank cards now include
electronic purses.
Prepaid Debit Card
Prepaid debit cards, also called reload able debit cards or
reload able prepaid cards, are often used for recurring payments.
The payer loads funds to the cardholder's card account. Prepaid
debit cards use either the offline debit system or the online debit
system to access these funds. Particularly for companies with a
large number of payment recipients abroad, prepaid debit cards
allow the delivery of international payments without the delays
and fees associated with international checks and bank transfers.
47

Providers include Caxton FX prepaid cards, [Escape prepaid

cards and Travelex prepaid cards. [ Whereas, web-based services
such as stock photography websites (stockpot), outsourced
services (odes), and affiliate networks (Media Whiz) have all
started

offering

prepaid

debit

cards

contributors/freelancers/vendors.

BENEFITS & FEATURES OF DEBIT CARDS

BENEFITS OF THE DEBIT CARD

48

for

their

 FREE WITH OUR BANK ACCOUNT

Obtaining a debit card is easy. If we qualify to open a bank
account, we usually get a debit card, if our bank offers the
service.
NO BACKGROUND CHECK
When we are applying for a debit card, the ban does not need to
look into our credit history. All we need is the documentation to
open a bank, account, and money in our bank when we use our
debit card.

CASH WITHDRAWALS
The customer can withdraw a minimum of Rs. 100/- and a
maximum Rs.10, 000/- per day

49

 CONVENIENCE
A Debit card fees us from carrying a lot of cash or a cheque
book. In case, we are an international traveler, we dont need to
stock up on Travelers Cheques or cash. We can use our debit
card to withdraw Cash from over 500,000 ATMs around the
world in over 100 countries. We can withdraw in the local
currency of the country we are in, limited only by the money we
have back home in our account, and Business Travel Quota
(BTQ) limit arability.
FAIR EXCHANGE
If we return merchandise or cancel services paid for with a
Debit card, the transaction is treated as if it were made with cash
or a check. Customers usually get cash back for offline
purchases; for on-line transactions, the amount is credited to our
account.
STATEMENT OF ACCOUNT

50

A statement of transactions can be obtained from the customers

branch. For example, a mini statement containing the last four
transactions and balance can be obtained at a State Bank Group
during the working hours of the customers branch.
BANKING CUM SHPPING CARD
Your Debit card can be used as ATM card at any ATM across the
world, as well as for making purchase at merchant locations.
You can also withdraw cash from any of the 12000 ATMs in
India.
WIDELY ACCEPTED, INTERNATIONALLY VALID

FEATURES OF DEBIT CARD

51

The following are features of Debit cards

A) It is a combination of a Cheque and ATM card. Therefore,

there are no fees for using the ATM for cash withdrawal, or
as a debit card for purchase.
B) The Debit Card services in meant for withdrawals against
the balance already available in the designated account.
C) It is the card holders obligation to maintain sufficient
balance in the designated account to meet withdrawals and
service charges.
D) A Debit card is more affordable than credit card. We just
our bank account for all our transactions. No credit period.
Our bank account is debited immediately.
E) No credit check is required to get a Debit card.
F) Use of card is terminated without notice, upon the death,
bankruptcy or insolvency of the cardholder or for other valid
reasons.
G) Spending is limited to our bank balance.
Process Debit Card Transactions

52

A successful business will usually accept debit cards as a

part of their overall profile of payment solutions. If you dont
process debit cards, you may not be taking full advantage of all
the potential that your merchant account can deliver. There are
essentially two ways you can accept debit cards, online and
offline.
Off line debit card transactions
An offline debit card transaction is still the way most
merchants accept debit cards. This is essentially the same as
processing credit cards. You swipe your customers debit card
through a credit card terminal and have them sign the receipt.
If you choose to accept debit cards offline, be sure that the
debit card has a VISA or MasterCard logo. Otherwise, the
debit card wont be approved and you wont be able to process
the debit card offline
Online debit card transactions

53

The most advantageous way to process debit cards is to do

it online. You will still be able to accept debit cards at the point
of sale, but you will need to install a PIN pad on your credit card
terminal.
An online debit card transaction works much like a credit
card transaction, except that after your customer swipes his or
her debit card, they will enter a PIN instead of signing the
receipt.
At this point the encrypted debit card information is sent to
the customers bank for authorization, and youll receive the
funds just as you would for a credit card transaction.
Your business has many advantages when you accept debit
cards.
For example, you pay a flat fee for each debit card
transaction that you process, instead the flat fee plus percentage
rate that you are charged when you accept credit cards. Over
time, this can potentially save you a lot of money.
0000000000000000000000000000000000000000000000000
54

Another advantage when you process debit cards is that

you cant be charged higher downgrade fees.
In a credit card transaction, you are usually charged the
discount rate. However, some transactions are considered to
be a higher risk or expense to the bank, and you are charged a
higher rate as a result.
But when you accept debit cards, you always pay the same
flat rate, with no danger of the rate increasing.
You can also cut down on checkout time when you accept
debit cards. It takes an average of 30 seconds to hand over the
pen, wait for the customer to sign the receipt, and then take the
pen back.
If you process 20 credit card transactions a day, youre
losing 100 minutes a day just passing a pen back and forth!
Thats almost two hours.

55

Plastic Fraud
State-of-the-art thieves are concentrating on plastic cards.
In the past, this type of fraud was not very common. Today, it is
a big business for criminals. Plastic cards bring new
convenience to your shopping and banking, but they can turn
into nightmares in the wrong hands. This pamphlet describes
credit and debit cards and some common schemes involving
card fraud with tips to help you avoid them
The following are the types of frauds
1. Stolen Cards at the Office
2. Extra Copies of Charge Slips
3. Discarded Charge Slips
4. Unsigned Credit Cards
5. Loss of Multiple Cards
6. Strange Requests for Your PIN Numbers
7. Legitimate Cards
8. Altered Cards
9. Counterfeit Cards
56

Advantages & Disadvantage

Advantages
Plastic money, unlike paper money, will not burn easily and
can resist higher temperatures than paper money.
You have no fear to be theft. And its easy to use.
Plastic money, unlike paper money, will not burn easily and
can resist higher temperatures than paper money.
Paper money also picks up dirt and stains more easily than
plastic money.
Plastic money is the debit and credit cards. Plus point of
plastic money is
that you won't have to carry your cash around all the time.
It also doesn't wear after time as paper does nor does it rip and
tear.
Disadvantage

57

 Cost much more than other forms of credit, such as a line of

credit or a
Personal loan, if you don't pay on time.
Damage your credit rating if your payments are late;
Allow you to build up more debt than you can handle;
Have complicated terms and conditions;
It also doesn't wear after time as paper does nor does it rip
and tear.
Paper money also picks up dirt and stains more easily than
plastic money.

TECHNOLOGY AND INFRASTRUCTURE

58

 One of the most important features that Plastic Money offers

is the technology associated with this business.
Credit card businesses rely on very reliable and secure
technology and demands very Strong connectivity backbone.
Although a third world country, with lot of insecurities and
almost no infrastructure, Pakistan has no exception when it
comes to credit card business.
There is approximately 3000 Point of Sale Terminals (POST)
present on merchant's sites connected with bank host system.
Inter-city

connectivity

is

accomplished

through

X.25

networks.
Perhaps, it is the most important time in the history of
Pakistan as the parameters of its Infrastructures are coming
into existence.

59

CASE STUDY
What Happens in Credit Card Fraud Cases?
1. The Basics

A variety of crimes constitute credit card fraud. The

term can describe a person using a stolen credit card to purchase
goods or services posing as the person named on the card. It can
also describe illegally and fraudulently withdrawing funds from
an account that is not yours. Identity theft, which is the act of
posing as an individual to make purchases, is often classified
together with credit card fraud. A victim of credit card fraud can
sometimes see bank accounts emptied of all their funds or
negative marks going on her credit report for things she had
nothing to do with. Many banks will monitor transactions made
with a credit card and alert the person named on the account of
any potentially suspicious activity. This is to protect the bank or
Credit Card Company just as much as it is to protect the
customer.

60

2. Investigation
Exactly what happens during a credit card fraud case
depends a great deal on the actions of the Credit Card Company
or bank involved. If fraudulent transactions are proven to have
been made on a person's account but the amount of the
transactions is lower than the cost of an investigation the
company can credit the money back to a person and then close
the

account

to

protect

from

further

harm.00000000000000000000000000
If the amounts of fraudulent charges are so great that
an investigation is warranted, the police will be notified. The
credit card company can look at a list of the fraudulent charges
and determine where they were made. At that point an officer
can question witnesses and review security camera footage in an
attempt to identify suspects. If a suspect is arrested he can be
tried in a court of law.

61

CONCLUSION
ST

Century banking has become wholly customer-driven &

technology driven by challenges of competition, rising customer

expectations & shrinking margins, banks have been using
technology to reduce cost & enhance efficiency, productivity &
customer

convenienence.

Technology

intensive

delivery

channels like net banking, mobile banking, etc have created a

win-win situation by extending great convenienence. & multiple
options for customer.
From educating customers about credit cards there is a need
to educate them about the differentiating factors of the cards.
Because visa and master card are advertising regularly and
thereby increases awareness. The strategy should be to
emphasize on its differentiating characteristics.
They also need to identify potential customers and target
those using mailers. As internet is growing at a fast rate the net
users can be targeted by having interactive sites.

The

prospective companys card personality could also be used in the

62

home page to solve customer queries in the Best Possible

Manner.

63