Attitude of Customers Towards Plastic Money

Customer attitude
towards plastic money
Project Report on
“A Study on Changing Attitude of Customers towards Plastic Money”
Bachelor of Commerce
Banking & Insurance
Semester-V
Submitted By
Mr. Akhilesh G. Pillai
Roll No. 46
BIRLA COLLEGE OF ARTS, SCIENCE & COMMERCE
Murbad Road Kalyan (W)
University of Mumbai
(2009-2010)
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Project Report on
“A Study on Changing Attitude of Customers towards Plastic Money”
Bachelor of Commerce
Banking & Insurance
Semester-V
(2009-2010)
Submitted
In partial fulfillment of requirement for the Award of Degree of
Bachelor of Commerce (Banking & Insurance)
By
Roll No. 46
BIRLA COLLEGE OF ARTS, SCIENCE & COMMERCE
Murbad Road Kalyan (W)
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BIRLA COLLEGE OF ARTS, SCIENCE, & COMMERCE, KALYAN
(Conducted by Kalyan Citizens’ Education Society)

(Affiliated by University of Mumbai)
BACHELOR OF BANKING AND INSURANCE

CERTIFICATE
This is to certify that Mr. Akhilesh G. Pillai of T.Y.B.Com. Banking & Insurance
(Semester V) has successfully completed the project on “A Study on Changing
Attitude of Customers towards Plastic Money”, under the guidance of Mr. Sachin
Achrekar.
Principal
Project Guide
Course Co-ordinator
Internal Examiner
External Examiner
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Declaration
I, Mr. Akhilesh G. Pillai, student of T.Y.B.Com (Banking &

Insurance) Semester V (2009-2010) hereby declare that I have completed the
project on “A Study on Changing Attitude of Customers towards Plastic
Money”.
I further declare that the information contained in this project report

is genuine, true & fair to the best of my knowledge.
Signature
(Akhilesh G. Pillai)
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Acknowledgement
If words are considered to be signs of gratitude then let these words

convey the very same. My sincere gratitude to Mumbai University for providing
me with an opportunity to get practical as well as theoretical knowledge of plastic
money and giving necessary directions by my guide on doing this project to the
best of my abilities. I am highly indebted to Branch Manager of IDBI Bank and
project guide Prof. Sachin Achrekar who has provided me with the necessary
information and also for the support extended out to me in the completion of this
project and his valuable suggestions and comments on bringing out this report in
the best way possible.
I also thank to Prof. Hema Tahilramani who has sincerely supported

me with valuable insights into the completion of this project.
I am grateful to all faculty members of Birla College and my

relatives and friends who had helped me in the successful competition of this
project.
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CONTENTS
SR NO. TOPICS PAGE

NO.
Preface
1. Introduction of Money
2. Plastic Money in India
3. Features of Plastic Money
4. Types of plastic money
5. Rise of plastic money
6. Plastic card and its uses
7. Safety and Precautions in plastic money
8. Credit card and Debit card
9. Parties involved in transactions
10 Customer attitude towards plastic money
Report on visit to a Bank
Conclusions
Bibliography
Wibliography
Annexure ‘A’
Annexure ‘B’
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PREFACE
It is my proud privilege to present this project on “A study on changing

attitude of customers towards plastic money” to Mumbai University.
In the initial stage paper currencies were popularly used against the goods
which finally leads to an end of barter system. People were considered paper money as
a purchasing power but due to increase in income the value of money were started
declining. When plastic money was first introduced people were not very free to use it,
but when frauds were started increasing in paper money people were losing their faith
on paper money. They thought carrying a plastic card is far more safer than carrying a
hard cash. Thus in the real sense plastic money came into existence. Under plastic
money debit card issued by bank helps the customer to an easy access as and when
they are in need for money whereas the credit card issued by bank in which the issuing
bank gives credit to its customer and earns commission and interest through it. Thus
from this we can see the changing attitude of customers.
Objectives of the study:-
• To find out the features of credit cards offered to the customer by the banks
through personal approach.
• To bring out different types of plastic money offered exclusively by banks.
• To prevent the causes for risk involved in the credit card business.
• To find out the customers attitude towards plastic money.
Research Methodology:
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• Secondary Data
• Primary Data
CH.1 The Introduction of Money
The Rise of Paper Money
The next phase in the evolution of currency was the invention of paper money. The first
banknotes were issued in China during the reign of Emperor Hien Tsung (AD806-
821), but not as a result of any great financial insight. The sole reason for their
introduction was an acute copper shortage that precluded the striking of new coins.
Eventually, China got carried away with the ease of producing this new form of cash.
Too much of it was printed and this led to inflation. In 1455, the Chinese abandoned
the use of paper money and did not return to it for several centuries.
The Chinese experience was repeated when Sweden became the first European nation to
experiment with paper money. In 1661, a banker named Johan Palmstruch began to issue credit
notes that could be exchanged at his Stockholm bank for stated numbers of silver coins.
Unfortunately for Palmstruch, who had consulted the Swedish government before launching the
scheme, he got carried away with his licence to print money. He issued more notes than his bank
had silver deposits to redeem, and in 1668 was prosecuted for fraud. He was initially sentenced
to death, but the penalty was later commuted to imprisonment.
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Despite the less than glorious outcomes to these early trials of paper money, the tide of history
was firmly on the side of the new form of currency. As economic activity increased in Europe, it
became apparent that the money supply needed to be expanded beyond the limits imposed by
holdings of precious metals.
This recognition led to the establishment of the first national central banks. People were much
more likely to trust notes backed by government reserves than those issued by private
institutions. They even proved willing to accept temporary governmental bans on the redemption
of banknotes for silver, as happened in Britain during the "Restriction Period" of 1797 to 1821.
The Gold Standard
Entrusting the issue of banknotes to one central authority effectively removed the danger of
bankruptcy, but it did raise the spectre of inflation. This would happen if a central bank printed
too much money. (To understand this, imagine you were an egg seller and everyone suddenly
had twice as much cash; you would feel foolish, not to say cheated, if you continued to sell your
eggs at the old price.) It was the risk of inflation, among other factors, that propelled
governments into joining the Gold Standard, a measure that harked back to the days when all
money really was made of precious metal.
The Gold Standard was a mechanism that fixed the values of the coins and banknotes of
participating nations in terms of specified quantities of gold.
The Standard operated both domestically and internationally. On the domestic front, it forestalled
inflation by ensuring that the money supply remained relatively constant. In the international
sphere, it had the effect of fixing exchange rates between the nations involved. If the US set the
price of gold at $20.67 per ounce, for example (as it did from 1834 until 1933), and the UK set it
at three pounds 17 shillings and 10.5 pence, as it did from 1844 until 1931 (apart from a period
after the First World War), an exchange rate of $4.867 dollars to the pound necessarily followed.
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The benefits of fixed exchange rates included stability and a balancing of prices between
subscribing nations. If the UK made a technological breakthrough that increased economic
output, its prices would fall. Assuming US prices stayed the same, this would make UK products
more attractive from an American perspective, and American products less attractive to the UK.
The upshot would be that gold – that is, the stuff in which payments were made – would flow out
of the US and into Britain.
As the money supply/amount of gold in Britain had now increased, its prices would rise. At the
same time, US prices would fall in line with the nation's own money supply. Hey presto,
everyone ended up more or less where they had been in the first place and price stability was
restored.
The Gold Standard worked very well so long as everyone played nicely. In the US, for example,
inflation between 1880 and 1914 averaged a mere 0.1 per cent per year. The trouble was that
many nations were inclined to cheat, particularly when the going got tough. When the First
World War broke out in 1914, the countries involved threw their rule books out of the window.
They started printing money to finance their war efforts and the Gold Standard broke down. It
was reinstated in modified form in 1925, but collapsed again due to instability caused by the
Great Depression.
In 1931, Britain left the Gold Standard as a result of massive outflows of gold from the nation's
coffers. The successor to the Gold Standard was the Bretton Woods system, named after the New
Hampshire resort where the Second World War Allies thrashed out the details in 1944. Once
again, exchange rates were fixed (within a margin of 1 per cent), but the key feature was that all
participating nations apart from the US were allowed to settle their debts in US dollars. The US
promised to redeem the dollar holdings of other countries for gold at a fixed rate of $35 per
ounce.
Unfortunately, this offer was taken up to the extent that the US started running out of gold,
which placed the entire system in jeopardy. In 1971, President Nixon announced that the US
would no longer be paying out gold for dollars. For the Gold Standard, this was the final nail in
the coffin.
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Fiat money
Since 1971, the world economy has largely run on a system of floating exchange rates, with
gold-backed currency replaced by what is called " fiat money". This is money that has no
intrinsic value and obtains its worth entirely on the basis of governmental decree. ("This piece of
paper can be used to pay debts because we say it can.") The use of fiat money obviously places a
greater responsibility on governments than they had in the days when currency had to be backed
by precious metals. Print too much of it and you end up in a right mess.
Credit cards, debit cards and cheques
Not so long ago, it was relatively difficult to open an account with one of the clearing banks, and
the Mainwaring and Wilsons who ran the institutions long catered principally to the professional
classes, discussing their affairs over a glass of Amontillado in the manager's office.
Though bounders could be relied upon to write bouncing cheques, for most of the 20th century
the possession of a current account denoted respectability. The manual working classes relied on
a little brown envelope of notes and coins at the end of the week, and remained "unbanked" until
well into the 1970s. If they wanted to send money away they relied on the postal order, now
almost extinct.
Then we all became more prosperous, the banks discovered marketing (black horses running
across the landscape) and students were being offered rail cards and book tokens (another quaint
form of money, happily still with us) just so that the bank could enjoy the mixed pleasure of
them running up enormous overdrafts.
In the 1980s, National Westminster Bank even raised eyebrows by allowing the customers the
option of "pictorial" cheque-books, featuring images of badgers and bunny rabbits. Cheque use
peaked in 1990, with 2.7 billion passing through the system; it's about one-third of that level
now, and falling.
The reason is the debit card, a sort of cheque guarantee card without the cheque. The first Switch
card transaction took place in 1988; by 1995, they had overtaken credit cards in popularity, and
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cheques fell behind them in 1998. The advent of "chip and PIN" greatly reduced the scope for
fraud. Last year, each debit-card holder used their cards 166 times on average, acquiring £3,848
in "cashback" and making purchases worth £4,799.
However, British consumers were not to be constrained by such trivial considerations as how
much money they had in the bank. The launch of the Barclaycard in 1966 (and its now defunct
but long-running rival Access in 1972) was the start of "plastic" – the discovery that a small
rectangle of polyvinylchloride (always measuring 85.60 by 53.98mm) could transform your life.
Until, that is, the astronomical APR (annual percentage rate of interest) and overlenient credit
limits led to the inevitable personal mini credit crunch.
The modern British addiction to debt can be traced back precisely to the advent of the credit
card. By the 1990s, 0 per cent cards were being offered to lure customers, and those who took
advantage of the initial free offers and then transferred the balance to the next free offer when the
interest became due were known as "rate tarts".
Our "flexible friend" (as the Access card marketing line went) had a nasty habit of landing us in
economic trouble; now that he's been allowed to make the acquaintance of the "sub prime"
community in the United States and Britain, the extent of the credit card's true perniciousness is
becoming apparent. At any rate, we save less than at any time since the 1950s; the teenager of
today is far more likely to have plastic than a building society
E-money: the future of cash
We may not be that far away from a world where cash follows the cheque book into oblivion and
few transactions are conducted face to face. There are in excess of 20 billion payments of less
than £10 made every year; they could all go cashless.
E-money comes in three forms, two of them specifically creations of the internet. First, there is
the "card not present" phenomenon, where you have sufficient faith in the online retailer –
nowadays, anyone from Tesco to Amazon and lastminute.com – that you feel happy to tap your
payment card details on to a web page. You and the "shopkeeper" never actually meet, and you
never leave your home or office.
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Money thus moves from being a physical commodity – a gold coin, a paper banknote or a plastic
card – to being a purely virtual commodity (though of course banks themselves have long held
your current account in virtual form, as a series of binary codes in a computer file).
Second, we have seen the growth of outfits specifically set up to facilitate payments on the web.
Perhaps the most high profile of these is Pay Pal, as featured, and trusted, on eBay. Barclays
Bank can chart its origins back to 1685, the Royal Bank of Scotland to 1727 and Lloyds to 1765;
Pay Pal dates back only to 2000, yet it now operates in 103 markets, manages more than 133
million accounts and allows customers to send, receive and hold funds in currencies from the US
dollar to the Polish zloty.
The real revolution, though, may be the abolition of cash, cheques, credit cards and debit cards
and their replacement by one single means of payment, which you just wave, possibly
nonchalantly, at the shop assistant. This is what the "contact less" card promises, so called
because you don't even have to put it into a reader to buy something.
The Barclaycard One Pulse card, for example, was launched only a month ago, with 4,000
guinea-pig customers in London. It will combine the functions of an Oyster card (Transport for
London's existing "cashless" method of prepaying for bus and Tube journeys), a Barclaycard,
and a "One Touch" contact less technology card.
This is the novel bit. It allows cardholders to make purchases of £10 or under more quickly and
conveniently with a single touch of their card against a reader instead of entering a PIN or
signature, thus reducing the need to use and carry cash. In a Bourne-style nightmare, your every
move and tiniest purchase will then be tracked by your bank and, if legislation allows,
officialdom. Thus can "they" know about your purchase of The Independent, a flapjack and day
trip to Tate Modern.
Alternatively, the SIM card in your mobile phone could be used to pay for the little things in life
(they're trying this out in South Korea). Either way, you will be being monitored. Money is what
money does, according to the old adage. And in the future, your money may even spy on you.
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HISTORY
OF MONEY
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Barter
The first people didn't buy goods from other people with money. They used barter. Barter is the
exchange of personal possessions of value for other goods that you want. This kind of exchange
started at the beginning of humankind and is still used today. From 9,000-6,000 B.C., livestock
was often used as a unit of exchange. Later, as agriculture developed, people used crops for
barter. For example, I could ask another farmer to trade a pound of apples for a pound of
bananas.
Shells
At about 1200 B.C. in China, cowry shells became the first medium of exchange, or money. The
cowry has served as money throughout history even to the middle of this century.
First Metal Money

China, in 1,000 B.C., produced mock cowry shells at the end of the Stone Age. They can be
thought of as the original development of metal currency. In addition, tools made of metal, like
knives and spades, were also used in China as money. From these models, we developed today's
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round coins that we use daily. The Chinese coins were usually made out of base metals, which
had holes in them so that you could put the coins together to make a chain.
Silver
At about 500 B.C., pieces of silver were the earliest coins. Eventually in time they took the
appearance of today and were imprinted with numerous gods and emperors to mark their value.
These coins were first shown in Lydia, or Turkey, during this time, but the methods were used
over and over again, and further improved upon by the Greek, Persian, Macedonian, and Roman
empires. Not like Chinese coins, which relied on base metals, these new coins were composed
from scarce metals such as bronze, gold, and silver, which had a lot of intrinsic value.
Leather Currency
In 118 B.C., banknotes in the form of leather money were used in China. One-foot square pieces
of white deerskin edged in vivid colors were exchanged for goods. This is believed to be the
beginning of a kind of paper money.
Noses
During the ninth century A.D., the Danes in Ireland had an expression "To pay through the
nose." It comes from the practice of cutting the noses of those who were careless in paying the
Danish poll tax.
Paper Currency
From the ninth century to the fifteenth century A.D., in China, the first actual paper currency was
used as money. Through this period the amount of currency skyrocketed causing severe inflation.
Unfortunately, in 1455 the use of the currency vanished from China. European civilization still
would not have paper currency for many years.
Potlach
In 1500, North American Indians engaged in potlach, a term that describes the exchange of gifts
at banquets, dances, and various rituals. Since the trading of gifts was so important in figuring
the leaders’ community status, potlach went out of control as the gifts became more extravagant
in an effort to surpass others' gifts.
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Wampum
In 1535, though likely well before this earliest recorded date, strings of beads made from clam
shells, called wampum, are used by North American Indians as money. Wampum means white,
the color of the clam shells and the beads.
Gold Standard
In 1816, England made gold a benchmark of value. This meant that the value of currency was
pegged to a certain number of ounces of gold. This would help to prevent inflation of currency.
The U.S. went on the gold standard in 1900.
Depression
Because of the depression of the 1930's, the U.S. began a world wide movement to end tying
currency to gold. Today, few nations tie the value of their currency to the price of gold. Other
government and financial institutions now try to control inflation.
Today
At present, nations continue to change their currencies. For example, the U.S. has already
changed its $100 and $20 banknotes. More changes are in the works.
Tomorrow
Tomorrow is already here. Electronic money (or digital cash) is already being exchanged over
the Internet.
Frauds in Paper Money
Counterfeit money (Indian rupee notes). Fake currency detection
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Counterfeit notes are a problem of almost every country but India has been hit really hard and
has become a very acute problem. Fake Indian currency of 100,500 and 1,000 rupees seems to
have flooded the whole system and there is no proper way to deal with them for a common
person. The legal way to handle is to lodge a police complain and mention the source of the
currency and then further investigations are done. The fake currency is then sent to RBI or
destroyed. RBI itself has installed currency verification and processing systems in its various
offices, each having a processing capacity of 50,000 to 60,000 pieces per hour.
PROBLEMS PEOPLE MAY FACE REPORTING / NOT REPORTING
If you are found to posses fake currency notes, and you cannot explain where you got them from,
you can even go to jail. Most people do not want to deal with this problem in a legal way
because our law enforcement (police) and legal system (courts) are not so easy to deal with.
Unlike most developed countries where a common person feels free to report even a smallest
problem to the police, in India it is quite different as most people avoid contacting police because
those investigations can be painfully inconvenient and especially because many people in law
enforcement are not exactly honest. The legal system is even more troublesome, even a
smallcourt case in India can easily drag for months and years.
Therefore more and more people have just started to live as is. It is not possible check each and
every currency note you receive in a bundle. Most people just pass it along to others, if someone
objects you just give different note. Infact most people in India do not even know how to the
things to check that differentiates a fake note from a real one.
Trying to pass on a currency note, knowing that is a fake, is a punishable offence under sections
120-B, 420 and 489-A, B, C & D of the Indian Penal Code. Possession of counterfeit notes too is
punishable with punishment as harsh as life imprisonment.
FOR TOURISTS
For people travelling to India, always take money from authorized dealers and insist on a
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currency exchange receipt. This proves the source of your funds in India. Never fall in prey to a
person who offers to give you a better exchange rate than exchange rate without receipt.
Similarly convert your currency back from an authorized place only. Fake foreign currency is
common in tourist areas.
HOW MUCH MONEY IN INDIA IS FAKE:

In year 2006: The Reserve Bank of India has estimated the amount of fake currency in
circulation at almost 1.7 trillion rupees, the report said. I am sure it is much-much higher now.
"The RBI annual report has confirmed all the fears of the security agencies on fake currency
notes in the country. The report shows that the number of counterfeit notes seized during the year
rose 87 per cent to 195,811 in FY08 compared to 104,743 in the previous year.”
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Know your Bank Note Currency - Identify fake Indian Rupees
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Optical Variable Ink:
The colour of the numeral 1000 appears green when the banknote is held flat but would change
to blue when the banknote is held at an angle. The font size is also reduced.
Latent Image:
When the note is head horizontally, the vertical band on the right shows an image of the number
1000.
Security Thread:
The note also has a three millimeter wide security thread with the inscriptions: one thousand, the
word 'Bharat' in Hindi and RBI.
Micro lettering:
The 'RBI' and the numeral, "1000" - which can be viewed with the help of a magnifying glass -
are between the Mahatma Gandhi portrait and the vertical band.
Watermark:
When the note is held against the light, the picture of Gandhi and an electrolyte mark showing
the number 1000 appear in the white space.
The best way to identify a note is the silver bromide thread that runs vertically
through a currency note. Fake currency notes tend to have silver-coloured band painted in place
of the silver thread. A real note has a prominent thread with raised 'RBI' markings made on it in
English and Hindi. Also, in a real note, the colour of the thread shifts from green to blue when
viewed from different angles.
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CH.2 Plastic Money in India
Plastic Money never saw it Better in India than Now!
India has come out of self-binding shackles to look "young" again and the enthusiasm shared by
the young work force of the country is driving the economy like never-before. In the present day
world, no one wants to be bothered by the presence of huge cash in his or her wallet and the
Indians are no exceptions. The unprecedented growth in the number of credit card users has
stimulated the Indian economy by a significant extent. The arrival of malls, multiplexes, online
shopping stores and shopping complexes have contributed to the growth of the use of plastic
cards. It will not be wrong to say that such a scenario in context of the Indian market is not
driven by style statement and is driven more by needs. The benefits of plastic money have
offered unmatched ways to create equilibrium and offer an amicable solution when it comes to
purchases and the inability to possess or carry cash. The modern day Indian customers find it
easier to make physical payment (credit card payments) rather than carrying too much cash. The
introduction of credit card facilities to pay for mobile, electricity, movie tickets and other related
transactions have also contributed to the growth of plastic money in the country.
Best credit cards (India)
In context of the Indian market, the leading credit card service providers are ICICI, HDFC,
HSBC and Standard Chartered to name a few. These financial institutions have tried their hands
on ensuring value-addition while offering customer-friendly credit card deals.
The Best credit cards in India are usually meant for specific user group such as women, students
and small business owners. These cards are offered to the prospective customers with appealing
deals. Statistics have clearly revealed that the numbers of credit card holders in India are close to
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22 million as of January, 2007. It has been also revealed that the increasing consumerism in the
country has led to a two-fold increase in the number of credit card transactions from FY 2003-04
to 2005-06. The trends were as favorable as ever in the financial years, FY 2006-07 and 2007-08
and the same.
The credit card system started in India
While the first card was issued in India by visa in1981 and country first gold card was also
issued from the same.
The first international credit card was issued to a restricted number of customers by Andhra
bank1987 through the visa programme, after getting through special permission from RBI later
the AZN credit cards came in 1989.
However the credit card industry in India grown exponentially in its 15 years of business in the
country it had issued 2.69 crores card till December 2003. However in just one year 2004, the
figure has spurted to 4.33 crores.
RBI Guidelines on credit card operations
The reserve bank of India has placed draft guidelines on credit card operation from the members
of the public. The guidelines, when finally issued would be applicable to all commercial
banks/non-commercial finance companies (NBFC’s) and would come to effect as soon as
implemented.
It may be recalled that the Reserve bank had constituted a working Group to evolve a regulatory
mechanism for cards to ensure orderly growth of this segment of consumer credit and protect the
interest of banks / NBFC and their customers. The report of the group was placed in public
domain on April 23, 2005. The draft guidelines issued now have been framed taking into account
the feedback received from media, member of the public and other on the report of the working
Group. The draft guidelines are as each Bank /NBFC has a well documented policy and a fair
practices code for credit card and should widely disseminate contents.
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CH.3 EATURES OF PLASTIC CARDS
As well as convenient, accessible credit, credit cards offer consumers an easy

way to track expenses, which is necessary for both monitoring personal
expenditures and the tracking of work-related expenses for taxation and
reimbursement purposes. Credit cards are accepted worldwide, and are available with a large
variety of credit limits, repayment arrangement, and other perks (such as rewards schemes in
which points earned by purchasing goods with the card can be redeemed for further goods and
services or credit card cash back).
Some countries, such as the United States, the United Kingdom, and France, limit the amount for
which a consumer can be held liable due to fraudulent transactions as a result of a consumer's
credit card being lost or stolen.
Revenues: Offsetting costs are the following revenues:
• Interchange fee
Bank card associations such as Visa and MasterCard require merchants to pay billions of dollars
in Interchange fees to banks that issue their credit and debit cards. Card-issuing banks obtain
these interchange fees in addition to the enormous revenue they receive from card holder interest
and fees. Interchange fees are the single largest component of the various fees that banks deduct
from merchants' credit card sales. Merchants pay their banks fees of 1 to 6 percent of each sale
(for large merchants these fees may be negotiated, but will vary not only from merchant to
merchant, but also from card to card, with business cards and rewards cards generally costing the
merchants more to process), which is why many merchants prefer cash, PIN-based debit cards,
or even cheques, or will add a percentage to the sale price to cover the interchange fee.
Traditionally, interchange fees have been set by the bank card associations and their major card-
issuing banks, who are the primary beneficiaries of these fees.
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The interchange fee that applies to a particular merchant is a function of many variables
including the type of merchant, the merchant's total card sales volume, the merchant's average
transaction amount, whether the cards are physically present, if the card's magnetic stripe is read
or if the transaction is hand-keyed or entered on a website, the specific type of card, when the
transaction is settled, the authorized and settled transaction amounts, etc. For a typical credit card
issuer, interchange fee revenues may represent about a quarter of total revenues, but this will
vary greatly among credit card issuers. Interchange fees may consume over 50 percent of profits
from card sales for some merchants (such as supermarkets) that operate on slim margins.
Merchants contend
That interchange fees force them to raise prices for everyone; banks contend that interchange fees enable
them to offer better cardholder rewards for their best customers.
Hidden costs
In the United Kingdom, merchants won the right through The Credit Cards (Price
Discrimination) Order 1990 to charge customers different prices according to the payment
method. The United Kingdom is the world's most credit-card-intensive country, with 67 million
credit cards for a population of 59 million people.
In the United States, until 1984 federal law prohibited surcharges on card transactions. Although
the federal Truth in Lending Act provisions that prohibited surcharges expired that year, a
number of states have since enacted laws that continue to outlaw the practice; California,
Colorado, Connecticut, Florida, Kansas, Massachusetts, Maine, New York, Oklahoma, and
Texas have laws against surcharges.
Redlining
Credit Card redlining is a spatially discriminatory practice among credit card issuers of providing
different amounts of credit to different areas, based on their ethnic-minority composition, rather
than on economic criteria, such as the potential profitability of operating in those areas.
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Operating costs
This is the cost of running the credit card portfolio, including everything from paying the
executives who run the company to printing the plastics, to mailing the statements, to running the
computers that keep track of every cardholder's balance, to taking the many phone calls which
cardholders place to their issuer, to protecting the customers from fraud rings. Depending on the
issuer, marketing programs are also a significant portion of expenses.
Charge offs
When a consumer becomes severely delinquent on a debt (often at the point of six months
without payment), the creditor may declare the debt to be a charge-off. It will then be listed as
such on the debtor's credit bureau reports (Equifax, for instance, lists "R9" in the "status" column
to denote a charge-off.) The item will include relevant dates, and the amount of the bad debt.
A charge-off is considered to be "written off as uncollectable." To banks, bad debts and even
fraud are simply part of the cost of doing business.
However, the debt is still legally valid, and the creditor can attempt to collect the full amount for
the time periods permitted under state law, which is usually 3 to 7 years. This includes contacts
from internal collections staff, or more likely, an outside collection agency. If the amount is large
(generally over $1500 - $2000), there is the possibility of a lawsuit or arbitration.
In the US, as the charge off number climbs or becomes erratic, officials from the Federal Reserve
take a close look at the finances of the bank and may impose various operating strictures on the
bank, and in the most extreme cases, may close the bank entirely.
Profits and losses
In recent times, credit card portfolios have been very profitable for banks, largely due to the
booming economy of the late nineties. However, in the case of credit cards, such high returns go
hand in hand with risk, since the business is essentially one of making unsecured
(uncollateralized) loans, and thus dependent on borrowers not to default in large numbers.
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Customer attitude
Costs
Credit card issuers (banks) have several types of costs:
Interest expenses
Banks generally borrow the money they then lend to their customers. As they receive very low-
interest loans from other firms, they may borrow as much as their customers require, while
lending their capital to other borrowers at higher rates. If the card issuer charges 15% on money
lent to users, and it costs 5% to borrow the money to lend, and the balance sits with the
cardholder for a year, the issuer earns 10% on the loan. This 5% difference is the "interest
expense" and the 10% is the "net interest spread".
Frauds in plastic money
The cost of fraud is high; in the UK in 2004 it was over £500 million. When a card is stolen, or
an unauthorized duplicate made, most card issuers will refund some or all of the charges
that the customer has received for things they did not buy. These refunds will, in some
cases, be at the expense of the merchant, especially in mail order cases where the
merchant cannot claim sight of the card. In several countries, merchants will lose the
money if no ID card was asked for, therefore merchants usually require ID card in these
countries. Credit card companies generally guarantee the merchant will be paid on
legitimate transactions regardless of whether the consumer pays their credit card bill.
• Problems
A smart card, combining credit card and debit card properties. The 3 by 5 mm security chip
embedded in the card is shown enlarged in the inset. The contact pads on the card enable
electronic access to the chip.
The low security of the credit card system presents countless opportunities for fraud. This
opportunity has created a huge black market in stolen credit card numbers, which are generally
used quickly before the cards are reported stolen.
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Customer attitude
The goal of the credit card companies is not to eliminate fraud, but to "reduce it to manageable
levels". This implies that high-cost low-return fraud prevention measures will not be used if their
cost exceeds the potential gains from fraud reduction.
Most internet fraud is done through the use of stolen credit card information which is obtained in
many ways, the simplest being copying information from retailers, either online or offline.
Despite efforts to improve security for remote purchases using credit cards, systems with security
holes are usually the result of poor implementations of card acquisition by merchants. For
example, a website that uses SSL to encrypt card numbers from a client may simply email the
number from the web server to someone who manually processes the card details at a card
terminal. Naturally, anywhere card details become human-readable before being processed at the
acquiring bank, a security risk is created. However, many banks offer systems where encrypted
card details captured on a merchant's web server can be sent directly to the payment processor.
Controlled Payment Numbers are another option for protecting one's credit card number: they are
"alias" numbers linked to one's actual card number, generated as needed, valid for a relatively
short time, with a very low limit, and typically only valid with a single merchant.
The Federal Bureau of Investigation and U.S. Postal Inspection Service are responsible for
prosecuting criminals who engage in credit card fraud in the United States, but they do not have
the resources to pursue all criminals. In general, federal officials only prosecute cases exceeding
US $5000 in value. Three improvements to card security have been introduced to the more
common credit card networks but none has proven to help reduce credit card fraud so far. First,
the on-line verification system used by merchants is being enhanced to require a 4 digit Personal
Identification Number (PIN) known only to the card holder.
Second, the cards themselves are being replaced with similar-looking tamper-resistant smart
cards which are intended to make forgery more difficult. The majority of smartcard (IC card)
based credit cards comply with the EMV (Euro pay MasterCard Visa) standard. Third, an
additional 3 or 4 digit code is now present on the back of most cards, for use in "card not
present" transactions.
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Customer attitude
The way credit card owners pay off their balances has a tremendous effect on their credit history.
All the information is collected by credit bureaus. The credit information stays on the credit
report, depending on the jurisdiction and the situation, for 1, 2, 5, 7 or even 10 years after the
debt is repaid.
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Customer attitude
Ch. 4 TYPES OF PASTIC CARDS
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 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 well-known charge cards. This card has its
own merchant establishment tie-ups and does not depend on the network of MasterCard or Visa.
This card is typically meant for high-income group categories and companies and may not be
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Customer attitude
acceptable at many outlets. There are a wide variety of special privileges offered to Amex
cardholders.
MasterCard and 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 customer’s world-wide may use their respective credit cards to make various purchases.
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 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.
Diners 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 high-income 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.
Photo card
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Customer attitude
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.
Global card
Global cards allow you the flexibility and convenience of using a credit card rather than cash or
travelers checks while travelling 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. 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.
Affinity card
The card issuer ties up with popular organizations/ institutions which are often non-profit
organizations (City-WWF card or the Stan chart-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.
Add-on card
An add-on card allows you to apply for an additional credit card within the overall credit limit.
You can apply for this card in the name of family members like your father/ mother/ spouse/
brother/ sister/ all children above 18 years of age. Your billing statement would reflect the details
of purchases made using the add-on card. You are liable to make good all the payments for the
purchases made using the add-on card(s).
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Customer attitude
Secured credit cards
A secured credit card is a type of credit card secured by a deposit account owned by the
cardholder. Typically, the cardholder must deposit between 100% and 200% of the total amount
of credit desired. Thus if the cardholder puts down $1000, they will be given credit in the range
of $500–$1000. In some cases, credit card issuers will offer incentives even on their secured card
portfolios. In these cases, the deposit required may be significantly less than the required credit
limit, and can be as low as 10% of the desired credit limit. This deposit is held in a special
savings account. Credit card issuers offer this because they have noticed that delinquencies were
notably reduced when the customer perceives something to lose if the balance is not repaid.
The cardholder of a secured credit card is still expected to make regular payments, as with a
regular credit card, but should they default on a payment, the card issuer has the option of
recovering the cost of the purchases paid to the merchants out of the deposit. The advantage of
the secured card for an individual with negative or no credit history is that most companies report
regularly to the major credit bureaus. This allows for building of positive credit history.
Although the deposit is in the hands of the credit card issuer as security in the event of default by
the consumer, the deposit will not be debited simply for missing one or two payments. Usually
the deposit is only used as an offset when the account is closed, either at the request of the
customer or due to severe delinquency (150 to 180 days). This means that an account which is
less than 150 days delinquent will continue to accrue interest and fees, and could result in a
balance which is much higher than the actual credit limit on the card. In these cases the total debt
may far exceed the original deposit and the cardholder not only forfeits their deposit but is left
with an additional debt.
Most of these conditions are usually described in a cardholder agreement which the cardholder
signs when their account is opened.
Secured credit cards are an option to allow a person with a poor credit history or no credit history
to have a credit card which might not otherwise be available. They are often offered as a means
of rebuilding one's credit. Secured credit cards are available with both Visa and MasterCard
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Customer attitude
logos on them. Fees and service charges for secured credit cards often exceed those charged for
ordinary non-secured credit cards, however, for people in certain situations, (for example, after
charging off on other credit cards, or people with a long history of delinquency on various forms
of debt), secured cards can often be less expensive in total cost than unsecured credit cards,
even including the security deposit.
Sometimes a credit card will be secured by home. This is called a home equity line of credit
(HELOC).
Prepaid "credit" cards
A prepaid credit card is not a credit card, since no credit is offered by the card issuer: the card-
holder spends money which has been "stored" via a prior deposit by the card-holder or someone
else, such as a parent or employer. However, it carries a credit-card brand (Visa, MasterCard,
American Express or Discover) and can be used in similar ways just as though it were a regular
credit card.
After purchasing the card, the cardholder loads it with any amount of money, up to the
predetermined card limit [and then uses the card to make purchases the same way as a typical
credit card. Prepaid cards can be issued to minors (above 13) since there is no credit line
involved.
The main advantage over secured credit cards (see above section) is that you are not required to
come up with $500 or more to open an account. With prepaid credit cards you are not charged
any interest but you are often charged a purchasing fee plus monthly fees after an arbitrary time
period. Many other fees also.
Collectible credit cards
A growing field of numismatics (study of money), or more specifically economic (study of

money-like objects), credit card collectors seek to collect various embodiments of credit from the
now familiar plastic cards to older paper merchant cards, and even metal tokens that were
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Customer attitude
accepted as merchant credit cards. Early credit cards were made of celluloid, then metal and
fiber, then paper and are now mostly plastic.
Ch.5 The Rise of Plastic Money
Indian consumers have never had it so good. The soiled

notes are definitely out. Plastic money in! Carrying
cash is no more `a pain in the neck' as consumers are
relying more on the `plastic card’, which gives them
money on credit.
Credit Cards have finally arrived in India. The card

industry which is growing at the rate of 20% per annum is flooded with cards ranging from gold,
silver, global, smart to secure….the list is endless. From just two players in early 80s, the
industry now houses over 10 major players vying for a major chunk of the card pie.
Currently four major bishops are ruling the card empire---Citibank, Standard Chartered Bank,
HSBC and State Bank of India (SBI). The industry, which is catering to over 3.8 million card
users, is expected to double by the fiscal 2003. According to a study conducted by State Bank of
India, Citibank is the dominant player, having issued 1.5 million cards so far. Stan chart follows
way behind with 0.67 million, while Hongkong Bank has 0.3 million credit card customers.
Among the nationalized banks, SBI tops the list with 0.28 million cards, followed by Bank of
Baroda at 0.22 million.
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Customer attitude
The credit card market in India, which started out in 1981, is on the verge of an unprecedented
boom. Between 1987 and 2000, the market has virtually grown to over 3.8 million cards with
almost 25-30 % growth in new cardholders.
SBI, one of the late entrants in the card market, has managed to grab over 8 per cent of the
market share from the bigwigs like Citibank and Standard Chartered Bank. The bank's credit
card business has grown by 8 per cent over the last two years. According to bank officials, SBI's
card issue so far is to the tune of 0.28 million which is expected to cross the 1 million mark by
the fiscal 2002. The bank is also planning to launch debit card, global card, gold card and
corporate card shortly.
In a bid to tap the lower middle class segment, SBI is currently sharpening its marketing skills
for the launch of `secure card', aimed at its fixed deposit clients. The bank will be launching this
new product at five of its branches at Delhi, the country's capital within a fortnight. With the
launch of `secure card', SBI will become the first bank to tap the lower middle class segment.
By the end of the fiscal 2000, the bank is expected to take the secure card to over 36 centers
throughout the country.
The bank is putting its best foot forward to compete with global card majors like Citibank and
Standard Chartered Bank. The global bigwigs have already established themselves as the
`bankable brands' in the metros. However, in a bid to move to greener pastures, they are trying to
tap the co-branded card market which has vast potential for growth. Citibank, which is leading
the card empire, recently launched a co-branded credit card in partnership with Indian Oil
Corporation. The card will offer its member’s reward points on every international spend which
can be redeemed for free fuel in India. Thus in a scenario where almost the entire card market is
dominated by the phirang banks, why the SBI-GE Capital subsidiary gung-ho about slicing off a
major chunk of the card market?
Expanding The Card Pie
There may be 3.8 million cards today. But the catch is that there are not 3.8 million cardholders -
one person has multiple cards. This makes the job of selling cards all the more difficult since
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Customer attitude
everybody is targeting the same market segment. What's more, multiple card ownership ends up
splitting card spends. If SBI ends up targeting the same multiple card customer-bases, then it is
unlikely to make much headway. Reason: Citibank and other foreign issuers like Hongkong
Bank and Standard Chartered Bank have already embarked on a massive marketing campaign to
boost card usage. Thus to move ahead of these phirang banks, nationalized banks like SBI and
BoB are targeting virgin territories. These banks are taking their products to smaller townships in
Uttar Pradesh, Andhra Pradesh and Orissa including others to widen their client base. Even in a
city like Mumbai, with an adult population of 7 million, card ownership is barely 2.5 million.
Now, SBI is perhaps best poised to geographically expand the existing credit card base and drive
up penetration. Its 8,800 branch network with an almost 100 per cent geographic coverage covers
almost 25% of the bankable population of the country. SBI is banking heavy on direct mailing
exercise aimed at its existing database, and bypassing the direct sales model, adopted by the
foreign banks.
Citibank Standard HSBC SBI ANZ Bank Others

Chartere Grindlays of
d Bank Baroda
Card Issue 1.5 m 0.67 m 0.30 m 0.28 m 0.26 m 0.22 m 0.57 m
(31st March
2000)
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Customer attitude
Targeting The Customers
Currently, there is lack of awareness among potential cardholders, which is likely to stifle card
growth. Most of the banks are relying on freebees and bundle of services like free accident
policy, special shopping offers, purchase protection and add-ons like additional cards for family
members of the cardholder to woo customers. The smart ones like HSBC are offering very high
credit limit to tap customers. Last month, HSBC launched `Maha' card `with jyada power' which
offer customers 25 % higher credit limit than the limit on any other credit card held by the
cardholder.
In order to track the 4 million potential customers presently untouched by the `plastic money' is
immense. The only solution is to expand geographical coverage, which is tricky for the simple
fact that Visa and MasterCard have distinct skews towards metros. Only banks, which penetrate
the Indian countryside, will be able to stand the test of the time. For present, consumer is
definitely the king.
The How's & Wherefores of Plastic Money
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Customer attitude
Not all credit cards are created equal. In fact, they can be as individualist as the people who use
them. So when you're trying to find the best one for your individual needs, it can get very
confusing very fast.
Fortunately, there are lots of online credit card clearing house type companies who help you do
the research and save you time, money and headaches. Just as with everything in life, a little
homework goes a long way. It behooves us all, in this fast-becoming-cashless-society.
To familiarize ourselves with the businesses that provide this credit card screening service; a
short visit is a real eye-opener when you see how much is out there in the way of plastic money.
There are low-to-no interest credit cards, secured credit card, airline mile cards, cards that offer
rewards in the form of cash back bonuses on your purchases (or in other forms, such as points),
cards with no annual fee, cards with different rates and terms - the list is almost endless. Do your
homework and choose well. After you've figured out which card is right.
It's almost imperative these days to have a credit card and break it out now and then. Those who
do not will have a low credit rating or none at all. And since you may well have to depend on
your credit rating one day for something important, using credit cards wisely makes very good
sense.
Let's say you stumbled on a fantastic deal for a house. You weren't planning on it, but it would
be a real opportunity lost if you couldn't take advantage of it. You go for a loan.
The first thing your potential creditors want to know is whether you are capable of repaying your
debt. They'll look at your job, how much overhead you have, where you live now, and all kinds
of factors. And they will definitely get your credit rating. This one number alone carries a heavy
weight in a creditor's mind. In fact, it could easily make or break the deal of a lifetime.
Use your credit card wisely, not frivolously, and you will build the strength of your credit history
with every purchase and payment. Credit card companies love to rake in the late fees and raise
interest rates when you fall behind.
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Customer attitude
Being aware of these pitfalls is part of being a responsible adult these days. Building a good
credit card payment history is part and parcel of good financial sense. You don't need to maintain
a zero balance. In fact, a balance can demonstrate, to your benefit that you're able to borrow and
pay back on a regular basis. Just keep the balance low. Take responsibility for your credit, and it
will be there for you and your family when you really need it.
CH.6 PLASTIC CARDS & USES:-
Card Types and there uses.
This section of the Intercard web site is designed to help you understand the various types of
plastic card available and their respective uses.
Access Control Card
Access control card is a plastic card used to gain/control access to premises or enter restricted
areas. Usually associated with magnetic or chip cards and proximity cards with or without photo
e.g. ID badges.
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Customer attitude
Affinity card
Affinity card is a form of loyalty card where the co-branding partner is a charity or organisation
that benefits financially from card use.
Barcode Card
Barcode card is a card with printed codes made from vertical lines of different thickness used for
fast error free data entry printed somewhere on the face or reverse. There is an array of machine-
readable rectangular bars and spaces arranged in a specific way defined in international standards
to represent letters, numbers, and other human-readable symbols. Cards are either the usually 30
micron credit card type cards or alternatively can be ‘pop out’ cards.
Blank Cards
Blank card it is totally blank card & cards with no printing usually used in imaging machines.
CR80 Card
CR80 Card it state about card size & information it is the description for a standard credit card
size (3 3/8" x 2 1/8" x .030).
Charge Card
Charge card is a payment card that provides automatic credit within a given invoice date (usually
monthly).
Cheque guarantee card
Cheque guarantee card is a card issued by a bank or building society for the purpose of
guaranteeing settlement of cheques to third parties or supporting the encashment of cheques at
financial institutions up to a specified value. Most debit and some credit cards may also function
as cheque guarantee cards (multifunction cards).
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Customer attitude
Chip Card
Chip card is another name for a smart card; refers to a plastic card with an embedded integrated
circuit, which offers memory and micro processing capabilities.
City card
City card is a multi-application prepayment card for use within a specific urban area - also
known as town card.
Combo Card
Combo card is a smart card with both "contact" and "contactless" technology on one card. It is a
smart card that transmits and receives data using radio frequencies (RF) technology to
communicate with compatible terminal. Eliminates physical contact or insertion into reader
terminal while retaining intelligence. Often used in walk-by or gate access applications for mass
transit. Any card where information is transferred to a reader via a series of contact points
located on the card is knows as contact car
Company Card
Company card is a card issued to or by a company for use by an employee for business-related
transactions (e.g., purchases, logical access, and physical access).
Contactless Smart Card
Contactless smart card is a smart card that transmits and receives data using radio frequencies
(RF) technology to communicate with compatible terminal. Eliminates physical contact or
insertion into reader terminal while retaining intelligence. Often used in walk-by or gate access
applications for mass transit.
Contact Smart Card
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Customer attitude
Contact smart card is a smart card that requires physical contact with a card reading device to
exchange data. Any card where information is transferred to a reader via a series of contact
points located on the card.
Credit Card
Credit card is a term used for a card allowing its owner to spend money with no immediate
reimbursement. It is basically use for any credit purpose in terms of money.
Debit Card
Debit card is a card similar to a credit card, but differs by immediately withdrawing money from
an account and transferring it to another account. It replaces cheques (with no delay to give the
issuer time to cover it) and does not have a credit line associated.
Digital Optical Laser Card
Digital optical laser card is a portable card that passively stores information in the form of high-
density marks or bars.
Electronic Purse (e-purse)
Electronic card is a smart card that contains electronic money. It is sometimes called the
electronic wallet or the stored value card (SVC).
E-wallet
E-wallet cards it is similarly to electronic purse (e-purse) it is a small portable device that
contains electronic money. E-wallets are generally used for low-cost transactions.
Financial Hologram Card
Financial hologram card is a card using a hologram, 30 mil thickness, ISO cards, e.g. MasterCard
/ Visa and others.
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Customer attitude
Financial Cards (Other)
Financial cards (other) are typically Debit, Cheque, Charge or ATM cards not using a hologram.
Fuel card
Fuel card is a special purpose charge card used most by transport drivers to pay for fuel on the
road. It is basically use to pay out the fuel bills.
Generic Card
Generic card is a card that utilizes a base card stock of a pre-designed, centralized image and is
not individualized to a specific issuer (or department) within its basic design. It may have an IIN
(Issuer Identification Number) that groups the issuer with other organizations (for benefits of
scales of volumes) but the users’ card can be subsequently individualized by personalization
techniques.
Gift Card
Gift card is a standard or custom size CR80 card with a stored or prepaid value placed on the
card through magnetic striping or bar coding. Usually a retail card initiated at cash desks or
checkouts.
Health Card
Health card is a card used to store information about medical history or insurance coverage.
Commonly used in the USA these cards can be of any technology.
Hologram card
Hologram card is an identification card bearing a hologram as a security measure against

counterfeiting.
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Customer attitude
Hybrid Cards
Hybrid card are cards that support more than one technology, such as an IC (integrated circuit)
card with a magnetic stripe.
IC Card
IC Card is an abbreviation for Integrated Circuit or "chip card". The banking industry prefers the
term "IC card" or "ICC".
ID card
ID card is an abbreviation for identity card: a card that identifies both the bearer and the issuer.
All financial transaction cards are I.D. cards.
Java Card
Java cards it is just like a software basis smart card that supports applications written in JAVA.
Key Card
Key card is a plastic card used to gain access to premises, usually associated with magnetic stripe
and proximity cards.
Laser Engraved Cards
Laser engraved card are cards produced from a particular group of thermoplastics. These have
the properties of high-durability, light weight and flexibility because they are polymers linked
together by carbonate groups. Polycarbonate cards are stronger than Polyvinyl Chloride (PVC)
cards and thus more expensive. However, for applications where longevity and higher security is
pre- requisite e.g. National ID, Passport and Driver’s Licence cards, Polycarbonate cards are
ideal. These cards are utilised where the virtually tamper-proof personalisation technique of laser
engraving is required.
Loyalty Card
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Customer attitude
Loyalty card is typically a standard CR80 size card that has off line accounting capabilities e.g.
mileage recording or merchandise purchases and often used as a retail frequent user card offering
promotional benefits.
Magnetic Stripe Card
Magnetic card is a card that has a strip of magnetic tape material attached to its surface. This is
the standard technology used for bankcards (ATM, credit, and debit cards) and for other
applications.
Membership Card
Membership card is just giving identity to an individual an identity is usually a club member card
for ID purpose.
Memory Card
Memory card is a type of smart card. Also known as a synchronous card, it features 256 bits or
32-byte memory and is suitable for use as a token or identification card. It is controlled only by
fixed logic rather than by a microprocessor.
Microprocessor Card
Microprocessor card is a type of smart card, also known as an asynchronous card. Features 1
kilobyte to 64 Kbytes of memory and is suitable for portable or confidential files, identification,
tokens, electronic purse or any combination of uses.
Mifare Card
Mifare card it give standarised to the card & it is a proprietary contactless smart card standard,
equivalent to ISO 14443 Type A.
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Customer attitude
Multi-application Smart Card
Multi-application card is a microprocessor smart card that can handle a variety of applications -
typically with lots of memory and computing power – whilst maintaining separate security
conditions.
Non-magnetic Card
Non magnetic card &it is a card without a magnetic stripe it contain any information in a view
form e.g. ID cards.
Optical Card
Optical card is a card with information recorded on an optical memory stripe, similar to compact
disks.
Other Secure Card
Other secure card are just give for the basis security & are usually retail, oil/gas, telecom,
transport, and pay TV cards.
PCMCIA Card
PCMCIA Card is an abbreviation for Personal Computer Memory Card International

Association: it is not considered to be a smart card, as, whilst this card type contains
semiconductor chips, it is (a) physically thicker than a smart card, and (b) the connection means
is through an edge connector, not via the standard surface-contact method.
PETG
PETG formal name is polyethylene terephthalate-glycol-modified is extremely clear. PETG

does not contain a UV inhibitor. (Polycarbonate) .
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Customer attitude
Photo ID card
Photo ID card is an identification card bearing a photographic image of the cardholder. The
image can be an actual photograph or one captured wholly electronically.
PVC card
PVC Abbreviation is Polyvinyl Chloride. It is basically use to prepare a plastic card. The primary
material used for typical plastic cards. Payment Card
Payment card is a card that is used as an identifier when used to transact full or part payment a
bill. It enables the payees’ details to be swiftly recorded automatically and credit lodged against
the account.
Pay TV Card
Pay TV Card is usually a chip card subscribing to a television service it is just connecting to
satellite for view of television. E.g. satellite TV.
Phone Card
Phone card is a stored value card that allows the user to access telephone networks via a PIN
number which is usually covered by a scratch-off panel for security.
Plastic card
Plastic card is a generic description of all payment cards including credit, debit and cheque
guarantee. It is just like carrying money in face of plastic card
Polycarbonate Cards
Polycarbonate card are cards produced from a particular group of thermoplastics. These have the
properties of high-durability, light weight and flexibility because they are polymers linked
together by carbonate groups. Polycarbonate cards are stronger than Polyvinyl Chloride (PVC)
cards and thus more expensive. However, for applications where longevity and higher security is
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pre- requisite e.g. National ID, Passport and Driver’s Licence cards, Polycarbonate cards are
ideal. These cards are utilized where the virtually tamper-proof personalization technique of laser
engraving is required.
Prepaid Card
Prepaid card is a card paid for at Point of Sale and permits the holder to buy goods or services up
to the prepaid value. Not all such cards show the identity of the bearer (e.g. phone cards).
Promotional Card
Promotional card is typically a card offering special benefits to users e.g. discounts or rewards.
Protected Memory Card
Protected memory card is a smart card that requires a secret code or PIN number to be entered
before the data can be sent/received from the chip.
Proximity Card
Proximity card is typically a contact less card whose presence and data can be sensed by an
interface device not in physical contact with the card and used for access control applications.
Embedded in the card is a metallic antenna coil, which allows it to communicate with an RF
external antenna.
Radio Frequency Card (RFlD)
Radio Frequency card (RFID). A proximity card in which the coupling between the card and the
interface device is by radio.
Retailer (Store) Card
Retailer (store) card it is given by retail group. It is a proprietary card used and issued by a
retailer or retailing group.
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Scratch Card
Scratch card is mainly used in mobile refilling or any price reveling it & it is a card that is
produced with special ink that can be scratched away to reveal a number or message.
Secure Card
Secure cards it is use for security are cards with an intrinsic value e.g. financial, other secure
cards etc.
SIM card
SIM card is an abbreviation for Subscriber Identification Module: a smart card that connects to a
GSM phone and establishes the user’s identity.
Single-application Smart Card
Single-application smart card is a smart card issued to a single organization for a singular
purpose.
Smart Card/Contact Smart Card
Smart card/Contact smart card also called a "chip" card or IC card. A smart card is a plastic card
with an embedded microchip that may be used to store information about the cardholder or
record card transactions as they occur. Plastic credit sized card that contains one or more
semiconductor chips. This is a credit card or SIM card sized plastic card with an embedded
microcircuit that contains either a: Memory Card, Protected Memory Card or Microprocessor
Card.
Store card
Stored card is a financial transaction card associated with a retailer or group of retail stores that
can be used only for purchases from the retailers concerned.
Stored Value Card

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Stored Value Card – is a financial card e.g. cash card, electronic purse, prepaid card that is
loaded with a certain amount of money/value e.g. loyalty points or credit for canteen meals with
each 'purchase' amount deducted from the card.
Telephone Card
Telephone Card is a card that can be utilized for the payment of telephone calls. This types of
card maybe a prepaid card, a credit card, or one that adds the cost of the call to a standard bill.
CH. 7. SAFETY MEASURES & PRECAUTIONS
PLASTIC CARDS
SAFETY MEASURES
Credit card security relies on the physical security of the plastic card as well as the privacy of the
Some merchants will accept a credit card number for in-store purchases, whereupon access to the
number allows easy fraud, but many require the card itself to be present, and require a signature.
Thus, a stolen card can be cancelled, and if this is done quickly, no fraud can take place in this
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way. For internet purchases, there is sometimes the same level of security as for mail order
(number only) hence requiring only that the fraudster take care about collecting the goods, but
often there are additional measures. The main one is to require a security PIN with the card,
which requires that the thief have access to the card, as well as the PIN.
An additional feature to secure the credit card transaction and prohibit the use of a lost credit
card is the MobiClear solution. Each transaction is authenticated through a call to the user mobile
phone. The transaction is released once the transaction has been confirmed by the cardholder
pushing his/her pin code during the call.
The PCI DSS is the security standard issued by The PCI SSC (Payment Card Industry Security
Standards Council). This data security standard is used by acquiring banks to impose cardholder
data security measures upon their merchants.
Interest on outstanding balances.
Interest charges vary widely from card issuer to card issuer. Often, there are "teaser" rates in
effect for initial periods of time (as low as zero percent for, say, six months), whereas regular
rates can be as high as 40 percent. In the U.S. there is no federal limit on the interest or late fees
credit card issuers can charge; the interest rates are set by the states, with some states such as
South Dakota, having no ceiling on interest rates and fees, inviting some banks to establish their
credit card operations there. Other states, for example Delaware, have very weak usury laws. The
teaser rate no longer applies if the customer doesn't pay his bills on time, and is replaced by a
penalty interest rate (for example, 24.99%) that applies retroactively. So customers should be
wary of these offers that usually contain some traps.
Fees charged to customers the major fees are for:-
• Late payments or overdue payments

• Charges that result in exceeding the credit limit on the card (whether done deliberately or
by mistake), called over limit fees
• Returned cheque fees or payment processing fees (e.g. phone payment fee)
• Cash advances and convenience cheques (often 3% of the amount).
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• Transactions in a foreign currency (as much as 3% of the amount). A few financial

institutions do not charge a fee for this.
• Membership fees (annual or monthly), sometimes a percentage of the credit limit.
Exchange Rate Loading Fees (May not even appear on your statement!).
Tips for prospective or existing credit card holders:
A prospective or existing credit card holder must observe carefulness while applying or owning a
credit card. The terms and conditions of the credit card agreement must be carefully viewed and
understood so that a clear insight can be achieved. This will help a credit card holder to make the
best use of the plastic money. The credit card repayments must be made before the due date to
avoid attraction of late fee, penalty and surcharge. This can also be done to maintain a smooth
flow of business transactions and ensuring one's credit stability and visibility in the plastic
money market.
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Precautions
To Avoid:
• Bending the Card.

• Exposure to electronic devices and gadgets.
• Direct exposure to sunlight.
• Be cautious about disclosing your account number over the phone unless you know
you're dealing with a reputable company.
• Never put your account number on the outside of an envelope or on a postcard.
• Draw a line through blank spaces on charge or debit slips above the total so the amount
cannot be changed.
• Don't sign a blank charge or debit slip.
• Tear up carbons and save your receipts to check against your monthly statements.
• Cut up old cards - cutting through the account number - before disposing of them.
• Open monthly statements promptly and compare them with your receipts. Report
mistakes or discrepancies as soon as possible to the special address listed on your
statement for inquiries. Under the FCBA (credit cards) and the EFTA (ATM or debit
cards), the card issuer must investigate errors reported to them within 60 days of the date
your statement was mailed to you.
• Keep a record - in a safe place separate from your cards - of your account numbers,
expiration dates, and the telephone numbers of each card issuer so you can report a loss
quickly.
• Carry only those cards that you anticipate you'll need.
To Do:
• Please sign on the signature panel on the reverse of the Card immediately with a non-
erasable ball-point pen (preferably in black ink). This will ensure that the benefits of
membership are yours and yours alone.
• Keep the Card in a prominent place in your wallet. You will notice if it is missing.
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Reasons credit card being rejected at retail outlet:
• One may have exceeded the borrowing limit or defaulted (constantly) on minimum
payment due.
• The Card is hot listed.
• The card has crossed its expiration date.
• Non-receipt of dues of one-card blocks future transactions on any other card(s) held of
the same card-issuing bank.
The magnetic stripe on the reverse of the card is damaged i.e. has been scratched or exposed to
continuous heat/direct sunlight or magnetic field-like card kept near a TV set / other electronic
appliances.
Systems or technology failures have in rare instances also led to non acceptance of cards when
swiped through Electronics.
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CH.8 CREDIT CARD & DEBIT CARD
Credit Card
Credit cards in India are gaining ground. A number of banks

in India are encouraging people to use credit card. The
concept of credit card was used in 1950 with the launch of
charge cards in USA by Diners Club and American Express. Credit card however became more
popular with use of magnetic strip in 1970.
Credit card in India became popular with the introduction of foreign banks in the country.
Credit cards are financial instruments, which can be used more than once to borrow money or
buy products and services on credit. Basically banks, retail stores and other businesses issue
these.
Workings of credit caard
An example of the front of a typical credit card:
1. Issuing bank logo

2. EMV chip
3. Hologram
4. Credit card number
5. Card brand logo
6. Expiry Date
7. Cardholder's name
An example of the reverse side of a typical credit card:
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1. Magnetic Stripe
2. Signature Strip
3. Card Security Code
Credit cards are issued after an account has been approved by the credit provider, after which
cardholders can use it to make purchases at merchants accepting that card. When a purchase is
made, the credit card user agrees to pay the card issuer. The cardholder indicates his/her consent
to pay, by signing a receipt with a record of the card details and indicating the amount to be paid
or by entering a Personal identification number (PIN). Also, many merchants now accept verbal
authorizations via telephone and electronic authorization using the Internet, known as a
'Card/Cardholder Not Present' (CNP) transaction.Electronic verification systems allow merchants
to verify that the card is valid and the credit card customer has sufficient credit to cover the
purchase in a few seconds, allowing the verification to happen at time of purchase.
The verification is performed using a credit card payment terminal or Point of Sale (POS) system
with a communications link to the merchant's acquiring bank. Data from the card is obtained
from a magnetic stripe or chip on the card; the latter system is in the United Kingdom and
Ireland commonly known as Chip and PIN, but is more technically an EMV card. Other
variations of verification systems are used by ecommerce merchants to determine if the user's
account is valid and able to accept the charge. These will typically involve the cardholder
providing additional information, such as the security code printed on the back of the card, or the
address of the cardholder. Each month, the credit card user is sent a statement indicating the
purchases undertaken with the card, any outstanding fees, and the total amount owed. After
receiving the statement, the cardholder may dispute any charges that he or she thinks are
incorrect (see Fair Credit Billing Act for details of the US regulations). Otherwise, the cardholder
must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher
amount up to the entire amount owed.
The credit provider charges interest on the amount owed (typically at a much higher rate than
most other forms of debt). Some financial institutions can arrange for automatic payments to be
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deducted from the user's bank accounts, thus avoiding late payment altogether as long as the
cardholder has sufficient funds.
DEBIT-CARDS
The difference between a credit card and a debit card is that in the case of the latter, the payment
is made against the balance in your bank account. So a debit card relieves you of having to
withdraw lump sums of money from your bank account or of carrying your cheque book around
every time you go shopping or decide to eat out.
A debit card differs from a credit card in that a debit card is tied directly to your checking
account and the amount of money you can spend with it is limited to the amount of money you
have in the bank.
Workings of debit card
When you use a debit card, the transaction debits (withdraws) the amount of the transaction from
your checking account, usually on the same day. You can use a debit card to get cash from ATM
machines or have it swiped like a credit card at shops or restaurants or swipe it through a pay
phone to make a call.
Making a Travel Budget with a Debit Card
Naturally, you can't rely on your debit card for all your international transactions - imagine
haggling with a street vendor, getting the price right and then trying to give him/her plastic!
Remote hostels and many restaurants in third world countries don't accept credit cards (which is
how debit cards are viewed in the business world). Thus, you'll need to make budget plans before
you leave home so that you have traveler's checks and cash and some money in your checking
account for use on your debit card.
Let's assume you have a budget of $2000 for your trip. Decide how you're comfortable splitting
that into the way you'll use it; $500 in traveler's checks, $500 in cash and $1000 left in your
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checking account, for example -- that's $1000 on your debit card. If that $2000 represents your
entire cash portfolio, consider setting up emergency precautions before you leave home. If
someone, like Dad, is willing to loan you money, leave deposit slips with him so that if you lose
all your money abroad, you can dial for dollars (using your debit card) and he can get some
money into your account. If your debit card (your checking account) is almost empty, ask him to
tell the bank to "memo post" the deposit so that the cash is immediately available and your debit
card is quickly back in business.
How to Get a Debit Card
Chances are you were automatically offered a debit card when you opened your checking
account. If you don't have a checking account, go open one now. Look for a bank that doesn't
charge checking account fees, and ask for a debit card.
It takes a few days to two weeks to get a debit card after you order it. When the card arrives, sign
the back; have photo id with your signature handy when you use the card - merchants may want
to compare your face and your signatures to protect themselves from fraud.
How to Choose a Debit Card PIN Number
Your debit card comes with a PIN (personal identification number) which can be changed to a
number you can easily remember. Memorize it; if you have to write it down, keep that separate
from your card. Don't choose an obvious number, like your birthday, in order to lessen the
chances of someone else being able to guess your PIN number if they come into possession of
your card.
If You Lose Your Debit Card...
If your card is lost or stolen, call your bank before someone else spends your money. Write down
your bank's number before you leave home and keep it in a couple of places - your journal, your
guidebook. Set up an international snail mail address before you leave home so your bank can
send you a new card if it does get lost or stolen.
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When to Use Your Debit Card
Debit cards are handy when making a long distance room reservation or any internet reservation,
including plane tickets. You can't use a debit card just like a credit card when renting a car - the
companies require a major credit card, which offer a certain amount of insurance in case you
have a fender bender.
About Debit Card Fees and Overseas Transaction Fees
International ATM machines will charge a fee when you use your debit card; the amount is
determined by the ATM owner. Most fees are under $5 -- a notice on the ATM machine will tell
you what the fee is. More than $2 is too much -- look for another ATM machine.
History of Credit Cards

Our society was once upon a time functioning without money; it is again likely to become
moneyless. While ancient society was confronted with the problems of adjusting mutually
satisfactory rates and basis of exchange, future society, with the help of computers, electronics
and telecommunications, credit cards, telephone and other modern means of communications,
would settle financial transactions instantly. Money as a medium of exchange will serve its
function. The difference will be that in future coins, currency notes, cheques, etc., will be
dispensed with in favor of records. India has entered the stage of credit card system and credit
cards are gaining increasing relevance to facilitate industrial, commercial and agricultural
transactions.
Credit was first used in Assyria, Babylon and Egypt 3,000 years ago. The Bill of Exchange – the
forerunner of bank notes - was established in the 14th century. Debts settled by one-third cash
and two-thirds bill of exchange paper money followed only in the 17th century.
The first advertisement for credit was placed in 1730 by Christopher Thornton who offered
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furnfvbr6d’iture that could be paid off weekly.
From the 18th century until the early part of the 20th, tallymen sold clothes in return for small
weekly payments; they were called “tallymen” because they kept a record of tally of what people
had brought on a wooden stick. One side of the stick was marked with notches to represent the
amount of debt and the other side was a record of payments. In the 1920s shopper’s plate – “buy
now, pay later” system – was introduced in USA. It could only be used in shops which issued it.
In 1950, Diners Club and American Express launched their charge cards in USA, the first
‘plastic money’. In 1951, Diners Club issued the first credit card to 200 customers who could use
it at 27 restaurants. With the magnetic strip in 1970, the credit card became a part of the
information age.
The origins of the bank credit card have been traced to John C. Biggins, a consumer credit
specialist at the Flatbush National Bank of Brooklyn, New York. In 1946, Biggins launched a
credit plan called Charge-It. The program featured a form of scrip that was accepted by local
merchants for small purchases.
Concept of credit card

Progress in civilization in its turn has brought out radical changes in the manner of trading. The
need for something intrinsically useful and easily applicable in everyday dealing is clearly felt.
Cash in the form of currency notes and coins makes up just one form of the payment system.
Development in banking while also giving inputs to the further development of cash brought
about a second phase in payment namely paper instructions such as cheques and credit transfers.
The requirement for greater flexibility and convenience has led to electronic payments, and this
is where plastic cards have proved their worth. It allows the card issuers to limit the sum of
money the card-holders wish to spend. The spending of card-holders who have defaulted on
payments or who are over their credit limit can be restricted until the balances are cleared.
Definition of credit card

A credit card is a credit-token within the meaning of section 14(1), Consumer Credit Act 1974 of
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the UK which defines a credit-token as a card, cheque, voucher, coupon, stamp, form booklet or
other document or thing given to an individual by a person carrying on a consumer credit
business, who undertakes:-
a. That on the production of it (whether or not some other action is also required), he will
supply, cash, goods and services (or any of them) on credit, or
b. That were, on the production of it to third party (whether or not any other action is also
required), the third party supplies cash, goods and services (whether or not deducting any
discount or commission), in return for payment to him by the individual. In very simple
words credit card can be termed as an unsecured personal loan offered to customers by
the banks where the card-holder could purchase goods and services from authorised
merchant or merchant establishments (MEs) of the bank up to a fixed limit on credit.
Such credit is normally made available for a period of 30 to 45 days. This is turn helps
earn income by way of commission from its merchant establishments; the scheme
provided large scope for sale and increased turnover with assured and prompt payment.
In 1951, the Franklin National Bank in New York issued the first modern credit card. Unsolicited
credit cards were sent to prospective card-holders who were not subject to credit screening prior
to being sent a card. Merchants signed agreements to accept the cards. When a purchase was
made, the card-holder presented the card to the merchant, who would copy the information on
the merchant’s account at Franklin Bank in the amount of the transactions, less the discount rate.
If a purchase exceeded the merchant’s floor limit, the merchant was required to call the bank for
approval. Franklin National Bank’s Credit Card programme was copied by hundreds of other
banks in the late 1950s and early 1960s.
The Bank of America issued Bank America in 1958 and eight years later, in 1966, the banks
comprising the Western State Bank Card Association issued the Master Charge Card. Bank
America and Master charge card became the focal points for the eventual groupings of all bank
cards throughout the world. The VISA and the MASTER the largest credit cards today appeared
in market in 1966. These two international cards are very popular and are accepted and honoured
all over the world in 170 countries. These two independent card companies led to latest
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innovations in the credit card business. Now the credit card system has become universally
popular throughout the world including the Communist countries. At the end of 1995 and 1980 a
million cards were used in the world. The total number of credit card users in India is currently
in excess of 80 lakh and now more than 30 banks are chasing customers with their cards.
Credit cards in India

Credit cards have finally arrived in India. The card industry, which is growing at the rate of 20
per cent per annum is flooded with cards ranging from gold, silver, global, smart to secure…the
list is endless. From just two payments in the early ‘80s, the industry now houses over 10 major
players vying for a major chunk of the card pie. Currently, four major bishops are ruling the card
empire - Citibank, Standard Chartered Bank, HSBC and State Bank of India (SBI). The industry,
which is catering to over 3.8 million1 card users, is expected to double by the fiscal 2003.
According to a study conducted by State Bank of India, Citibank is the dominant player, having
issued 1.5 million cards so far. Standard Chartered Bank follows way behind with 0.67 million,
while Hongkong Bank has 0.3 million credit card customers. Among the nationlaised banks, SBI
tops the list with 0.28 million cards, followed by Bank of Baroda at 0.22 million.
The credit card market in India, which started out in 1981, is on the verge of an unprecedented
boom. Between 1987 and 2000, the market has virtually grown to over 3.8 million cards with
almost 25-30 per cent growth in new card-holders.
India is generating more credit card spenders than spending places. While card-base and appends
are growing at a spiffy 25-30 per cent2 annually, the number of merchant establishments which
accept cards is growing selectively sluggish. The figure was put at 75,000–80,000 a couple of
years ago, and now stands at 100,000 on both the Visa and MasterCard loops. As opposed to
that, there are 2.5 million card-holders and 3.3 million cards (some, obviously, have more than
one) and the numbers are growing very strongly.
The seven million Indian credit card industry has been growing over 25 per cent3 annually and
has now more than 30 banks chasing customers with their cards. Still, credit cards in India have
made business sense only to a few.
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“The annual growth rate is good, but it is only 20 per cent of the card base, that is generating
revenue,” says Roopan Asthana, manager, Card Products Division of HSBC. Nearly 45-50 per
cent of the card-holders are estimated to be inactive, while another 30 per cent use the card as a
charge card without using the revolving facility cards are expected to account for 33 per cent of
all purchases by 2000 and 43 per cent by 2005.
The credit card embodies two essential aspects of the basic banking function - the transmission
of payments and the granting of credit. Therefore, in its true sense, a ‘credit’ card must offer the
opinion of revolving credit. This is very akin to the overdraft facility offered by banks to their
account holders. A credit card holder does not necessarily have to settle his entire account at the
end of the month for he has the option to make partial payment in subsequent months. In fact,
when the card-holder makes the full payment at the end of the month he is said to be using his
credit card as a ‘charge card’. Incidentally, the interest paid by the card-holder on the ‘credit’
utilized by him is what makes the business of credit cards profitable from the point of view of the
bank issuing the card.
Credit card frauds
In a recent case of credit card frauds busted by the Chennai Police, it was found that the credit
card particulars had been stolen from many hotels in several foreign cities such as Singapore.
These were used in preparing duplicate credit cards through which purchases were made from
shops in Chennai.
The incident highlights the risks that are inherent in the use of credit cards. Citizens have always
been very skeptical about use of credit cards for online purchases fearing the stealing of credit
card information and their use on the Internet lack of “signature” was the principal reason for
fear. This fear has been one of the reasons for the slow growth of e-commerce and perhaps also
contributed to some of the dotcom failures also.
In the initial days of e-commerce, there were incidents where “pseudo sites” were created to
gather credit card information in exchange for some service. Many of the e-commerce sites used
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to save the credit card details on the web server which were hacked into and information stolen.
Sometimes, the unencrypted flow of credit card information was collected by an eavesdropper.
All these are now things of the past. At present, the e-commerce sites use various measures to
prevent misuse of credit card data. First, there is encryption of data between the client’s browser
and the e-commerce site. The credit card information also is sent directly to the payment gateway
and the e-commerce site avoids storing of the data on its server. As a result of some of these
measures, exchange of credit card data online is saved even though the authorization itself is
done on the basis of information otherwise found on the face of a credit card.
Some of the e-commerce sites today take a precaution to ensure that the billing address on the
card and the destination of goods purchased are same to ensure that there is no third party who is
benefiting from the purchase. This sometimes creates an embarrassment when a person is trying
to send a gift to another person. One of the precautions that Indian e-commerce site owners are
adopting in such cases is to verify from the destination address the genuineness of the transaction
and the relationship between the credit card holder and beneficiary
It can therefore be said that the biggest risk for credit card frauds online is not from online
security problems but from the possibility of the credit card data being offline in a hotel or a shop
where the user parts with the card for sometime.
The problems that arise to the credit card users are many. There is harassment from the clutches
of bankers also. Some banks issued credit cards to people without verifying their credit
worthiness. This led the card-holders into a debt. Considering all these things, the Chennai
chapter of the Credit Card Users Association was launched on April 25, 20074. It is organising
credit card surrender campaign for such card-holders. So the repaid growth of credit holders will
be going up.
The motto of credit cards, besides providing the facility of ‘buy now and pay later’, also provides
a range of benefits like free insurance cover , preferential treatment at airports, hotels,
restaurants, hospitals and other merchant establishments, discount offers and the like. Lured by
these benefits, middle class and upper class people are increasingly becoming interested in card
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membership. The card-holder feels confident of his status and prestige. The financial health of
Indian banks is also expected to improve, allowing them to invest in technology and push the
card business strongly.
J. Sheebarani
The growth and popularity of plastic money in India has been phenomenal in the last few years.
The Indian economy is booming with a refreshing youthfulness in its march to success.
Credit Cards in India
India has come out of self-binding shackles to look "young" again and the enthusiasm shared by
the young work force of the country is driving the economy like never-before. In the present day
world, no one wants to be bothered by the presence of huge cash in his or her wallet and the
Indians are no exceptions. The unprecedented growth in the number of credit card users has
stimulated the Indian economy by a significant extent. The arrival of malls, multiplexes, online
shopping stores and shopping complexes have contributed to the growth of the use of plastic
cards.
It will not be wrong to say that such a scenario in context of the Indian market is not driven by
style statement and is driven more by needs. The benefits of plastic money have offered
unmatched ways to create an equilibrium and offer an amicable solution when it comes to
purchases and the inability to possess or carry cash. The modern day Indian customers find it
more easy to make physical payment (credit card payments) rather than carrying too much cash.
The introduction of credit card facilities to pay for mobile, electricity, movie tickets and other
related transactions have also contributed to the growth of plastic money in the country.
Best credit cards (India):

In context of the Indian market, the leading credit card services providers are ICICI, HDFC,
HSBC and Standard Chartered to name a few. These financial institutions have tried their hands
on ensuring value-addition while offering customer-friendly credit card deals. The Best credit
cards in India are usually meant for specific user group such as women, students and small
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business owners. These cards are offered to the prospective customers with appealing deals.
Statistics have clearly revealed that the number of credit card holders in India are close to 22
million as on January, 2007. It has been also revealed that the increasing consumerism in the
country has led to a two-fold increase in the number of credit card transactions from FY 2003-04
to 2005-06. The trends were as favorable as ever in the financial years, FY 2006-07 and 2007-08
and the same is likely to continue in the coming financial years.
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CH 9.Parties involved in trnsactions
Cardholder: - The holder of the card 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. American Express and Discover were previously the only card-issuing banks
for their respective brands, but as of 2007, this is no longer the case.
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.
Independent sales organization: - Resellers (to merchants) of the services of the acquiring
bank.
Merchant account: - This could refer to the acquiring bank or the independent sales
organization, but in general is the organization that the merchant deals with.
Credit Card association:- An association of card-issuing banks such as Visa, MasterCard,

Discover, American Express, etc. that set transaction terms for merchants, card-issuing banks,
and acquiring banks.
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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: Card net, Nabanco, Omaha,
Paymentech, NDC Atlanta, Nova, Vital, Concord EFSnet, and Visa Net.
Affinity partner:- Some institutions lend their names to an issuer to attract customers that have
a strong relationship with that institution, and get paid a fee or a percentage of the balance for
each card issued using their name. Examples of typical affinity partners are sports teams,
universities and charities.
CH. 10 Customer attitude towards plastic money
Introduction
A notable change in consumer financial services over the past few decades has been
the growth of the use of credit cards, both for payments and as sources of revolving
credit. From modest origins in the 1950s as a convenient way for the relatively
well-to-do to settle restaurant and department store purchases without carrying cash,
credit cards have become a ubiquitous financial product held by households in all
economic strata.
In modern commerce, credit cards (along with debit cards) serve as a payment
device in lieu of cash or checks for millions of routine purchases as well as for
many transactions that would otherwise be inconvenient, or perhaps impossible (for
example, making retail purchases by telephone or over the Internet). Credit cards
have also become the primary source of unsecured open-end revolving credit, and
they have largely replaced the installment-purchase plans that were important to the
sales volume at many retail stores in earlier decades. Along with most major
73
Customer attitude
societal changes come questions about whether the trend is beneficial or detrimental
(or somewhere in between), and the rise of plastic cards for payments and open-end
credit is no exception. Credit cards certainly are widely used and accepted by the
public. But they have also raised concerns in two areas: (1) whether consumers fully
understand the costs and implications of using credit cards (the consumer
information–consumer understanding concern) and (2) whether credit cards have
encouraged widespread over indebtedness, particularly among those least able to
pay (the indebtedness–financial distress concern). The two issues are related,
because one result of lack of understanding may be over indebtedness. Both issues
remain prominent in public discourse, as debt and personal bankruptcy levels have
increased over the decades and media reports of confused consumers have
multiplied.
Although one can usually find anecdotes to illustrate a point—consumers who are
unaware of the costs of credit cards, for instance, or consumers who overspend
because of the wide availability of credit— such examples can never lead to a
definitive understanding of issues having broad social or economic impact.
Statistically representative surveys can contribute to a more complete understanding
of consumers’ experiences. Taken together, such surveys can serve as a status report
on the use of credit cards some fifty years after their introduction. This article
brings to the discussion some survey evidence on the use of credit cards in the
United States. It begins with an examination of long-term trends in consumer
indebtedness, with attention to the growth of card based credit. It then moves to an
exploration of the consumer information–consumer understanding issue, with
emphasis on consumers’ attitudes toward credit cards and their knowledge of costs.
Consumers’ Attitudes toward Credit Cards

To explore consumers’ attitudes toward and understanding of credit cards, as well
as to gather information about card use, the Credit Research Center in
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Customer attitude
January 2000 sponsored interviews of nearly 500 households representative of

households in the forty-eight contiguous states. Interviewing was done by the
Survey Research Center of the University of Michigan as part of its monthly
Surveys of Consumers.
General Attitudes
Respondents—both those who used credit cards and those who did not—were
first asked their broad feelings about credit cards. So that attitude changes could be
tracked over time, the question was identical to the question asked in nationwide
Surveys of Consumer Finances in 1970 and again in 1977: ‘‘People have different
opinions about credit cards. Overall, would you say that using credit cards is a good
thing or a bad thing?’’
Overall opinions about credit cards are somewhat more negative and
polarized in 2000 than they were a generation ago, especially among holders of
banktype cards (table 3). Opinions among all families that credit card use is
‘‘good’’ register a bit higher in 2000 (33 percent) than in 1970 (28 percent) but a
bit lower than in 1977 (39 percent). The view that card use is ‘‘bad’’ is stronger in
2000 than in either of the earlier years.
In all three surveys, views among holders of banktype cards were more
favorable than those among the population generally. Nonetheless, unfavorable
views among cardholders have increased over the decades; negative attitudes among
cardholders are much more common in 2000 (42 percent) than they were in 1977 (14
percent). This finding is interesting because card use is also much greater in 2000.
In 2000, holders of bank-type cards are about equally divided in their opinions that
credit card use is good or bad, much different from 1977, when a considerably
larger proportion had a favorable opinion.
Consumers’ opinions about credit cards also vary depending on their use of
and experience with cards. Less enthusiastic viewpoints are somewhat more
common among those who use credit cards as credit devices rather than primarily as
substitutes for cash
75
Customer attitude
or checks. Specifically, cards are viewed less positively by those who have three or
more cards, have an outstanding balance of more than $1,500, have transferred a
balance between cards, hardly ever pay their outstanding balance in full, hardly ever
pay more than the monthly minimum, or have received a collection call.
Conversely, those who have fewer
cards, have no balance or a low balance
outstanding, generally pay more than the
minimum, or have not received a
collection call have more favorable
views (not shown in the table).
Demographic measures also appear to be
related to attitudes toward credit cards,
but the relationship is not as strong as
that associated with the variables related
to the use of cards.
Attitudes toward Card Features, Card Issuers, and Other Users

To examine why card users might have the general attitudes about credit cards that
they do, the 2000 survey also asked questions about specific features of
credit cards and about card issuers and users. The questions took the form of
statements with which respondents could agree or disagree. Although data
76
Customer attitude
from earlier years are not available for comparison, responses to these questions
reveal an interesting divergence of views that might help explain why
overall attitudes have deteriorated. The responses suggest that the current negativity
may have arisen in part from an individual’s perceptions of other consumers’
difficulties rather than from the individual’s own experiences. Without data from
earlier periods and questions designed specifically to address this hypothesis, one
cannot be certain, but from the 2000 survey results it seems likely that as card use
has become more common, negative opinions about card use may have increased as
a result of perceptions about ‘‘the other guy.’’ Views about personal experiences
with credit cards, in contrast, are much more positive.
Consumers in 2000 seem to be concerned about specific practices of credit
card issuers. Most holders of bank-type credit cards (more than 80 percent) believe
that the annual percentage rates charged on outstanding balances are too high (table
4). They also express concern over privacy practices. In contrast, relatively few
express concern about billing accuracy.
Consumers’ feelings about experiences with credit cards in general are even more
negative than their feelings about specific practices. Holders of bank-type
credit cards in 2000 believe that too much credit is available, that consumers are
confused about some practices, and that credit users have difficulty getting
out of debt. Somewhat over half said that issuers should not be allowed to market
cards to college students. Moreover, they appear to believe that consumers bring on
themselves many of the problems associated with credit cards: Ninety percent agree
to some extent that overspending is the fault of consumers, not of card issuers.
Survey evidence does not suggest that increasingly negative views of credit cards
have arisen from adverse personal experiences. Rather, consumers’
opinions about their own relations with their current card issuers are much more
favorable than their opinions about the relations of consumers in general.
Approximately nine in ten holders of bank-type credit cards said that they are
satisfied with their dealings with card companies, that their card companies treat
them fairly, and that it is easy to get another card if they are not treated fairly.
Almost seven in ten trust that their own card companies would keep their personal
77
Customer attitude
information confidential, substantially more than the proportion believing that card
companies in general show enough concern about protecting privacy (just under five
in ten). Cardholders’ opinions about their own experiences are almost the reverse of
their views about consumers’ experiences in general, suggesting considerable
concern over the behavior of
others and possibly a belief that ‘‘I can handle credit cards, but other people
cannot.’’
Despite expressed concerns about some practices and experiences, consumers
appear to be satisfied
with the credit card market in general. Approximately nine in ten holders of bank-
type credit cards said that credit cards provide a useful service to consumers, and
about seven in ten said that most people are satisfied in their dealings with card
companies. About six in ten disagreed that consumers would be better off without
78
Customer attitude
cards. These results are similar to those from a 1977 survey of users of
nonrevolving credit (memo items in table 4). It seems that credit and creditors are
not viewed completely favorably, even by users of the service, but that most users
are favorably inclined.
Many holders of bank-type cards in 2000 said that it would be helpful to
include on their billing statement information about the length of time it would
take to pay off the balance if only the minimum payment were made each month.
Exactness in such a calculation assumes, of course, that the consumer
does not use the card during the repayment period and that the balance declines on
schedule. If the balance were to fluctuate substantially, the calculation would be
difficult or impossible, and most likely meaningless (discussed further later).
Survey respondents probably did not consider the implications and complexity of
the calculations but were simply acknowledging a desire for a practical measure of
the burden they are incurring. Many respondents also reported that ‘‘teaser rates’’
are confusing. They could, of course, avoid teaser rates altogether by ignoring the
mailings that promote them; consequently, this survey finding may reflect concerns
among consumers that card issuers have complicated promotions sufficiently that it
is difficult to understand and accept advantageous offers when they are made.
What emerges from these responses to opinion questioning, in sum, is a
multifaceted set of attitudes about credit cards. Multifaceted opinions are not
especially surprising, given that consumers overall seem to think that credit cards
are both good and bad. They believe that finance percentage rates on outstanding
balances are too high, are suspicious of how personal information is used, and have
relatively little confidence in other individuals who use credit
cards. When they imagine ‘‘the other guy’’ in contact with card issuers, whose
behavior is already suspect, they imagine possibly negative consequences, for
example, excessive credit use. When the focus shifts to more-personal experience,
however, they view the outcome much more favorably, suggesting that actual
problems with credit cards are not nearly as widespread as consumers imagine them
to be when they think about the population of largely unknown ‘‘others.’’ On
balance, holders of bank-type credit cards in
79
Customer attitude
2000 believe that credit cards are useful and that consumers are better off with them
than without them—despite concerns over the inability of ‘‘other (unknown)
consumers’’ to exercise self-discipline and avoid overuse; these opinions seem to
mirror earlier views about installment credit. Finally, consumers believe that
additional, and less-confusing, information about payments and rates would be
useful.
CASE STUDY
BANK PROFILE
The Industrial Development Bank of India Limited, now more popularly known as IDBI Bank,
was established as a wholly-owned subsidiary of Reserve Bank of India. The foundation of the
bank was laid down under an Act of Parliament, in July 1964. The main aim behind the setting
up of IDBI was to provide credit and other facilities for the Indian industry, which was still in the
initial stages of growth and development. In February 1976, the ownership of IDBI was
transferred to Government of India.
After the transfer of its ownership, IDBI became the main institution, through which the
institutes engaged in financing, promoting and developing industry were to be coordinated. In
January 1992, IDBI accessed domestic retail debt market for the first time, with innovative Deep
Discount Bonds, and registered path-breaking success. The following year, it set up the IDBI
Capital Market Services Ltd., as its wholly-owned subsidiary, to offer a broad range of financial
services, including Bond Trading, Equity Broking, Client Asset Management and Depository
Services.
80
Customer attitude
The year 2005 witnessed the merger of IDBI Bank with the Industrial Development Bank of
India Ltd. The new entity continued to its development finance role, while providing an array of
wholesale and retail banking products (and does so till date). The following year, IDBI Bank
acquired United Western Bank (which, at that time, had 230 branches spread over 47 districts, in
9 states). In the financial year of 2008, IDBI Bank had a net income of Rs 9415.9 crores and total
assets of Rs 120,601 crores.
Today, IDBI Bank is counted amongst the leading public sector banks of India, apart from
claiming the distinction of being the 4th largest bank, in overall ratings. It is presently regarded
as the tenth largest development bank in the world, mainly in terms of reach. This is because of
its wide network of 509 branches, 900 ATMs and 319 centers. Apart from being involved in
banking services, IDBI has set up institutions like The National Stock Exchange of India (NSE),
The National Securities Depository Services Ltd. (NSDL) and the Stock Holding Corporation of
India (SHCIL).
REPORT FROM IDBI BANK
QUESTIONNAIRE
Q. How many types of cards do you issue?
A. Debit card and Credit card. In credit card silver card, gold card etc.
Q. When such cards are issued what customers should do for that?
A. They should maintain an account with the bank.
Q. What are the new ideas coming in respect of plastic money?
81
Customer attitude
A. Air ticket, Railway reservation ticket, Mobile banking all this can be made
through plastic cards.
Q. How do you issue pin no. to customers why precautions to be taken?
A. The card and pin is issued to customers by two different couriers to avoid frauds for
e.g. If same courier is made to issue both card and pin then he can use the customer’s card.
The card and pin issued by the two different couriers is verified by the bank through
customers.
Q. How many customers in your bank use plastic card?
A. Out of 20,000 customers not less than 1,000 people use plastic cards.
Q. What is your opinion about plastic money?
A. Plastic money is an way to deal with daily needs. Some people in our bank especially old
people even if they had applied for plastic money and they got it still they return it because
they are habitual to paper currency they feel that plastic money is more risky as compared
to paper money but which is not the case if plastic money is lost you can stop the payment
by contacting to the bank but if plastic money is lost it is lost forever. Plastic money are
more used by middle and younger generation people. So according to me plastic money is
still growing.
Q. What do you think about fake notes?
A. Now-a-days fake notes are available of many denomination such as 1000, 500,100, 50,
20. The fake notes can be identified by our finger tip which is sensitive because the original
notes quality i.e. paper quality is far more different than fake notes and as we are very
habitual to paper notes so it is easily identifiable.
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Customer attitude
CONCLUSION
Plastic money is of great use in todays busy world and as far as time saving is
concerned. Since paper notes are more risky than plastic money. The transactions
take place in plastic money is very easy and customers get satisfied easily.
Out of 100% only 10-20% people use plastic money approx. out of which
many of the people are unaware of it and many of the people are not comfortable
or don’t want use it as they feel that paper notes are more safer than plastic
money.
People can take credit through plastic money i.e. credit card as and when
required. It is also observed that there are frauds in plastic money some of them
can be solved and some of them cannot be solved.
83
Customer attitude
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Customer attitude

towards plastic money

“A Study on Changing Attitude of Customers towards Plastic Money”

Banking & Insurance

Mr. Akhilesh G. Pillai

BIRLA COLLEGE OF ARTS, SCIENCE & COMMERCE

Murbad Road Kalyan (W)

“A Study on Changing Attitude of Customers towards Plastic Money”

Banking & Insurance

In partial fulfillment of requirement for the Award of Degree of

Bachelor of Commerce (Banking & Insurance)

Mr. Akhilesh G. Pillai

BIRLA COLLEGE OF ARTS, SCIENCE & COMMERCE

Murbad Road Kalyan (W)

BIRLA COLLEGE OF ARTS, SCIENCE, & COMMERCE, KALYAN

(Conducted by Kalyan Citizens’ Education Society)

BACHELOR OF BANKING AND INSURANCE

I, Mr. Akhilesh G. Pillai, student of T.Y.B.Com (Banking &

I further declare that the information contained in this project report

If words are considered to be signs of gratitude then let these words

I also thank to Prof. Hema Tahilramani who has sincerely supported

I am grateful to all faculty members of Birla College and my

Mr. Akhilesh G. Pillai

SR NO. TOPICS PAGE

It is my proud privilege to present this project on “A study on changing

Objectives of the study:-

• To bring out different types of plastic money offered exclusively by banks.

• To find out the customers attitude towards plastic money.

CH.1 The Introduction of Money

The Rise of Paper Money

The Gold Standard

Credit cards, debit cards and cheques

E-money: the future of cash

First Metal Money

Frauds in Paper Money

Counterfeit money (Indian rupee notes). Fake currency detection

PROBLEMS PEOPLE MAY FACE REPORTING / NOT REPORTING

HOW MUCH MONEY IN INDIA IS FAKE:

Know your Bank Note Currency - Identify fake Indian Rupees

Optical Variable Ink:

CH.2 Plastic Money in India

Plastic Money never saw it Better in India than Now!

Best credit cards (India)

The credit card system started in India

RBI Guidelines on credit card operations

CH.3 EATURES OF PLASTIC CARDS

As well as convenient, accessible credit, credit cards offer consumers an easy

Revenues: Offsetting costs are the following revenues:

Profits and losses

Credit card issuers (banks) have several types of costs:

Frauds in plastic money

Ch. 4 TYPES OF PASTIC CARDS

MasterCard and Visa

Diners Club card

Secured credit cards

Prepaid "credit" cards

Collectible credit cards

A growing field of numismatics (study of money), or more specifically economic (study of

Ch.5 The Rise of Plastic Money