PROJECT REPORT

On PREFERENCE OF CREDIT CARD

SUBMITTED TO IMSAR, M.D. UNIVERSITY, ROHTAK In partial fulfillment for the requirement for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION

2010-2012

SUBMITTED TO: Dr. Rajkumar Proff. MBA Deptt.

SUBMITTED BY: Gargi Verma MBA (B.E.)3rd sem. Roll No.

DECLARATION

I, Gargi, Roll no. Class MBA 3rd Sem. of IMSAR, M.D. University, Rohtak hereby declare that the Project Report entitled PREFERENCE OF CREDIT CARD is an original work and the same has not been submitted to any other Institute for the award of any other degree.

ACKNOWLEDGEMENT

The Project Report of this nature is a difficult task stretching over a period of time. Although this project report is being brought in our name, it bears an imprint of guidance & cooperation of many individuals in the successful & trouble free completion of our project on PREFERENCE OF CREDIT CARD I would like to express my deep sense of gratitude to Dr. Rajkumar (Proff.) MBA Deptt., IMSAR.

GARGI VERMA

PREFACE

The project Report of department of business administration by IMSAR, M.D. University, Rohtak involves the exposure of the student to get an insight into the business situation. This practical training gives ample opportunity to apple ones personality, initiative and lesson capability. I hope my survey report will be valuable for formulating the various policies adopted by the firm that are necessary to employee, so that the company can reduce the problem.

TABLE OF CONTENTS
Declaration Acknowledgment Preface TABLE OF CONTENTS Chapter 1 Introduction Chapter 2 Industry profile Chapter 3 Significance of the study Objectives of the study Chapter 4 Research Methodology  Research Design  Sample selection and Size  Method of Data collection Chapter 5 Limitations of the study Chapter 6 Hypothesis and Interpretation Chapter 8 Findings & Conclusion of the Study Chapter 9 Suggestions

Annexure Questionnaire Bibliography

INTRODUCTION
Consumer financing have become increasingly important in the private sector of India for the last two decades. With the new reforms in the banking sector, the marketing of financial products has become very competitive, creating a need for strategizing the marketing efforts. This study investigates the shift of Indiai consumers towards the use of plastic money, with emphasis on credit cards. A survey of consumers holding (at least) one or no credit card were used for data collection. Variables related to demographics such as age, income level and gender have also been taken into consideration. This study makes (the) use of descriptive variables in terms of analyzing the general attitude about the use of credit cards and the factors contributing towards the selection of (a) one particular credit card over the other. A positive relationship has been found between the income level of a person and his/her possession of the credit card. While making the choice of a credit card the trust in a particular brand name seems to hold a very significant importance in the selection of a credit card, instead of the logo of Visa or Master card. The profession of the person seems to play a very interesting role with their behavior towards credit cards. Our study shows that the bankers hold negative attitude towards the use of a credit card. The moderating variables include the marketing campaign of a particular bank, sales teams support, openness from retailers for accepting credit card instead of cash, knowledge about the true interest 7

rate imposed by the banks and the concept of Islamic mode of financing, etc. Based on our observations, suggestions have also been made for managers to refine the target market.

The credit card penetration rate in India has been slow considering that it is in the market for over 20 years. One of the reasons for the initial slow growth rate was that the product was targeted to the elite class which comprised of less than 10% of the population. But today the market presents a different picture. With increased liquidity of banks, there has been an overall push towards the supply of consumer finance that includes personal loan, house mortgage, credit cards and auto loans. Today, consumer financing forms more than 25% of the total private sector credit (Economic survey, 2006-2007) in India.

In India since the year 2000, there has been a massive reform in the financial sectors by privatization and the restructuring of banks and financial institutions. According to the Economic Survey of India 2007, the financial and insurance sector has seen a startling growth of 18.2% despite the fact that government raised the interest rates over the last two to three years to control the rising inflation in the country. In addition, State Bank of India (SBP) has laid out stringent requirements for banks to get formal approval of those given credit and from the Credit Information Bureau to keep a check on non performing loans.

However, SBP holds no strict regulation for the issuance of credit cards in the prudential regulations as compared to the disbursement of personal loans, auto loans and house mortgages. The limit of credit cards can be extended to two million rupees in case of a privileged customer.

The importance of credit cards, both as a payment and short-term financing medium to today's consumers, is no longer debatable (Chakravorti and Emmons 2001; Hayhoe et al. 2000).

The unsecured loans, in the form of credit cards, are increasing at a high rate. According to the Economic Survey of India 2006-2007 the credit card holders are increasing at the rate of 50% annually. In December 2006, the total credit card amount outstanding was Rs. 39198 Million (a substantial increase from Rs. 19340 Million in June 2005. Yet the market remains unsaturated and a low number of cardholders exist as compared to other developing countries.

Competition in the financial industry has forced many players in the market to offer similar prices on deposits and loans. The financial institutions seek new, non-price factors to market their products. These can then be used as a means of differentiation to achieve higher revenues and improve market share (Worington 2005).

On the consumer's side, consumers generally have different motives for holding cards. They also have different incentives to incur the time and psychological costs of searching for lower interest rate terms (Kim, F. Dunn, and E. Mumy 2005). But for a Indiai consumer, who is slowly and gradually accepting the use of plastic money, there is a need for proper segmentation, as there are different explanations for the use of credit card. On the other side the gap between the consumption and saving is widening up at the expense of financially insecure customers, who are unable to make the payments and have to pay more penalties in return. The highest default

within the consumer portfolio has been increased from 1.4 percent in December, 2006 to 3.7 percent in March, 2007.(Ghani 2007).

Since credit card debt is clean and non-secured loans, where no collateral is required, Banks are exposing themselves to higher risks and covering the cost from the end consumers in return. In terms of growth, the mortgage loans and credit card debts have the highest growth during the last couple of years (H.Kazmi 2007).

Now, all the banks are competing for the same pocket of consumers in terms of credit cards, and the majority carry multiple credit cards. We have seen new trends in the credit cards market in terms of customization of credit cards (introduced by UBL to allow a customized picture on the credit card), Awami card (introduced by Askari Commercial Bank) and Co branding of cards (e.g Abn amro Bank and U-lone), and so on. Yet there is a need to refine the credit card strategies by understanding the perception and attitude of potential and existing customers. This study attempts to observe the general behavior and attitude of the Indiai consumers in the credit card market.

10

CONSUMER BEHAVIOUR

The Consumer behaviour plays an important part in developing a relationship between the customer and the marketer. In this, the marketer identifies with his customers & thinks from customer's prospective. If purchase represents customer's consumption motives & purposes, the post-purchase behaviour indicates whether or not those purposes & motives have been achieved. Thus, purchase activity is the means while post-purchase is an evaluation. The formation of satisfaction or dissatisfaction is, however a function of many factors. These factors are as follows Use, occasion of product.  Prior experience of product.  Personal expectation & norms.  Time tag b/w the choice and use of the product.  Cultural norms.  Group norms.

11

Need Recognition

Information Search

Valuation of Alternatives

Purchase

Post-purchase

Analyzing what happens after a sale is as important as understanding what causes consumer to buy in the first place. In fact because this is an analysis of actual rather than potential customers and purchase situations, marketers consider post-purchase behavior of primary importance in its impact on future sales. Analyzing both positive & negative post-purchase behavior is a very effective means through which goods & services can be improved, promotions better targeted & strategies reshaped both to keep current customers & to new ones like them.

12

Consumer Behaviour is analyzed after selling goods & services. In this the marketer takes the views of the consumers for a particular good or service. We can also call it as feedback from consumers to make goods and services more effective & maintaining good & long term relations b/w consumers & marketer. In present scenario customer is the king & marketer can't neglect them. Consumer Behaviour is of two types:-

1. Positive post-purchase behaviour. 2. Negative post-purchase behaviour.

Positive Post-Purchase Behaviour

The most positive outcome from achieving customer satisfaction is to gain loyalty. Loyalty, in its simplest sense, is to a product, brand, marketer that results in his levels of repeat purchase. Consumers might purchase the same brand due to some another reasons, but unless there commitment, they are not considered as loyal. When the consumers are satisfied with the product and have good opinion about the product & the brand it shows their positive postpurchase behavior.

Negative Post-Purchase Behavior

Negative post-purchase behavior takes several forms, each of which can erode brand & outlet loyalty & diminish customer satisfaction. Some negative behavior are - such as the lack of taking services or not guiding to other potential customers, producing more & more complaints.

13

These may be very harmful for an organization because it can damage the reputation of the company & also can decrease the sale of the product.

It can be caused due to following reasons-

Negative Word-of-Mouth Rumor Complaint Behavior

14

LITERATURE REVIEW

Credit cards, including store cards and bankcards, serve two distinct functions for consumers: a means of payment and a source of credit (Ausubel 1991; Chakravorti 1997, 2000; Chakravorti and Emmons 2001; Slocum and Matthews 1970; Stavins 2000). Based on the main use of credit cards and the benefits sought, credit card users can be segmented into two groups: convenience users and revolvers (Lee and Hogarth 1999). Convenience users tend to employ credit cards as an easy mode of payment; typically pay their balance in full upon receiving the statement. Revolvers, on the other hand, use the card principally as a mode of financing and chose to pay interest charges on the unpaid balance. According to the consumer behavior literature, consumer usage behavior and the benefits sought from a product or a service are one of the best predictors to explain consumer purchase behavior (Peter and Olson 1999).

Credit cards also serve as an open-ended, easily available credit source ( Lee and Kwon 2002). When consumers use credit cards as a mode of financing, credit cards compete with bank loans and other forms of financing (Brito and Hartley 1995). Credit cards allow consumers to borrow within their credit limit without transaction costs, which includes all the time and effort involved with obtaining a loan from a financial institution. This convenience attracts many consumers to pay high interest on outstanding credit card balances, rather than taking the time to apply for a loan with a lower interest rate. As a result, credit cards account for a substantial and growing share of consumers' debt (Canner and Luckett 1992).

The popularity of credit cards as a payment medium has been attributed to the convenience of

15

not carrying cash and checks, the limited liability of lost/ stolen cards, and additional enhancements, such as dispute resolution services and perks (i.e., frequent-use awards programs) (Chakravorti 1997, 2000; Chakravorti and Emmons 2001; Whitesell 1992). They are frequently used for convenience, telephone and Internet transactions.

The behavior and the attitude of the consumer towards the use and acceptability of credit cards differ for psychographic reasons (Yang, James and Lester 2005). Xiao, Noting and Anderson (1995) devised a 38-item scale to measure affectiveness, cognitive and behavioral attitudes towards credit cards. Affective attitudes involve emotional feelings (e.g. My credit card makes me feel happy); cognitive attitudes involve thoughts (e.g. Heavy use of credit cards results in heavy debt); while behavioral attitudes involve actions (e.g. I use my credit card frequently).

Many consumers value uncollateralized credit lines for making purchases when they are illiquid (i.e. before their incomes arrive), even at relatively high interest rates. Because of limited alternatives to short-term uncollateralized credit, the demand for such credit may be fairly inelastic with respect to price (Brito and Hartley 1995).

Ausubel (1991) suggests that consumers may not even consider the interest rate when making purchases because they do not intend to borrow for an extended period when they make purchases. However, they may change their minds when the bill arrives.

Stavins (1996) argues that consumers are somewhat sensitive not only to changes in the interest rate but also to the value of other credit-card enhancements such as frequent-use awards,

16

expedited dispute resolution, extended warranties, and automobile rental insurance. However, she agrees with Ausubel (1991), Calem and Mester (1995) that lowering interest rates may attract less creditworthy consumers, therefore dissuading some credit-card issuers from lowering their interest rates. According to Jeans S. Bowers (1979) longitudinal study, low income users of credit cards tend to use the cards for the installment feature rather than for service features such as convenience, safety, or identification. It has been suggested that the installment feature of credit is needed by the low income consumer to permit purchases such as automobiles, furnishings, and other consumer durables. Demographics also seem to play a vital role in making a choice and the use of credit cards as a convenience user or revolver. Age, income level has been studied previously and suggest some indication for correlation between demographic and use of credit card. According to the study conducted by Jean Kinsey (1981) the probability of having credit cards and the number held was correlated highly with age and occupation. However these two characteristics were less important than the place of residence, use of checking and savings accounts, and attitude towards credit.

17

CONCEPTUAL FRAMEWORK

In India, the banking reforms have made the market more competitive and attractive. There is a need to study the customer and how do they behave towards use of plastic money, specially through the use of credit cards. As compared to the rest of the economies, credit card has not been a driving source for the Indiai economy. The development of financial services marketing has been slow and for a long time the industry was primarily product led. According to Raj Singh and Evertt (1996), banks focus on geographical, socio-economical and psychological characters to segment the market for financial services, although this is not the right predictor of the buying behavior. For this purpose, a better approach is to focus on the customer's attitudes and behaviors and segment them by benefit segmentation. Knowing consumers' level of interest in alternative benefits is important in shaping, and perhaps changing a company's product portfolio.

18

CREDIT CARD INDUSTRY IN INDIA

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 product and service on credit. Basically banks retail stores and other businesses issue these. Major Banks issuing Credit Card in India State Bank of India credit card ( SBI credit card) Bank of Baroda credit card or BOB credit card ICICI credit card HDFC credit card IDBI credit card ABN AMRO credit card 19

HSBC credit card Citibank Credit Card Global player in credit card market Master card Master card is a product of MasterCArd international and along with VISA are distributed by financial institutions around the world. Cardholders borrow money against a lline of credit and pay it bacck ith interest if the balance is carried over from month to month. Its products are issued by 23,000 financial insitittions in 220 countries and territories. In 1998, it had almost 700 million cards in circulation, whose users spent $650 billion in more than 16.2 million locatioins. VISA Card VISA cards is a product of VISA USA and along with Mastercard is distributed by financial institutions around the world. A VISA cardholder borrows money against a credit line and repays the money with interest if the balance is carried over from month to month in a revolving line of credit. Nearly 6000 million cards carry one of the VISA brands and more than 14 million locations accept VISA cards . American Express

20

The worlds favorite card is American Express Credit card. More than 57 million are in circulation and growing and it is still growing further. Around US $123 billion was spent last year through American Express Cards and it is poised to the worlds No. I card in the near future. In a regressive US economy last year, the total amount spend on American Express card rose by 4 percent. American Express cards are very popular in the U.S., Canada, Europe and Asia and are used widely in the retail and everyday expenses segment. Diners Club International Diners Club is the worlds No. 1 Charge Card. Diners Club cardholders reside all over the world and the Diners Card is a all time favorite for corporate. There are more than 8 million Diners Club cardholders. They are affluent and are frequent travelers in premier business and institutions, including fortune 500 companies and leading global corporations.

21

The following are some of the varieties of credit cards in India. ANZ Gold ANZ- Silver Bank of India- Indiacard Bol- Taj Premium Bol- Gold BOB- Exclusive BoB-Premium Canara Bank- Cancard Citibank Gold Citibank- Silver Citibank WWF card Citibank visa card for women Citibank Cry Card Citibank Silver International Credit Card

22

Citibank Womens International Credit Card Citibank Gold International Credit Card Citibank Electronic Credit Card Citibank Indian Oil Internaitonal Credit Card Citibank Citi Diners Club Card HSBC Gold HSBC- Classic ICICI Sterling Silver Credit Card ICICI Solid Gold Credit Card ICICI True Blue Credit Card SBI Card Stanchart Gold Stanchart- Executive Stanchart- Classic Thomas Cook Standard Chartered Global Credit Card.

23

Standard Segregation of credit card Standard Card it is the most basic card ( sans all frills) offered by issuers. Classic Card Brand name for the standard card issued by VISA Gold Card/ Executive Card A credit card that offers a higher line of credit than a standard card, income eligibility is also higher. In additions, issuers provide extra perks or incentives to cardholders. Platinum card A credit card with a higher limit and additional perks than a gold card. PROGRESS OF CREDIT CARD BUSINESS The number of members using credit card and the number of establishment ownering it after joining the scheme have increased vastly over the past few years. Many Indian banks have joined hand with international banks to provide this card facility on a worldwide based or a selected international centers. The number of credit card holders which was 8 lakh (1997), have increased to 25 lakh now. The credit card network is also fast spreading in smaller cities and towns besides by cities and metros.

24

ELIGIBILITY
A bank who is in the business of credit card grant subject to some rules and guidelines to its eligible customer before a credit card is given to a customer the banker analysis following factors and accordingly fixes a credit limit if found eligible.

a) The customer should have a saving or current account with the bank. b) His/Her monthly or annual are regularly received and credit to this bank account. c) His/Her assets and liabilities are known and reported to the bank. He is considered credit worthy up to a limit depending on his income, assets and expenditure and past dealing with the bank. The eligible member is then asked to fill in an application from where in details of account number, name and address, income, wealth, status and evidence statement of income etc. are given. This application form is processed and credit limit is established. This credit limit differs from individual to individual and Bank to bank. The maximum limit depends upon the users income. Some banks have fixed of Rs. 1 lakh, 2 lakh or 5 lakh. ARRANGEMENTS WITH BANKER Credit card is the key to opening of the bank accounts. The credit card charges and other payments utilized through credit cards are debited to his account. The banker issues a monthly statement and sent to cardholder. This statement contains details of the charges. 25

The following are some of the plus features of credit card in India. Hotel discounts Travel fare discounts Free global calling card Lost baggage insurance Addident insurance Insurance on goods purchased Waiver of payment in case of accidental death Household insurance Benefits of having a Credit card A credit card makes it easy to buy something now and pay for it later. Its much safer to use a credit card than to carry around cash. If you lose your credit car, you can ask your credit card company to cancel your card, and no one else can use it. But if you lease cash your money is gone. Credit cards are also convenient. Your can use them to make hotel, are rental and other reservations. You can buy items over the phone or online. You can also use

26

credit cards for emergencies, like unexpected care repairs, when you dont have the cash to cover the expenses. A Credit card gives you a credit history, which helps to get home loans and other credit in a future. HOW CREDIT CARD BENEFITS THE BANK a) Credit card increases the customer base of the bank. b) Credit card increases credit portfolio of the bank. c) Credit card enhances the reputation of the bank public. d) The business establishments, which accept these cards, also give some incentives or commission to bank, by which the bank gains. HOW CREDIT CARD BENEFITS THE CARD HOLDER a) Cardholder can avoid carrying cash and risk of its lose. b) Cardholder enjoys a credit limit up to which he makes purchases per his need and pay at leisure. c) Cardholder gets some period of 30 to 45 days the outstanding overdraft. d) Credit cards serve as a status symbol. e) Money can be withdrawn at any time over the day and night. It provides free accidentals insurance cover.

27

f) It provides purchase protection loss of travel, documents, loss of delay in arrival of baggage screeched baggage.

BENEFITS TO BUSINESS ESTABLISHMENT a) Business increases to great extent of business houses that accept credit cards. b) Reputation of the business establishment increases. c) Customer based increases. What are the cost of having a credit card? All credit cards have finance charges foror not paying your balance in fill each moneh, but you could save a lot of money by shopping around for the crdit card that offers you the best terms. Key credit card terms to took at are the annual percentage rate ( APR), annual fee, grace period, and late payment charge. Shop for a card with a grace period that gives you enough time to pay your bills on time without charging you interest. Credit card with no grace period start charging you fees as soon as you buy something on your credit card. Where can I get credit card ? Your mail is probably full credit card offers from national companies. Most local banks and Community Development Credit Unions ( CDCUs) offer credit cards as well. The fees, charges and benefits for credit cards very among different 28

companies. When youre choosing a card, shop around. CDCUs often offer the best rates and lowest fees, since they are not trying to make a profit like credit card companies are. Some large department stroes also offer credit cards that only can be used in their stores. Usually, when you apply for a store credit card, you get a one-time discount on your purchase that day. But these credit cards have limited uses and often carry high finance charges. How do I get a credit card If you are least 18 years old, have a regular source of income and good credit rating; you can probably qualify for a credit card. Before you submit a credit card application, order a copy of your credit report to make sure all of the information on it is correct. After you check your credit report, and fix any wrong information, you can start carefully researching credit card rates, fees and benefits. At the same time, make a list of the features you want in a credit card. Call any credit any credit companies youre interested in for question and other available plans.

29

OBJECTIVES OF THE STUDY

1. What is the general perception about credit card usage among the non-card holder? 2. What factors contribute towards the choice of a credit card out of a pool of factors? 3. What are the different motives behind carrying multiple or single credit cards? 4. Does the level of income and the average amount of transaction per month exhibit a relationship?
5. What is the general perception about the usage of credit cards among

nonusers?

30

RESEARCH METHODOLOGY

Research Problem: - Knowledge of stock exchange Research Design: - Exploratory & Descriptive Data Type: - Primary & Secondary Data Collection Tools: - Questionnaire, financial records

Sampling

Sampling Area: - Rohtak Sampling Size: - 1000 Sampling Unit: - Past & Current records Sampling types: - Non probability

31

Research Design:-

Research design stands for advantage planning of methods to be adopted for collecting the relevant data and the techniques to be used their analysis keeping in the view the objective of research and availability of time and money. We can classify research design mainly four parts: Exploratory research studies are those whose main purpose is that of formulating a problem for more precise investigation of developing the working hypotheses for an operational point of view.  Descriptive research studies are those studies, which are concerned with describing the characteristics of a particular individual or of a group.  Diagnostic research studies determine the frequency with which something

occurs.  Experimental research studies are those where the researcher test the hypothesis of casual relationship between the variables.

Our research study carried out is exploratory and descriptive in nature. Descriptive research includes surveys and fact-finding and enquiries of different kinds.

32

In this research we seek to measures like:  Preferences of people among various investment options. Awareness of mutual funds etc.

Sampling

All the item under consideration in any field of inquiry constitute a universe or population is known as a census inquiry. This is the population is known as a census inquiry. This type of inquiry involves a great ideal of time, money and energy. Hence quite often a few items are selected from the universe for the purpose of the study. The item so selected constitutes what is technically called a sample. The sample size taken in this research is 100. In our research we have used Non probability sampling.

33

Data Collection Method:-

When we go for solution of any real life problem it is often found that data at hand are inadequate and hence, it becomes necessary to collecting the appropriate data that differ considerably in context of money costs, time and other resources at the disposal of the researcher.   Primary Data Secondary Data

Primary Data: - Primary data are those which are collected a fresh and for the first time and the thus happen to be original in character. These data can be collected through experiment, we have collected primary data by using:-

 

Questionnaires Telephonic Conversation

34

Secondary Data: - Secondary data are those which have been collected by some one else and which have been passed through the statistical process. In our research we have collect secondary data by help of:-

 


Research Reports Magazines

Websites

35

LIMITATIONS SOF THE STUDY

However I have tried my best in collecting the relevant information yet there are always present some limitations under which researcher has to work. Here following are some limitations under which I had to work to as shown below:

Limited Area: - The area covered in this project was only Rohtak, not whole haryana.

Few interactions: - There was little interaction with the people as we were only limited with in an area.

Communication Problem: - The accurate decision cant be taken by the information collected; people were relocating while giving their personal information.

36

HYPOTHESIS AND INTERPRETATION

Table 1: Sample characteristics

Part A: Individuals who do not carry credit card No. of respondents

Male Female Total

47 21 68

Age:

Concentration of sample

Intend to buy credit card: Yes No

15-25 Years 26-35 36-45 46 and above Total

58.82% 29.41% 1.47% 10.29% 100%

21 7 1 1 30

19 13 0 6 38

Profession:

Concentration of sample

Intend to buy credit card Yes No

Banker Engineers Doctor Lawyer Educationist Management Artists Others * Total

16.18% 19.12% 4.41% 1.47% 17.65% 14.71% 1.47% 25%

1 7 2 1 4 4 1 10 30

10 6 1 0 8 6 0 7 38

37

Income:

Rs.5000-20000

66.18%

Income & intend to buy credit card:

Rs.21000-35000 Rs.36000-50000 Rs.51000-65000 Rs.65000 & above

17.65% 8.82% 5.88% 1.47%

Sig (2-tailed) N Pearson correlation

0.931 68 -.011

Potential perceived problems in the use of card:

Lack of trust while snaking transaction Unacceptability, at retail outlet High interest rate Terms and condition of banks Technology linkage issues Perceived uses of carrying credit card: Additional credit line Fashion statement Secure as compare to other payments mode Ease while shopping Convenience

22.06% 20.59% 26.47% 14.70% 16.18% 12% 9% 26% 29% 24% Yes No

Importance of Advertisement in compelling the decision to open credit card accoun Importance of bank name and standing of bank in the market for credit card Use of plastic money in the future as very promising 65% 35% 70% 30% 57.3% 42.7%

* Others include government employees, students, insurer and homemakers

38

Table 2: Sample characteristics

Part B: Individuals who carry credit card No. of respondents

Male Female Age: Concentration Main card Supplement card

47 16 Avail reward points of sample

Yes 15-25 years 26-35 36-45 46 and above Total Age: Hold more than

No 30.16% 42.86% 15.87% 11.11% 100%

Yes 14 27 10 6 57 5 0 0 1 6

No 9 13 6 2 30 10 14 4 5 33

Convenience user

Revolver

one credit card

15-25 Years 26-35 36-45 46 and above Total Profession:

19 27 10 7 63 Concentration of sample

11 17 4 3 35

8 7 9 4 28

Banker Fngineers Doctor Fducationist Management Artists Others * Total

26.98% 19.05% 3.71% 14.29% 26.98 9.52% 25% 100

39

Income: Rs-5000-20000 Rg.21000-35000 Rs.36000-50000 Rs 51000-65000 Rs.65000 & above 30.16% 23.81% 11.11% 20.63% 14.29% Income & avg. transaction amount per month. Sig(2-tailed) N Pearson correlation 0.001 68 0.397 ***

** Correlation is significant at the 0.01 level (2-tailed).

Motivation behind carrying multiple cards: Better acceptability To avail different offer More credit line options Fashion statement 17% 21% 58% 4%

Factors determine choice of credit cards: Looks of the card Co branding offer Power by (Visa/Amex/Master) Credit limit Marketing campaign Image of issuer Bank 12% 3.17% 22% 32% 7% 24%

40

CONCLUSION
Recommendations From the analysis, it is evident how the customer preferences vary from one age group to another. Therefore, it is recommended that product development should be based on the information taken from the market, which otherwise leads to issues like product evolution in a wayward direction such as the intricate concept of cobranding that is being introduced by a majority of banks. Similarly reward schemes that do not result in an increased usage of the product are futile. Redemption of reward points is also a complex process. It seems that the customers hardly benefit from them. Furthermore, issues like religious reservations, cultural inhibitions towards being in debt, and the unfamiliarity with using plastic money need to be seriously addressed. Segmentation strategies should be re-evaluated. The current strategies cluster the salaried class together, without giving consideration to their age. However, within the salaried class, individuals have different demographics, attitudes and opinions. Credit cards can be best targeted to people the age of 18-24, which forms almost 50% of the population. This age group treasures convenience the most. They are technology savvy and do anything for the sake of the perceived status. The study shows that the convenience and security element that credit cards offer is most important for women. Considering the increasing number of independent working women, a specialized product that gives extra benefits for shopping household items can be launched focusing to these women. A proper attention should be given to market supplementary cards. Encouraging the current credit cardholders to purchase supplementary cards for their spouses can help increase the profitability of this already established product. Affinity cards are meant for

41

a group of individuals belonging to a particular organization or an association. Considering the collective culture in India, a customized credit card can be offered for individuals belonging to a particular association. For example, cards can be designed for the Steel mill association of India the textile association of India, the donor community of the Shaukat Khanum Cancer hospital and other NGOs like Edhi Foundation, etc. Like all other financial services where customer relationship plays a defining role in building loyalties, same is the case for credit cards also. Customers can be delighted by giving them instant rewards at the point of purchase. Unfortunately, for this particular product the emphasis has been on selling the product to the customers and not building a relationship with the customers. For card business, a very important role is played by the customer support service. Developing a competent and helpful customer support department can create a positive image of the issuing bank. As opposed to the marketing campaigns in the world where the message is mostly based on dream and fantasy, a marketing strategy which entices general population to use credit cards to get what they always wished for will be a smart tactic.

As far as religious inhibitions to incurring interest are concerned, card issuers can work on establishing a new credit card model, which originates from the principles of Islamic Banking. This will help companies in gaining higher penetration amongst the masses, which are concerned about these issues. Banks need to address the technological issues faced by cardholders. Acceptability level of cards at retail level is still low. Collectively, the issuers need to devise strategies to solve these technological issues by increasing the number of machines in the market. In addition, an efficient technical service team can be formed for every city, which solves any technical problem as soon as it occurs.

42

Several research papers can be developed from this study. For example, this study can be replicated to gauge customer preferences among the youth in India. Researchers can also look at the importance and feasibility of the credit cards in India and develop effective supplementary credit card services there.

43

QUESTIONNAIRE
Part A: Individuals who do not carry credit card

Age: 15-25 Years 26-35 36-45 46 and above Profession: Banker Engineers Doctor Lawyer Educationist Management Artists Income: Rs.5000-20000 Rs.21000-35000 Rs.36000-50000 Rs.51000-65000 Rs.65000 & above

44

Potential perceived problems in the use of card: Lack of trust while snaking transaction Unacceptability, at retail outlet High interest rate Terms and condition of banks Technology linkage issues Perceived uses of carrying credit card: Additional credit line Fashion statement Secure as compare to other payments mode Ease while shopping Convenience Importance of Advertisement in compelling the decision to open credit card account Yes No

Importance of bank name and standing of bank in the market for credit card Yes No

Use of plastic money in the future as very promising Yes No

45

Part B: Individuals who carry credit card Age:

15-25 Years 26-35 36-45 46 and above Profession: Banker Engineers Doctor Lawyer Educationist Management Artists Income: Rs.5000-20000 Rs.21000-35000 Rs.36000-50000 Rs.51000-65000 Rs.65000 & above

46

Motivation behind carrying multiple cards: Better acceptability To avail different offer More credit line options Fashion statement Factors determine choice of credit cards: Looks of the card Co branding offer Power by (Visa/Amex/Master) Credit limit Marketing campaign Image of issuer Bank

47

REFERENCES

Ausubel, Lawrence M. 1991. The failure of competition in the credit card market. American Economic Review, 81 (1): 50-81. Dagobert, Brito L. and Hartley, Peter R. 1995. Consumer rationality and credit cards. Journal of Political Economy, 103 (2): 400-433. Calem, Paul S. and Loretta, J. Mester. 1995. Consumer behavior and the stickiness of credit- card interest rates. American Economic Review, 85 (5): 1327-1336. Canner, Glenn B. and Luckett, Charles A. 1992. Developments in the pricing of credit card services. Federal Reserve Bulletin, 78(9): 652-666. Chakravorti, Sujit and Emmons, William R. 2001. Who pays for credit cards? Federal Reserve Bank of Chicago, Policy Studies EPS: 2001-1. The Economic Survey of India. 2006-2007. Extracted from website of Ministry of Finance. Goyal, Anita. 2004. Role of supplementary services in the purchase of credit card services in India. Asia Pacific Journal of Marketing and Logicsics, 4(1): 36-45. Hayhoe, Celia Ray; Leach, Lauren J.; Turner, Pamela R; Bruin, Marilyn J. and Lawrence, Frances C. 2000. Differences in spending habits and credit use of college students. Journal of Consumer Affairs, 34 (1): 113-133. Kinsey, Jean. 1981. Determinants of credit card accounts: An application of Tobit analysis Journal of consumer Research, (8): 179-180.

48

Bowers, Jeans. 1979. Consumer credit use by low income consumers who have had a consumer education course: An exploratory study. The journal of consumer affairs, 13(2): 340-341. Lee, Jinkook and Kyoung-Nan Kwon. 2002.Consumers 'use of credit cards: Store credit card usage as an alternative payment and financing medium. The journal of Consumer Affairs, 36(2): 248. Lee, Jinkook and Hogarth, Jeanne M. 1999. Returns to information search: Consumer credit card shopping decision. Financial Counseling and Planning, 10(2): 23-34. Paul, Peter J. and Olson, Jerry C. 1999. Consumer Behavior and Marketing Strategy, 5th ed., Boston, Irwin, McGraw-Hill. Minhas, Raj Singh and Jacobs, Everett M. 1996. Benefit segmentation by factor analysis: an improved method of targeting customers for financial services. International Journal of Bank Marketing, 3-13. Kazmi, Shabbir H. 2007. The growth of consumer Finance: cost is a major constraint. India and Gulf Economist, XXVI(44):12. Ghani, Shamsul. 2007. Credit cards: Financing or fleecing, India and Gulf Economist, XXVI(44): 14. Slocum, John W. Jr. and Matthews Lee H. 1970. Social class and income as indicators of consumer credit behavior. Journal of Marketing, 34(2): 69-74. Stavins, Joanna .1996. Can demand elasticities explain sticky credit card rates? Federal Reserve Bank of Boston. New England Economic Review, (July/ August): 43-54.

49

Kim, Taehyung; Dunn, Lucia F., and Mumy, Gene E. 2005. Bank competition and consumer search over credit card interest rates. Economic Inquiry, 43(2): 344. Whitesell, William C. 1992. Deposit banks and the market for payment media. Journal of Money, Credit and Banking, 24(4): 246-250. Worthington, Steve. 2001. Afiintity credit cards: a critical review. International Journal of Retail & Distribution Management, 12(2): 484-510.

50