TECHNOLOGY IN BANKING IMPORTANT QUESTION

Important Questions:
1. Briefly explain the various committees Involved in Banking Reforms.

2 Explain the role of RBI

Regulatory Oversight: RBI provides regulatory oversight to ensure that banks adopt secure and
efficient technological solutions in their operations, including cybersecurity measures and data
protection standards
Promoting Innovation: RBI encourages innovation in banking technology by providing
guidelines and frameworks for the adoption of new technologies such as mobile banking, digital
payments, and blockchain while ensuring compliance with regulatory requirements.
Regulator of Banks and Financial Institutions
Regulator of Payment and Settlement Systems

3. Explain the advantages of Internet Banking.

1. Convenience: Internet banking offers customers the convenience of accessing their
accounts and conducting various banking transactions anytime, anywhere, without the
need to visit a physical branch. This accessibility enhances customer experience and saves
time.
2. Cost Efficiency: Internet banking reduces operational costs for both banks and customers
by eliminating the need for physical infrastructure and personnel required for traditional
banking services. This cost efficiency often translates into lower fees and charges for
customers and higher profitability for banks.
3. Accessibility
4. Time-saving
5. Enhanced Services

4. what is a Debit Card?

A debit card is a payment card issued by a bank or financial institution that allows cardholders to
access funds directly from their checking or savings account to make purchases or withdraw cash.
Here are the key points regarding debit cards:
 Direct Access to Funds: Unlike credit cards that allow users to borrow money up to a certain
credit limit, debit cards enable users to spend only the money they have in their bank account.

1
 TECHNOLOGY IN BANKING IMPORTANT QUESTION

 Payment Functionality: Debit cards can be used for various payment transactions, including
in-store purchases, online shopping, bill payments, and cash withdrawals from ATMs.
 PIN-Based or Signature-Based Transactions: Debit card transactions can be authenticated
using a personal identification number (PIN) or a signature, depending on the card network
and the merchant's requirements.
 Linked to Bank Account: Each debit card is linked to the cardholder's bank account, and
transactions made with the card result in immediate deduction of funds from the account
balance.

5. Explain the process involved in the generation of a new ATM PIN.

 The process involved in generating a new ATM PIN typically involves the following steps:
 Request Initiation: The cardholder initiates the process by visiting an ATM, bank branch, or
through the bank's online or mobile banking platform to request a new ATM PIN.
 Authentication: The cardholder is usually required to authenticate their identity using various
methods such as inserting the debit card into the ATM, providing personal identification
details, answering security questions, or using biometric authentication (e.g., fingerprint or
iris scan).
 PIN Generation Options: The cardholder may be presented with different options for
generating a new PIN, depending on the bank's procedures. Common options include
selecting a PIN of their choice or receiving a randomly generated PIN.
 PIN Selection or Generation: If the cardholder chooses to select their own PIN, they will
typically be prompted to enter their desired PIN using the ATM's keypad. If they opt for a
randomly generated PIN, the system will automatically generate a PIN and display it on the
screen.
 Confirmation: After selecting or generating the new PIN, the cardholder is usually required
to confirm their choice by re-entering the PIN to ensure accuracy and avoid errors.
 PIN Activation: Once the new PIN is confirmed, it is activated and associated with the
cardholder's debit card. The cardholder can immediately start using the new PIN to conduct
transactions at ATMs, make purchases at point-of-sale terminals, or perform other banking
activities.

2
 TECHNOLOGY IN BANKING IMPORTANT QUESTION

 Receipt Generation: In some cases, the ATM or bank terminal may provide a printed receipt
confirming the successful generation of the new ATM PIN. This receipt serves as a record of
the transaction and may include instructions or safety tips regarding PIN security.
 Overall, the process of generating a new ATM PIN is designed to be secure, convenient, and
user-friendly, enabling cardholders to quickly and easily set up a PIN that meets their
preferences and security requirements.

6. Explain the types of ATM.

 On-Site ATMs
 Off-Site ATMs
 White Label ATMs
 Brown Label ATMs
 Mobile ATMs

7. State the features of ATM

 Cash Withdrawal
 Balance Inquiry
 Fund Transfers
 Mini-Statements
 PIN Change

8. what is branch banking?

Branch banking entails the operation of physical bank branches in various geographical locations,
offering a comprehensive suite of banking services to customers. This includes services such as
account opening, deposits, withdrawals, loans, and financial advisory, fostering personalized
customer interactions and community presence.

9. what is E-Banking?
E-Banking, short for electronic banking, refers to the provision of banking services and transactions
conducted over electronic channels such as the Internet, mobile devices, ATMs, and electronic
payment systems. E-banking allows customers to access and manage their bank accounts, conduct
financial transactions, and utilize banking services conveniently without visiting physical bank

3
 TECHNOLOGY IN BANKING IMPORTANT QUESTION

branches. It encompasses various electronic banking products and services, including online banking,
mobile banking, electronic fund transfers, electronic bill payments, and card-based transactions,
among others. E-banking offers customers greater flexibility, accessibility, and convenience in
managing their finances while also enabling banks to streamline operations and expand their reach
beyond traditional brick-and-mortar branches.

10. D/B Traditional Banking and Internet Banking.

Feature Traditional Banking Internet Banking

Operates through online platforms
Physical Presence Relies on physical branches/offices. accessible via the internet.
Remote interaction through online
Interaction Face-to-face interaction with bank staff. platforms.
Transaction Paper-based transactions, manual Electronic transactions, automated
Process processing. processing.
24/7 access from any location with
Accessibility Limited access during branch hours. internet connectivity.
Comprehensive range of services, but with Wide range of services, including self-
Services Offered physical constraints. service options.
Offers self-service features, with less
Personalization Emphasizes personalized service. personalized interaction.
Manual processes may lead to longer Automation and technology improve
Efficiency processing times. efficiency and speed.

11. Explain the functions of CBS.

 Account Management: CBS enables centralized management of various types of accounts,
including savings, current, and loan accounts, facilitating account opening, maintenance, and
closure processes.
 Transaction Processing: It supports real-time processing of transactions such as deposits,
withdrawals, fund transfers, and bill payments, ensuring timely and accurate execution of
banking operations.

4
 TECHNOLOGY IN BANKING IMPORTANT QUESTION

 Customer Relationship Management (CRM): CBS integrates customer data and interactions
across multiple channels to provide personalized services, targeted marketing, and efficient
customer support.
 Integration with Channels: CBS seamlessly integrates with various banking channels such as
Internet banking, mobile banking, ATMs, and branches, ensuring consistent and convenient
banking services across different touchpoints.
 Reporting and Analytics: CBS generates comprehensive reports and analytics on account
activity, transaction volumes, customer demographics, and financial performance, aiding in
decision-making, performance monitoring, and regulatory compliance.

12. Briefly explain the frauds in Internet Banking.

 Phishing: Fraudsters send deceptive emails or messages pretending to be from legitimate
financial institutions, tricking users into divulging sensitive information such as usernames,
passwords, or account numbers.
 Malware Attacks: Malicious software infects users' devices, capturing login credentials or
intercepting sensitive information during online banking sessions, which can then be
exploited by hackers.
 Man-in-the-Middle Attacks: Hackers intercept communications between users and banking
websites, enabling them to eavesdrop on transactions, manipulate data, or steal sensitive
information.
 Account Takeover: Hackers gain unauthorized access to users' accounts by obtaining login
credentials through phishing, malware, or other means, allowing them to initiate fraudulent
transactions or modify account settings.
 Payment Card Fraud: Criminals use stolen payment card information to make unauthorized
transactions online, exploiting vulnerabilities in the payment processing system and causing
financial losses to cardholders and financial institutions.

13. Explain the process involved in EFT.

 Electronic Funds Transfer (EFT) is a digital payment method that allows the electronic
transfer of funds from one bank account to another. Here's a simplified explanation of the
process involved in EFT:

5
 TECHNOLOGY IN BANKING IMPORTANT QUESTION

 Initiation: The process begins when the sender initiates the electronic funds transfer. This can
be done through various channels such as online banking, mobile banking apps, telephone
banking, or in-person at a bank branch.
 Authorization: The sender provides authorization for the transfer by entering the recipient's
account details, including the account number, bank name, and routing number. They also
specify the amount to be transferred and any relevant details such as the purpose of the
transfer.
 Verification: Before processing the transfer, the sender's bank verifies the authorization
details provided by the sender to ensure accuracy and completeness. This may involve
confirming the availability of funds in the sender's account and validating the recipient's
account information.
 Processing: Once verified, the sender's bank processes the transfer request and debits the
specified amount from the sender's account. The funds are then held temporarily while the
transfer is executed.
 Transmission: The sender's bank transmits the transfer instructions electronically to the
Automated Clearing House (ACH) or another payment processing network responsible for
routing the funds to the recipient's bank.
 Settlement: The ACH or payment processing network facilitates the settlement process
between the sender's bank and the recipient's bank, ensuring that the funds are transferred
securely and efficiently.
 Receipt: Upon receiving the transfer instructions, the recipient's bank credits the specified
amount to the recipient's account. The recipient may receive a notification confirming the
deposit, depending on their bank's notification settings.
 Confirmation: Once the funds have been successfully transferred, both the sender and
recipient receive confirmation of the transaction. This may be in the form of transaction
receipts, online banking notifications, or account statements.

14. what is a digital signature?

A digital signature is a cryptographic technique used to verify the authenticity and integrity of digital
messages, documents, or transactions. It involves using a private key to generate a unique digital
signature, which can be verified using a corresponding public key, thereby ensuring the identity of
the signer and the integrity of the signed content.

6
 TECHNOLOGY IN BANKING IMPORTANT QUESTION

15. What is E-wallet?

An e-wallet, short for electronic wallet, is a digital application or platform that allows individuals to
store, manage, and transact various forms of digital currency, such as cryptocurrencies or electronic
money. E-wallets enable users to securely store their payment information, such as credit card details
or bank account information, and make electronic transactions conveniently through computers,
smartphones, or other electronic devices. Users can use e-wallets to make online purchases, transfer
funds to other users, pay bills, and conduct various financial transactions without the need for
physical cash or traditional banking services. E-wallets often offer features such as encryption for
security, transaction tracking, and integration with other financial services and platforms.

16. Explain the process involved in the electronic payment gateway.

 The process involved in an electronic payment gateway typically includes the following
steps:
 Initiation of Payment: The process begins when a customer initiates a payment for goods or
services on a merchant's website or mobile app. The customer selects the items to purchase
and proceeds to the checkout page to complete the transaction.
 Input of Payment Information: The customer enters their payment information, such as credit
card details, debit card details, or other payment credentials, into the payment form provided
by the merchant. Alternatively, the customer may choose to use an e-wallet or other digital
payment method stored in their account.
 Encryption and Secure Transmission: Once the payment information is entered, the payment
gateway encrypts the data using secure encryption protocols to protect it from unauthorized
access or interception during transmission. The encrypted payment data is then securely
transmitted to the payment gateway server.
 Authorization Request: The payment gateway forwards the encrypted payment data to the
acquiring bank or payment processor responsible for authorizing the transaction. The
acquiring bank verifies the authenticity of the payment information and checks for available
funds or credit limits to approve the transaction.
 Transaction Processing: If the payment is authorized, the acquiring bank or payment
processor sends an authorization response to the payment gateway, indicating that the
transaction has been approved. The payment gateway then sends a confirmation message to
the merchant's website or app, informing them that the payment was successful.

7
 TECHNOLOGY IN BANKING IMPORTANT QUESTION

 Settlement: After the transaction is authorized, the acquiring bank or payment processor
initiates the settlement process, transferring the funds from the customer's account to the
merchant's account. The settlement process may take several business days to complete,
depending on the payment method and banking processes involved.
 Confirmation and Receipt: Once the settlement is completed, the merchant's website or app
generates a payment confirmation message for the customer, providing details of the
transaction, such as the payment amount, transaction ID, and confirmation number. The
customer receives a receipt or confirmation email for the transaction, completing the payment
process.

17. what is SWIFT?

 SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. It is a
global messaging network and financial communication platform used by banks and financial
institutions worldwide to securely and efficiently exchange information and instructions
related to financial transactions.
 SWIFT provides a standardized messaging format and a secure network infrastructure that
enables banks and financial institutions to communicate with each other in a standardized and
secure manner. It facilitates various types of financial transactions, including payments,
securities trading, foreign exchange, and treasury operations.
 Key features of SWIFT include:
 Standardized Messaging: SWIFT uses a standardized messaging format, known as SWIFT
messages or MT messages (Message Type), to facilitate communication between banks and
financial institutions. These messages contain structured information about financial
transactions, such as payment instructions, account details, and transaction status.
 Secure Network: SWIFT operates a highly secure and reliable network infrastructure that
ensures the confidentiality, integrity, and availability of financial messages transmitted
between participants. The network employs advanced encryption and authentication
mechanisms to protect sensitive financial information from unauthorized access or
interception.
 Global Reach: SWIFT provides a global network that connects thousands of banks, financial
institutions, and corporations across the world. This extensive network enables participants to

8
 TECHNOLOGY IN BANKING IMPORTANT QUESTION

communicate and transact with counterparties located in different countries and regions,
facilitating international trade and financial transactions.
 Compliance and Regulatory Support: SWIFT offers compliance and regulatory support
services to help participants adhere to international standards, regulations, and industry best
practices related to financial messaging and transactions. It provides tools and solutions for
anti-money laundering (AML), sanctions screening, and other regulatory requirements.
 Efficiency and Automation: SWIFT streamlines and automates the process of exchanging
financial messages between participants, reducing manual intervention, errors, and processing
time. It enables straight-through processing (STP) of financial transactions, improving
operational efficiency and reducing costs for banks and financial institutions.

18. what is ECS? (Electronic clearing system)?

 ECS, which stands for Electronic Clearing System, is an electronic mode of funds transfer
and clearing used in India for bulk transactions such as salary payments, dividend payments,
and utility bill payments. It enables electronic credit and debit transactions between bank
accounts held with participating banks across the country.
 There are two main variants of ECS:
 ECS Credit (ECS-C): ECS-C is used for crediting funds to a large number of beneficiaries'
accounts periodically, such as salary payments by employers, dividend payments by
companies, or interest payments by financial institutions. The sender submits a file containing
transaction details to their bank, which then processes the transactions and credits the funds
to the beneficiaries' accounts.
 ECS Debit (ECS-D): ECS-D is used for debiting funds from a large number of payer
accounts on a periodic basis, such as utility bill payments or loan repayments. The biller or
creditor obtains authorization from customers to debit their accounts for payment and submits
a file containing transaction details to their bank, which then processes the transactions and
debits the funds from the payer accounts.
 Key features of ECS include:
o Efficiency: ECS eliminates the need for physical instruments such as cheques or
demand drafts, streamlining the process of funds transfer and clearing, and reducing
processing time and costs for both banks and customers.

9
 TECHNOLOGY IN BANKING IMPORTANT QUESTION

o Timely Settlement: ECS transactions are settled electronically between participating

banks through the Reserve Bank of India's (RBI) electronic clearinghouses, ensuring
timely and efficient settlement of funds transfers.
o Wide Coverage: ECS covers a wide range of transactions and participants, including
banks, financial institutions, corporates, government agencies, and utility service
providers, facilitating bulk payments and collections across the country.

19. Explain the impact of technologies on Banking customer services.

 The impact of technology on banking customer services has been profound, revolutionizing
the way banks interact with their customers and deliver services. Here are some key impacts:
 Enhanced Convenience: Technology has enabled customers to access banking services
anytime, anywhere, through various channels such as online banking websites, mobile
banking apps, and ATMs. This enhanced convenience allows customers to perform
transactions, check balances, and manage their accounts without visiting physical branches.
 Personalized Services: Advanced data analytics and artificial intelligence (AI) technologies
enable banks to analyse customer behaviour, preferences, and transaction patterns, allowing
them to offer personalized recommendations, product suggestions, and targeted marketing
offers tailored to individual customer needs.
 Improved Customer Experience: Technology has facilitated seamless and frictionless
customer experiences, with intuitive user interfaces, simplified account opening processes,
and faster transaction processing times. Banks can leverage digital channels to provide real-
time support, assistance, and resolution to customer queries and issues.
 Expanded Product Offerings: Technology enables banks to offer a broader range of products
and services to customers, including digital wallets, robo-advisory services, peer-to-peer
payments, and online lending platforms. This expanded product portfolio enhances customer
choice and accessibility, catering to diverse financial needs and preferences.
 Enhanced Security: Advances in cybersecurity technologies help banks protect customer
data, prevent fraud, and safeguard against unauthorized access to accounts and sensitive
information. Multi-factor authentication, biometric authentication, encryption, and fraud
detection systems enhance the security of digital banking channels, instilling trust and
confidence among customers.

10
 TECHNOLOGY IN BANKING IMPORTANT QUESTION

 Seamless Omnichannel Experience: Customers expect a seamless omnichannel experience,

where they can transition seamlessly between different banking channels (e.g., online,
mobile, branch) while maintaining continuity in their interactions and transactions.
Technology enables banks to integrate and synchronize customer touchpoints, providing a
cohesive and unified experience across channels.
 24/7 Accessibility: Digital banking channels operate 24/7, allowing customers to access
banking services and perform transactions at any time of the day or night, even outside
traditional banking hours. This round-the-clock accessibility caters to the needs of customers
with busy schedules or those in different time zones.

20. Explain RBI guidelines regarding the Information Technology Act.

 Reserve Bank of India (RBI) guidelines regarding the Information Technology Act
encompass a comprehensive framework aimed at ensuring the security, confidentiality, and
integrity of banking operations and customer data. Here's an expanded explanation worth 10
marks:
 Cyber Security Framework (2 marks): RBI mandates banks to establish and maintain robust
cyber security frameworks to safeguard against cyber threats and vulnerabilities. This
framework includes conducting regular risk assessments, implementing appropriate security
controls, developing incident response plans, and continuously monitoring for threats and
attacks.
 Data Protection and Privacy (2 marks): RBI requires banks to comply with data protection
and privacy regulations to protect sensitive customer information. Banks are mandated to
implement measures such as encryption, access controls, data masking, and data leakage
prevention to ensure the confidentiality and integrity of customer data and prevent
unauthorized access or disclosure.
 Third-Party Risk Management. : RBI emphasizes the importance of third-party risk
management to ensure that banks' outsourcing arrangements adhere to the Information
Technology Act and related regulations. Banks are required to assess and manage the risks
associated with third-party service providers, including cloud service providers, software
vendors, and technology partners.
 Cyber Incident Reporting. : RBI mandates banks to promptly report cyber security incidents
and data breaches to the RBI's Cyber Security and IT Examination (CSITE) Cell and other

11
 TECHNOLOGY IN BANKING IMPORTANT QUESTION

relevant authorities. This enables timely response and remediation of cyber incidents to
minimize the impact on customers and the financial system.
 Security Controls for Digital Transactions. : RBI requires banks to implement strong
security controls for digital transactions, including multi-factor authentication, transaction
monitoring, and fraud detection systems. These measures help prevent unauthorized
transactions, phishing attacks, and other forms of financial fraud.
 Compliance and Audit Requirements. : Banks are required to conduct regular audits,
assessments, and compliance reviews to ensure adherence to the Information Technology Act
and related regulations. They must also submit compliance reports and certifications to RBI
as part of their regulatory obligations.
 Training and Awareness Programs: RBI emphasizes the importance of employee training and
awareness programs to educate bank staff about cyber security risks, best practices, and
regulatory requirements. Banks are required to conduct regular training sessions and
awareness campaigns to enhance the cyber security posture of their organizations.

21. State the provisions relating to the Prevention of Money Laundry Act.
 The Prevention of Money Laundering Act (PMLA) in India is a significant legislation aimed
at combating money laundering and related offenses. Here's an expanded explanation of its
provisions:
 Definition of Money Laundering Offenses. : The PMLA defines money laundering offenses,
as including acquiring, possessing, or using proceeds of crime, projecting or claiming such
proceeds as untainted property, and aiding or being involved in such activities.
 Establishment of Designated Authority. : The Act establishes the Financial Intelligence Unit-
India (FIU-IND) as the designated authority responsible for receiving, analyzing, and
disseminating information related to suspicious transactions to appropriate law enforcement
agencies.
 Reporting of Transactions. : Banks, financial institutions, and designated persons are
required to maintain records of transactions, including suspicious transactions, and report
such transactions to the FIU-IND within prescribed timeframes.
 Know Your Customer (KYC) Norms. : The PMLA mandates banks and financial institutions
to implement robust KYC norms to verify the identity of customers, assess the risk of money
laundering, and monitor customer transactions for suspicious activities.

12
 TECHNOLOGY IN BANKING IMPORTANT QUESTION

 Customer Due Diligence (CDD) Requirements. : Banks and financial institutions must
conduct customer due diligence measures, including identifying and verifying customer
identities, obtaining information about the purpose and nature of the customer's business
relationship, and monitoring transactions for unusual patterns or suspicious activities.
 Freezing and Confiscation of Assets. : Authorities are empowered to freeze and confiscate
assets derived from money laundering offenses, as well as properties involved in or used for
money laundering activities.
 Penalties and Punishment. : The Act prescribes stringent penalties and punishment for money
laundering offenses, including imprisonment, fines, and confiscation of proceeds of crime.
 International Cooperation (1 mark): The PMLA facilitates international cooperation and
collaboration in combating money laundering by enabling the exchange of information and
assistance with foreign countries and international organizations.
 Regulatory Oversight. : The Act provides for regulatory oversight by the Enforcement
Directorate (ED) and other competent authorities to ensure compliance with anti-money
laundering measures and regulatory standards.
 Review and Amendment. : The PMLA allows for periodic review and amendment of its
provisions to address emerging challenges and strengthen anti-money laundering efforts in
line with international best practices.

22. what is data privacy?

 Data privacy is a multifaceted concept that addresses the protection of individuals' personal
information and their right to control how their data is collected, used, and shared. Here's an
expanded explanation of data privacy:
 Definition. : Data privacy, also known as information privacy or data protection, refers to the
set of principles, policies, and practices aimed at safeguarding personal information from
unauthorized access, use, or disclosure.
 Individual Rights. : At the core of data privacy are the rights of individuals to control their
data. This includes the right to know what personal information is being collected, the
purpose for which it is collected, and the ability to consent to or opt out of its collection and
use.
 Data Collection and Processing. : Data privacy regulations often require organizations to be
transparent about their data collection and processing practices. They must collect only the

13
TECHNOLOGY IN BANKING IMPORTANT QUESTION

minimum amount of personal data necessary for a specific purpose and must obtain explicit
consent from individuals before collecting or processing their data.
 Purpose Limitation and Data Minimization. : Organizations should limit the use of personal
data to the purposes for which it was collected and should avoid collecting more data than
necessary. This principle ensures that personal data is not used for purposes unrelated to the
original intent without individuals' consent.
 Transparency and Notice. : Data privacy regulations typically require organizations to
provide individuals with clear and easily understandable notices about their data practices.
This includes informing individuals about the types of data collected, the purposes for which
it is used, and any third parties with whom it is shared.
 Security Measures. : To protect personal data from unauthorized access, disclosure, or
alteration, organizations must implement appropriate security measures. This includes
encryption, access controls, data masking, and regular security audits to ensure compliance
with industry standards and best practices.
 Individual Access and Correction. : Individuals have the right to access their data held by
organizations and to request corrections or updates if the data is inaccurate or incomplete.
Organizations must provide mechanisms for individuals to exercise these rights and respond
to requests promptly.
 Accountability and Compliance. : Organizations are accountable for their data processing
activities and must demonstrate compliance with data privacy regulations. This includes
establishing policies, procedures, and governance frameworks to ensure that personal data is
handled responsibly and by legal requirements.
 Global Regulations. : Data privacy regulations vary by jurisdiction, with prominent examples
including the General Data Protection Regulation (GDPR) in the European Union, the
California Consumer Privacy Act (CCPA) in the United States, and the Personal Data
Protection Bill in India. These regulations impose obligations on organizations to protect
personal data and uphold individuals' privacy rights.
 Importance and Implications. : Data privacy is essential for maintaining trust and confidence
in the digital economy. Violations of data privacy can lead to reputational damage, legal
consequences, and loss of customer trust. Therefore, organizations must prioritize data
privacy and implement robust data protection measures to safeguard personal information
and comply with regulatory requirements.

14
 TECHNOLOGY IN BANKING IMPORTANT QUESTION

23. What is a Credit card?

 A credit card is a financial tool issued by banks or credit card companies that allows
cardholders to borrow funds up to a predetermined credit limit to make purchases, pay bills,
or access cash advances. Here's an expanded explanation of credit cards:
 Credit Limit. : Each credit card has a predefined credit limit, which represents the maximum
amount of money a cardholder can borrow using the card. The credit limit is determined by
the card issuer based on factors such as the cardholder's credit history, income, and financial
profile.
 Interest Charges. : When cardholders make purchases using a credit card, they are essentially
borrowing money from the card issuer. If the full balance is not paid by the due date, the
issuer charges interest on the outstanding balance. The interest rate applied to unpaid
balances is known as the Annual Percentage Rate (APR).
 Revolving Credit. : Credit cards offer revolving credit, allowing cardholders to carry a
balance from month to month by making minimum payments on the outstanding balance.
However, carrying a balance accrues interest charges, so it's advisable to pay off the full
balance each month to avoid interest fees.
 Rewards and Benefits. : Many credit cards come with rewards programs or benefits to
incentivize card usage. These rewards may include cash back, travel rewards, points
redeemable for merchandise or gift cards, airline miles, or other perks such as travel
insurance, extended warranties, or purchase protection.
 Security Features. : Credit cards are equipped with security features to protect against
fraudulent transactions and unauthorized use. These features may include EMV chips, which
provide enhanced security for in-person transactions, as well as zero-liability protection,
which shields cardholders from liability for unauthorized charges.
 Convenience. : Credit cards offer convenience and flexibility for making purchases, both
online and in-person, without the need to carry large amounts of cash. They are widely
accepted by merchants worldwide and can be used for various transactions, including retail
purchases, bill payments, and online shopping.
 Credit Building. : Responsible use of credit cards can help individuals establish and build
their credit history. Timely payments and low credit utilization demonstrate creditworthiness

15
TECHNOLOGY IN BANKING IMPORTANT QUESTION

and can improve credit scores over time, making it easier to qualify for loans, mortgages, and
other financial products.
 Grace Period. : Many credit cards offer a grace period, typically ranging from 21 to 25 days,
during which cardholders can pay off their balance without incurring interest charges. This
grace period provides flexibility for cardholders to manage their finances and avoid interest
fees.
 Global Acceptance. : Credit cards are widely accepted by merchants worldwide, making
them a convenient payment option for domestic and international transactions. They can be
used at retail stores, restaurants, hotels, online merchants, and other establishments that
accept card payments.
 Financial Responsibility. : While credit cards offer numerous benefits and conveniences, it's
essential for cardholders to use them responsibly to avoid accumulating debt. Responsible
credit card usage involves paying off balances on time, avoiding overspending, and managing
credit utilization to maintain good financial health.

16