Q1:- WHAT ARE THE VARIOUS

FACILITIES OFFERED TO A CREDIT AND

DEBIT CARD HOLDER?
ANSWER:-
• Because of intense competition in the credit card
industry, credit card providers often offer incentives
such as frequent flyer points, gift certificates, or
cash back (typically up to 1 percent based on total
purchases) to try to attract customers to their
programs.
• Low interest credit cards or even 0% interest credit
cards are available.
• The only downside to consumers is that the period of
low interest credit cards is limited to a fixed term,
usually between 6 and 12 months after which a higher
rate is charged.
• However, services are available which alert credit card
Q2:- New types of credit card available
in the market?
Answer:
• Credit Card: The basic form of credit card gives
credit to the user. The grace period varies from 20-50
days. One can choose to pay all dues at one go or
settle them in monthly installments. It also gives
various benefits like travel discounts, discount on
retail loans.
• Charge card: Its similar as that of the credit card but
its dues are to be paid on its due date. Settlement in
installments is not applicable.
• Global card: global card enables you to use your
credit card even when u are overseas. You can spend
in dollars and other foreign currency and still settle
dues in local currency. The credit limit is fixed on basic
travel quota BTQ we can withdraw cash up to 500 US
• Smart card: A smart card, combines credit card and
debit card properties. The contact pads on the card
enable electronic access to the chip. A smart card,
chip card, or integrated circuit card (ICC), is defined as
any pocket-sized card with embedded integrated
circuits which can process information.

• Corporate credit card: Issuers negotiate package

with major employers for issuance of credit cards to
their executives. They are issued under one umbrella
scheme and at heavily discounted annual fees.
corporate card negotiates extra privilege

• ATM card: Banks offer this card to its deposit holder

for free of cost. its used to withdraw cash from bank
accounts when bank counters are closed or even when
counters are open to save on time.
• Co-branded card: leading merchant
establishment banks especially chains have
started issuing co-branded cards. they offer extra
benefits to card holders. HPCL offers petrol /fuel
credit points as benefits. Jet airways offers extra
miles. Big bazaar and times of India also offers
various offers on events and entertainment
arranged by them. 

• Online card: They are different cards for online

web based transactions it provides good security
against frauds. Small limits of rs.1000/- are ser on
such cards to prevent big online frauds. Original
credit card is not valid for online transactions.
 Q3. Who are the parties to credit
card?
Explain about them.
Answer:
• 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.
• 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
• 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.
• Transaction network: The system that
implements the mechanics of the electronic
transactions. May be operated by an independent
company, and one company may operate
multiple networks.
• Transaction processing networks include:
Cardnet, Nabanco, Omaha, Paymentech, NDC
Atlanta, Nova, Vital, Concord EFSnet, and
VisaNet.

• 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,
charities, professional organizations, and major
retailers.

• Information: The flow of information and money

between these parties — always through the card
 Q4. Discuss the advantages and
disadvantages of credit cards to its
member and its bank.

Answer: ADVANTAGE
To Members/Cardholders

• Convenience: It is very convenient to carry a card as

compared to cash. Its acceptance is better than
cheques. Risk of theft is less and if stolen, stoppage
and recovery is better than cash and cheque. It is
even more convenient for unplanned purchases and
needs as one may not carry enough cash every time.
• Spot credit: As and when needed, credit is available.
Its pre negotiated (decided) credit limit which can be
availed of whenever desired. Credit is free of interest
till first immediate billing cycle. This improves
purchasing power.
• Easy payments: Minimum balance payment for each
bill is a must. Over and above this, it is cardholder’s
ability and willingness to pay for each card bill.

• ATM cash: Cash can be withdrawn from ATMs as and

when required. This is very important feature in
countries like India where cash usage is more as
compared to other modes of payments. Thus card
improves liquidity and credibility of the cardholders.

• Reward points and discounts: These are additional

benefits provided by issuer for usage of card. Reward
points can be converted to discount and gifts as per
the catalogue of the issuer.

• Privileges: Access to VIP lounges at the airport and

star hotels is an additional privilege for the cardholder.
• Other loans: Bankers provide personal loans, car
loans, etc. with some priority and ease if cardholders
payment history is good.

• Balance transfer: Bankers encourage cardholders to

transfer their outstanding dues to other issuers card to
their bank card. This transfer is again at a concession
rate of interest.

• Insurance: Most bankers insure the life of

cardholders at a concessional rate of interest and
assign insurance proceeds towards outstanding bill on
the card. In case of eventuality, insurance proceeds
meet bankers outstanding dues and remainder
amount is paid to the heirs of the cardholder.
To bank/issuers

• Profit: APR is high on credit cards as these are high

risk unsecured loans. If cards are issued with proper
due diligence then defaults is less and banker’s profit
in the card business are high.

• New customers: New customers get hooked to

bankers as cardholders. It is easy to sell them other
products such as housing loans, auto loans, bank
assurance products later on.

• Brand image: Card issuing bank creates better brand

images in the minds of its customer as compared to
other banks.

• ATM sharing fees: Bankers who establish their own

ATMs get sharing fees from other banks if other banks
 Disadvantages

To Members/Cardholders

• Some people have been swindled by giving their

credit card numbers to dishonest salespeople over the
phone.

• It becomes a loan when the credit becomes due and

you do not pay for it.

• Adding monthly interest charges means you pay more

for the goods and services.

• Overspending: Consumers can fall into the habit of

using credit cards to extend their income.
• Cost: Cost of card is high. Annual fee, APR, penalties,
lost card replacement charges is significant.

• Habitual borrowing: With popularity of card, stigma

on loans as negative feature of life, has vanished.
Borrowing and enjoying life is no longer looked down
upon. Unknowingly everyone has become a habitual
borrower. Incidentally no religious book approves of
this style of living.

• Fraud risk: Credit card are used as a smart idea by

the frauds. Stolen or misplaced credit cards are used
for shopping, ATM transactions and also online
purchases.
To bank/issuers

• Risk: cards are unsecured loans. Recovery

mechanism does not have any recourse on assets.
Legal backup thus limited. Establishing a recovery
system within these limitations is a high cost affair.
• Servicing cost: cards are technology oriented . cards
are costly. Issuance process, billing and payment
processing is a laborious and costly affair.
• Utilization dependency: banks earn well on cards
are used frequently by the holders. Indian psyche is
not very tuned to careless use. Cards which are not
used much are in fact cost burden on the bank.
• Payment habits: APR interest earnings are
significant provided part of billed amount is rolled over
to the next billing. If many customers pay full bill
every time, there is no APR earning for bank.