What is a Credit Card?

A credit card is a financial product that can be used as an alternative to cash spending both
online and in stores. The credit card relieves the consumer from botheration of carrying cash
and ensures safety. It is a convenience of extended credit with formality. Thus credit card is a
passport to, “safety, convenience, prestige and credit”. In most cases the user will be given a
physical credit card to use unless they opt for an online virtual product. 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. To make a purchase the consumer hands over their card or gives its
number (for remote transactions). Payment is then taken from their account.

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 million 1 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 cent 2 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 cent 3 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.

“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’
utilised by him is what makes the business of credit cards profitable from the point of view of the
bank issuing the card.
 Major Credit Card Providers in India

 Following are major credit card providers in India: ABN Amro

HDFC a

 Kotak Mahindra

 Canara Bank Citibank

 Visa

 HSBC

 MasterCard

 Deutsche Bank

 Amex

 Barclays Bank

 Diners Club

 Standard Chartered

ABN Amro

HDFC

American Express
ICICI Bank

Axis Bank

SBI

Bank of Baroda

Canara Bank

Citibank

Visa

HSBC

MasterCard

Deutsche Bank

Amex