CHAPTER 1

INTRODUCTION
TOPIC
Comparative analysis of private (ICICI) and public sector (PUNJAB NATIONAL
BANK) banks in relation to their credit card divisions and processing.

OBJECTIVE
To understand the working and processing behind the issuing and
maintenance of the credit cards by the private and public sector banks.

SYNOPSIS
The dissertation topic taken is “The Comparative Analysis Of The Private And
The Public Sector Banks With Respect To Their Credit Cards Division” .For the
purpose of research I have taken up one private sector bank (ICICI) and one
public sector bank (PUNJAB NATIONAL BANK).The report will be an attempt to
chalk out the procedures, processes, flaws, and merits of the credit cards
division of the respective banks. The various credit card policies these banks
are following .with respect to credit card working and norms, the report will
also chalk out the analysis of the degree of success and failure of these
respective banks VIZ their credit card functions. The report will consider the
international aspect to the credit card functions of these banks.

RESEARCH METHODOLOGY
The research methodology followed will be a mix of secondary and primary
data. However the major part of the report is through the secondary data .The
secondary data includes the use of internet and various homepages to the
banking sector, whereas the primary data collected will be that collected by
questionnaires and the surveys of the bank employees.

SCOPE OF THE RESERCH

The project and the research has great scope. Though my field of survey and
research is in finance but the research has provided great insight every
whether it’s marketing, IT or HR.

The project would cover the following aspects:

• The process of credit card application

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 • The processing of the application

• Final issuing of the credit cards

• The maintenance of credit cards VIZ relation to CRM (customer

relationship in banking sector)

• The failures and success factors viz. the credit card functioning of the
respective banks.

This is just the layout of the topics, there are many areas that will be taken up
in the report, not mentioned hereof, in the outline.

LIMITATIONS
My data collection is through secondary sources provided by co. The
constraints which I feel are there in the project are:

•
The incomplete base information like use of formulas and bank
sensitive information
• Incomplete data collection forms
• The topic is vast enough ,to be covered in detail
• Financially sensitive information
• The common base for the comparison is missing between the two
banks.
These are the only constraints I feel I‘ll be going through the project’s hope I’ll
be able to cop up with the project well in spite of these constraints.

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CHAPTER 2
INTRODUCTION TO BANKING

History of Banking in India

"Banking Sector, managing the demand and supply functions of money, plays
a significant role for promoting a healthy, balanced and sustainable
development of a country. It is considered as the most important segment
responsible for accelerating as well as slowing down the national and global
economies. Movements in this sector have almost one to one relationship with
the growth of an economy.

A strong financial and banking sector provides the necessary support to the
economic system to function effectively and vice versa, so, a sound,
systematic and dynamic banking system occupies a pivotal position in the
economies world over and supports them to emerge as business leaders.With
the intensification of the pace of the ongoing economic and financial sector
reforms for more liberalization and globalization of the Indian economy, the
Indian banking industry is undergoing a paradigm shift in scope, content,
structure, functions and governance.

Banks offer following services to account holders at their specified branches:

Multi-city / payable at par (PAP) cheque facility

Anywhere banking facility, internet banking facility, Credit card,

debit / ATM card, mobile banking and Real Time Gross Settlement
(RTGS) gradually, foreign banks are expanding the number of
products on offer, their complexity such as derivatives, leverage
financing.

DEFINING A BANK

A bank is a financial institution whose primary activity is to act as a payment

agent for customers and to borrow and lend money. It is an institution for
receiving, keeping, and lending money.[1]

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The first modern bank was founded in Italy in Genoa in 1406,[citation needed]
its
name was Banco di San Giorgio (Bank of St. George).

Many other financial activities were added over time. For example banks are
important players in financial markets and offer financial services such as
investment funds. In some countries such as Germany, banks are the primary
owners of industrial corporations while in other countries such as the United
States banks are prohibited from owning non-financial companies. In Japan,
banks are usually the nexus of cross share holding entity known as zaibatsu.
In France "Bancassurance" is highly present, as most banks offer insurance
services (and now real estate services) to their clients.

In 1899, the United States Supreme Court (Austen) used these words to
define a bank:

"A bank is an institution, usually incorporated with power to issue its

promissory notes intended to circulate as money (known as bank notes); or to
receive the money of others on general deposit, to form a joint fund that shall
be used by the institution, for its own benefit, for one or more of the purposes
of making temporary loans and discounts; of dealing in notes, foreign and
domestic bills of exchange, coin, bullion, credits, and the remission of money;
or with both these powers, and with the privileges, in addition to these basic
powers, of receiving special deposits and making collections for the holders of
negotiable paper, if the institution sees fit to engage in such business."

Law of banking

Banking law is based on a contractual analysis of the relationship between the

bank and the customer. The definition of bank is given above, and the
definition of customer is any person for whom the bank agrees to conduct an
account.

The law implies rights and obligations into this relationship as follows:

1. The bank account balance is the financial position between the bank
and the customer, when the account is in credit, the bank owes the
balance to the customer, when the account is overdrawn, the customer
owes the balance to the bank.
2. The bank engages to pay the customer's cheques up to the amount
standing to the credit of the customer's account, plus any agreed
overdraft limit.
3. The bank may not pay from the customer's account without a mandate
from the customer, e.g. a cheque drawn by the customer.
4. The bank engages to promptly collect the cheques deposited to the
customer's account as the customer's agent, and to credit the proceeds
to the customer's account.

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 5. The bank has a right to combine the customer's accounts, since each
account is just an aspect of the same credit relationship.
6. The bank has a lien on cheques deposited to the customer's account, to
the extent that the customer is indebted to the bank.
7. The bank must not disclose the details of the transactions going through
the customer's account unless the customer consents, there is a public
duty to disclose, the bank's interests require it, or under compulsion of
law.
8. The bank must not close a customer's account without reasonable
notice to the customer, because cheques are outstanding in the
ordinary course of business for several days.

These implied contractual terms may be modified by express agreement

between the customer and the bank. The statutes and regulations in force in
the jurisdiction may also modify the above terms and/or create new rights,
obligations or limitations relevant to the bank-customer relationship.

Profitability of a bank
A bank generates a profit from the differential between the level of interest it
pays for deposits and other sources of funds, and the level of interest it
charges in its lending activities. This difference is referred to as the spread
between the cost of funds and the loan interest rate. Historically, profitability
from lending activities has been cyclical and dependent on the needs and
strengths of loan customers. In recent history, investors have demanded a
more stable revenue stream and banks have therefore placed more emphasis
on transaction fees, primarily loan fees but also including service charges on
an array of deposit activities and ancillary services (international banking,
foreign exchange, insurance, investments, wire transfers, etc.). Lending
activities, however, still provide the bulk of a commercial bank's income.

VARIOUS FUNCTIONS OF BANKS

The Bank's functions are segmented into several operating groups including:
Corporate Banking Group which handles a variety of financing
programmers for Export Oriented Units (EOUs), Importers, and overseas
investment by Indian companies.

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Project Finance / Trade Finance Group handles the entire range of export
credit services such as supplier's credit, pre-shipment credit, buyer's credit,
finance for export of projects & consultancy services, guarantees, forfeiting
etc.
Lines of Credit Group Lines of Credit (LOC) is a financing mechanism that
provides a safe mode of non-recourse financing option to Indian exporters,
especially to SMEs, and serves as an effective market entry tool.
Agri Business Group, to spearhead the initiative to promote and support
Agri-exports. The Group handles projects and export transactions in the
agricultural sector for financing.
Small and Medium Enterprises Group to the specific financing requirements of
export oriented SMEs. The group handles credit proposals from SMEs under
various lending programmes of the Bank.
Export Services Group offers variety of advisory and value-added
information services aimed at investment promotion
Fee based Export Marketing Services Bank offers assistance to Indian
companies, to enable them establish their products in overseas markets.
Besides these, the Support Services groups, which include: Research &
Planning, Corporate Finance, Loan Recovery, Internal Audit, Management
Information Services, Information Technology, Legal, Human Resources
Management and Corporate Affairs.

Main Functions of Banks

Major activities that usually take place in a bank are:

(i) Retail banking - which includes deposits, withdrawals, transfer of money,

exchange of foreign currency, issue of travelers’ cheques.

(ii) Personal banking - which includes loans, mortgages, credits insurance

policies, pensions.

(iii)Corporate banking - includes transacting business with big companies

and government agencies.

(iv) Merchant banking - includes transacting business with institutional

investors, international finance and public issue management. As the very
title suggests, Merchant Banking relates to investment management:
management of Mutual Funds, public issues, trusts, securities, international
funds and other such instruments. To offer advisory services to corporate
clients on capital structure decisions, public issue management, underwriting,
raising funds through public issues and from overseas markets etc. are some
of the prominent functions of merchant banking.

6
(v) Rural banking- includes transacting business with banking and credit
needs of the people in the rural sector.

(vi) Investment Banking: Securities underwriting, markets and arranging

mergers, acquisitions and restructuring are banking jobs related to financial
activities covered under investment banking. Functional areas of investment
banking include retail banking, working with corporate clients and institutional
banking. These banks have large financial assets as they have to manage
dealer activities and in trading and distribution of securities. Investment
Banks take part in direct markets by bringing financial claim for sale with the
objective of helping businesses and governments sell their new security
issues.

Functioning of a Bank is among the more complicated of corporate

operations. Since Banking involves dealing directly with money, governments
in most countries regulate this sector rather stringently. In India, the
regulation traditionally has been very strict and in the opinion of certain
quarters, responsible for the present condition of banks, where NPAs are of a
very high order. The process of financial reforms, which started in 1991, has
cleared the cobwebs somewhat but a lot remains to be done. The multiplicity
of policy and regulations that a Bank has to work with makes its operations
even more complicated, sometimes bordering on illogical. This section, which
is also intended for banking professional, attempts to give an overview of the
functions in as simple manner as possible.

Banking Regulation Act of India, 1949 defines Banking as "accepting, for the
purpose of lending or investment of deposits of money from the public,
repayable on demand or otherwise and withdrawal by cheques, draft, order or
otherwise."

Banks essentially perform the following functions:

 Accepting deposits is one of the two major activities

of the Banks

Banks are also called custodians of public money. Basically, the money is
accepted as deposit for safe keeping. But since the Banks use this money to
earn interest from people who need money, Banks share a part of this interest
with the depositors. However, accepting deposits and keeping track of the
money involves a lot of book-keeping and other operations. Let us see what
the Banks must maintain to provide this service

1. An effective branch network to reach the targeted customer base

2. A system of Intra branch accounting with separate account(s) for each
customer

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 3. A system of reconciliation at the end of the day
4. Availability of adequate funds at each branch
5. Trained staff for effective customer service
6. Infrastructural inputs like space, stationery, comfortable environment
etc.

 ADVANCED BANKING

Earlier Government business used to be exclusively carried out by

Government Treasuries where all type of transactions took place. However,
now Banks act on behalf of the Government to accept its tax and non tax
receipts. Most of the Government disbursements like pension payments and
tax refunds also take place through banks. While the Banks carry out this
business for a fee to be paid by the Government, providing this service
requires a lot of effort and organization. The Banks must provide:

• Interface with the public

• Liaison with local government departments and government treasury
• Arrangement for reconciliation with the Government Accounts
Department
• Necessary infrastructure, stationery etc. to cater to the numbers

 LENDING MONEY TO THE PUBLIC

Lending money is one of the two major activities of any Bank. In a way, the
Bank acts as an intermediary between the people who have the money to
lend and those who have the need for money to carry out business
transactions. This activity places its own requirements on the resources of the
Bank. For effective functioning of this, a bank must possess:

• Sufficient deposits.
• Skills to appraise the potential borrowers and the activity.
• Legal skills for documentation.
• Legal skills for recovery of its dues through the courts.
• Skills to follow up and monitor the end-use of money lent by it.
• An effective credit delivery system.
• Review of credit portfolio.

 SAFE KEEPING

Bankers are in the business of providing security to the money and valuables
of the general public. While security of money is taken care of through
offering various types of deposit schemes, security of valuables is provided
through making secured space available to general public for keeping these
valuables. These spaces are available in the shape of LOCKERS. The latter are
small compartments with dual locking facility built into strong cupboards.

8
These are stored in the Bank's Strong Room and are fully secure. Lockers can
neither be opened by the hirer or the Bank individually. Both must come
together and use their respective keys to open the locker. To make this
facility available to its customers, the Bank must provide:

• Physical structures to house the lockers

• Locker cabinets
• Security arrangements
• Record of access to lockers

 REMITTANCE

Apart from accepting deposits and lending money, Banks also carry out, on
behalf of their customers the act of transfer of money - both domestic and
foreign.- from one place to another. This activity is known as "remittance
business" . Banks issue Demand Drafts, Banker's Cheques, and Money Orders
etc. for transferring the money. Banks also have the facility of quick transfer
of money also know as Telegraphic Transfer or Tele Cash Orders.

To deliver this service, a Bank must have:

• An effective branch network or correspondent relationships.

• A system of Inter branch reconciliation
• A system of reconciliation with the correspondents
• Availability of funds at all the centers

SOURCE: INTERNET,GOOGLE.COM

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CHAPTER 3
INTRODUCTION TO PLASTIC MONEY
DEFINING PLASTIC MONEY
Generic term for all types of bank cards, credit cards, debit cards, smart
cards, etc.

DEFINING CREDIT CARDS

“a card issued by a bank or financial institution and accepted by a merchant
in payment for a transaction for which the cardholder must subsequently
reimburse the issuer”

A credit card is a small plastic card with some numbers embossed on

it and which helps to purchase the things with no requirement
of cash in pocket. It is 3-1/8 inches by 2-1/8 inches in size and has
identification information for example a signature or picture.
A plastic card that can be used by the cardholder to make purchases or
obtain cash advances using a line of credit extended by the financial
institution that issued the card. The card normally contains the
cardholder's name and account number and may contain other
information encoded on a magnetic strip. Some credit cards may be
used in automatic teller machines
Cardholders normally must pay for credit card purchases within 30 days of
purchase to avoid interest and/or penalties.
It permits the person named on it to charge purchases or services to his
account charges for which he will be billed periodically. This information is
checked where we use it for example by automated teller machines (ATMs),
store readers, Internet computers and banks.

DEFINING DEBIT CARDS

Debit cards are similar to credit cards, except debit cards pull money out of your checking or
brokerage account. Debit cards do not create or increase a loan like credit cards do. a card

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(usually plastic) that enables the holder to withdraw money or to have the cost of
purchases charged directly to the holder’s bank account

DEFINING MASTER CARDS

Surpassing Visa in market share -- now that would be priceless. Serving more
than 25,000 member financial institutions worldwide, MasterCard is the #2
payment system in the US. The company does not issue credit or its
namesake cards; rather, it markets the MasterCard (credit and debit cards)
and Maestro (debit cards) brands, provides the transaction authorization
network, establishes guidelines for use, and collects fees from members. The
company provides services in more than 210 countries and territories; its
cards are accepted at more than 25 million locations around the globe.
MasterCard also operates the Cirrus ATM network.

DEFINING VISA CARDS

Visa card also Visa trademark a type of credit card (=plastic card
used to obtain goods and services, which the buyer pays for later)
which can be used all over the world
“A card linked to the VISA network worldwide. Payments made using your One
account VISA card are added to your account the following Thursday”. You
can use your One account to pay for goods and services or to withdraw cash
anywhere in the world you see the VISA sign.

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CHAPTER 4
LITERATURE REVIEW CREDIT CARDS AS MOST WIDELY
USED AMONG ALL PLASTIC CARDS
History
It is said that necessity give rise to inventions. Man always invented new
things to satisfy his need ands comforts. Credit cards were introduced with
same background since its need was felt. Today there are thousand of
financial institutions that issue credit cards as compared to previous when the
number was less. They have become important sources of identification. The
first all-purpose use of credit cards appeared in 1958, with the BankAmerica
card, from the Bank of America. This card later was named as VISA card. One
more popular card also renamed from Master Charge card to MasterCard. The
digitally encoded credit card permits its user to borrow money or buy goods
and services on credit up to a pre decided spending limit.

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There are many cases that people fall into no mans land situation when they
find a huge debt created on them due to excessive use of credit card. A major
part of your property may be washed out. So care must be taken to
understand following things.

Identify what are the different types of charges that you will be charged with
on making transactions with credit card for example what are the late fee
charges? The best way to avoid financial problems is to keep your debt
burden light. The best way is to make smart use of and keep our financial
condition good so that they can be used in our dark period such as job loss or
medical emergency.

Credit cards that we use today have been all around for over half a century.
The first credit card appeared in the year 1951 when some of the loan
customers of the Franklin National Bank of New York were screened for credit
and those who were approved were given a card to make credit purchases.
The merchants who participated copied the customer information from the
card to the sales slip and then the bank credited the merchant account for the
loan.

Later, in the year 1958, The American Express Company began to issue a
charge card for travel and entertainment charges which was accepted at the
restaurants, hotels and online merchants who participated.

People who had plastic charge cards enjoyed the convenience as well as the
line of credit being offered by the new bank credit cards. Merchants found
that credit card customers usually spend more than when it came to pay with
cash. To accept bank issued card was much safer for the merchant dealing
with cash and also less expensive as compared to creating and maintaining
merchant-specific credit program.

In the year 1959, Bank of America started to issue the BankAmericard within
the state of California and was the first universal credit card with wide spread
merchant acceptance. In 1966, Bank Card Associations began and it was the
time when Bank of America formed licensing agreements with other banks.
This made it possible for them to issue credit cards on a widespread basis and
also to settle transactions among the participating banks.

In 1966, a group of 14 US banks formed interlink a new bankcard processing

association with the ability to exchange information on credit card

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transactions. In the year 1967, four California banks formed the western
states Bankcard Association and also introduced the Master Charge program
to compete with the BankAmericard which was later renamed as Visa in the
year 1976. Visa and MasterCard are organizations both of which issue credit
cards through member banks and also set and maintain the rules for
processing.

With the passing time, as the bank card industry grew, banks were interested
in issuing cards also became members of the Visa Card Association or the
MasterCard Association.

Industries recognized the need for credit

The system of credit took a real turn in 1914, when Western Union, in the
interest of good customer service, gave some of their more prominent
customers a metal card to be used in deferring payments – interest free – on
services used. This system became known as “Metal Money”.

Then another company realized the value of making goodwill gestures to their
customers. In 1924, General Petroleum Corporation issued the first metal
money specifically for gasoline and automotive services. They offered this
first to their employees, then to select customers and then, because the
system seemed to work so well, to the general public.

The Ford Motor Company played a large part in creating the consumer credit
business. Just like Christopher Thompson back in 1730, Ford recognized that
not all Americans had enough savings to buy a Model T. Even those who did
have enough might not want to put their whole life-savings into just a car. So
Small Loan Companies, or Finance Companies, began making their first car
loans.

In the late 1930’s, American Telephone and Telegraph (AT&T) introduced the
“Bell System Credit Card.” Other industries followed suit – railroads and
airlines introduced similar cards. The system of credit was fast growing in
popularity.

But then World War II came along and, with it, came the prohibition of all use
of credit and charge cards. However, as soon as the War was over, business
starting booming. Travel became more popular. People were also beginning to
acquire more costly modern conveniences for their homes, like kitchen
appliances and washing machines. These demands on the budget made the
concept of credit more popular because people could buy things with credit
cards that they couldn’t afford to buy with cash. So the demand for credit
cards increased in ratio to the improvement in lifestyles. People wanted more
– and they wanted it now!

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Credit Card
Nowadays, all of us have a credit card with us. Read on to know more about
the intricacies involving this little plastic card…

What Is A Credit Card?

A Credit Card is a small plastic card which is given by a Credit Card provider /
issuer to an individual. The credit card issuing authority, in effect, assures the
individual, that it will lend him a certain amount of money (equal to the credit
card limit) to pay other people.

All of the credit cards follow a size standard as specified by ISO 7810, which is
85.60 millimeters X 53.98 millimeters (or ID-1).

So How Does a Credit Card Work?

A credit card is therefore very different from a debit card, because in a credit
card transaction, money does not get taken out of the individual’s bank
account. It is simply reduced from the total amount that can be lent by the
credit card issuer (which is the credit limit) and interest is charged on the
total amount used by the individual in a ‘revolving credit’ method.
The individual can then choose to either repay the entire amount due or pay a
minimum amount due.
All these things, including the method of calculating the minimum amount
due and the rate of interest, the amount of days after which interest will be
charged etc. are mentioned and explained in the contract or agreement
between the individual and the credit card issuer.

What Happens During A Credit Card Transaction?

Here is the process that occurs when the individual wishes to pay for
something using the credit card:
The individual gives his credit card to the merchant who swipes it on a credit
card payment terminal or a Point of Sale system. This system communicates
with the system of the credit card issuer to ensure that the amount being
swiped for is available within the credit limit of the card. If the amount is
available the transaction is authorized by the credit card issuing authority.
The individual then signs on the receipt, which is his consent to the
transaction and that he will pay the credit card issuing authority the amount
of the transaction.
Nowadays, some cards also incorporate an extra security measure for such
transactions and the card holder has to type in a ‘Personal Identification
Number’ or a PIN after the card is swiped.
Alternatively, if the individual is using his credit card over the Internet, he will
put in his credit card number and the 3-digit Card Security Code (which is

15
present on the back side of the card) into the website form. The website’s
payment gateway then connects with the system of the credit card issuing
authority and confirms if the amount is available. If it is, the transaction goes
through. These type of transactions are also called ‘Card / Cardholder Not
Present’ or CNP transactions.

Each month, the credit card holder then receives a statement which informs
him of the transactions that have occurred and the charges that he has to pay
which include the total amount due, the minimum amount due, the amount of
interest being charged etc.
Again there are many ways in which the individual can make his payment –
he can send in a check for the amount or make the payment over the Internet
or telephone, depending upon the services provided by his bank or the credit
card issuing company.
The monies used (borrowed) is paramount to a loan or cash advance and
there is usually a limit put on the amount available. To obtain the credit card,
the holder has to make an application and it is granted, or not granted, based
on his credit history and certain other criteria.

Making charges on the card is done by swiping it through an electronic device

that reads the information (the credit card numbers) that is stored on the
card, or the card number can be given verbally, or typed on the computer and
sent over the internet.

For security reasons, keeping your credit card number out of the public forum
is a good idea. Because of identity theft, millions of dollars of bogus charges
are made to unsuspecting card holders every year.

The credit card can be used wherever it is accepted up to the amount of the
credit charge limit. Some credit card companies allow a cash withdrawal from
the card account while others only allow purchases.

A credit card makes it possible for consumers to “revolve their balance” by

making minimum payments but with interest charges compounded daily, it
takes a much longer period of time to pay the card down to a zero balance.

Credit cards are very useful in today's fluid, fast paced, economy because
they can be used for emergencies or other unexpected incidents, or for
purchases when cash is not available.

Interest rates on credit card balances are regulated by law, even though the
interest is usually high.

Most major banks, some credit unions, department stores, chain stores, oil
and gas companies, and other retail establishments offer credit cards and

16
many smaller stores are starting to go the way of credit cards, prompting
some people to talk of a day when cash is eliminated from everyday use.

Important features of credit cards

Credit card features includes the rate of interest, credit limits, different fees
associated with it and the rebates you avail on the purchased items.

In today’s time I feel most of you hold a credit card but having a credit card
with no basic information about it could be harmful for your financial stake.
Credit card is an instrument that could be easily used to purchase something
whereby you owe that money to the person who has issued the credit card to
you.

There are innumerable features of a credit card as many cards are there.

1. The first and foremost feature of any credit card is the rate of interest you
are obliged to pay on its unpaid balance. In case of most of the cards, you get
30 days to make payment for any initial purchase and if you pay the balance
in full then there are some cards that don’t even charge any interest rate. If
the charges are not being paid within the period of 30 days then the
remaining balance is charged with an interest rate charge. This interest rate
depends upon number of factors such as current APR and your credit rating.

2. Other feature of credit card is the credit limit that is the amount of money
you can charge before the credit company cuts you off. The credit limit also
depends upon your credit rating because if you have a good credit rating then
you will be given higher credit limit.

3. Another feature that most of you overlook is the fees associated with
having a credit card also known as "annual fees." Many credit don’t have an
annual credit fee but there are other fees included such as cash advance fees,

17
late payment fees, balance transfer fees that often lead to higher rate of
interests over credit limit increase fees, return item fees and many other fees
that you need to review before using the card.

4. There are mainly three types of cards namely; regular credit cards,
premium cards and secured credit cards. A secured credit card asks you for a
security deposit and the higher the deposit is, the higher credit limit is given.
Regular credits don’t ask for any credit deposit but they don’t have many
features and benefits. Premium credit cards carry the highest credit limits and
usually come with additional features such as product warranties, emergency
services etc.

5. Another feature is the rebate you get on the purchased items whereby
some cards refer it as cash back incentives. For example, you make a
purchase of $100 and you get a percentage of the money back but this
percentage depends upon the card you hold.

Important RBI guidelines on credit cards for the help of

customers

In recent times the usage of credit card has increased. According to data
available the usage of credit card is going up by the day 27 million credit
cards were in circulation till June 2008. So is the increase in the complaints
against them, from the annoying practice of issuing unwanted cards to a
range of unexplained fees charged by banks, the piling list of grievances has
forced RBI to keep check on them.
The central bank recently conducted a survey on credit card operations
seeing the rise in the allegations of lack of transparency and excessive
interest rates. The apex bank has issued a set of guidelines, which are not
only proposed to streamline operations but also authorize the customers.

Although it’s not compulsory for the banks to adopt these recommendations,
but these guidelines will help the customers become more aware of their
rights and serve as a basis for redressal of complaints. Here are some deadly
issues which may help you in dealing with more competently:

1. Many times you are burdened with a credit card that you never wanted and
you have to go all through those troubles and harassments to chase customer
care executives to cancel it. RBI in its guidelines has advised the banks that
they can issue a credit card or any other product only after getting a

18
customer’s explicit consent-meaning that it cannot be processed on an
implied understanding. And by chance such a card is lost and misused; it shall
be the bank’s sole responsibility and not yours. On the contrary, if a bank
rejects your application for a credit card, it has to provide to you in writing the
reason for doing so. You can also choose the chards with options of photos,
PINs and laminated signatures, as advised by RBI to reduce the risk of
stealing or misuse of cards.

2. In case you find that you are paying a higher rate of interest than your
neighbor, you can ask for the explanation regarding this from your bank -
whether it’s due to your poor payment and default history or some other
reason, as banks have been advised to publicize through their Website and
other means the interest rates charged for various categories of customers.
Also, regarding the extremely high interest rates being charged by banks on
payment rollover, RBI has suggested that they prescribe a ceiling rate,
including processing and other charges.

Banks are liable to clearly specify any charges that were hidden earlier and
emerged as a vicious surprise along with the bill. In case you have taken a
card that is free of issuance charges only for the first year, banks will have to
specify it. If you always pay only the minimum dues, leaving the balance for
the next month in the hope that it shall also constitute free credit period, now
bank has to inform you that the rollover amount is not interest-free. This will
help you to use your card with greater care.

3. If you have always worried about the constant delays in receiving bills or
statements, expect online dispatches in future if you are not getting them
already then RBI has instructed banks that customers are entitled to at least
15 days’ time to pay the credit card bill before the interest begins to be
charged.

Banks have also been asked to take the customers’ acknowledgement for the
bills’ receipt in order to keep up with the complaints of delayed or lost
statements. There is also a clause that a bill cannot be sent after an indefinite
period of, say, two years. A set time-frame has to be specified and adhered to
by the banks regarding the settlement of any outstanding claims or rectifying
any errors by the card-holder.

4. There are very few customers who have not had to spend hours stuck to a
phone to correct a billing fault. If you have been one such discontented card-
holder, RBI has provided some respite. RBI has asked the banks to have
qualified call centre staff members who can deal with all complaints
competently, and also to automatically forward the unresolved complaints
from a call centre to higher authorities. It has also suggested that the details
of such a mechanism should be put up on the banks’ Websites to provide
information to the public.

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In case, if the mistake is on your part and you have defaulted on credit card
payments, the banks will now give you sufficient notice period to either settle
the dues or to inform you that they are reporting your default status to CIBIL
or any other Credit Information Company authorized by RBI. In fact, banks
shall make sure that they stick to a procedure duly approved by their board.

5. In case you inform the bank that you want to close your credit card
account, banks will have to honor your request immediately. More
significantly, if you’ve lost your card and want to block it, the banks have to
follow your instructions and do it the minute you inform them, and the
formalities, if any, including the lodging of an FIR, should follow within a
reasonable period of time.

Another customer-friendly recommendation by RBI has included is the

provision of an insurance cover by banks to take care of the liabilities arising
out of lost cards. According to this only those card-holders who are ready to
bear the cost of the insurance premium shall be provided an appropriate
cover with respect to lost cards. In addition to the blocking or closing of a
credit card, RBI has also issued guidelines on its issuance. An important
suggestion it gave that you will not be obliged to share personal information
or card history with any other agency, and the bank cannot make it
conditional for issuing a card. It is, however, mandatory to share it with Credit
Information Companies/CIBIL.

Moreover the direct sales agents or direct marketing agents (DSAs/DMAs)

have been instructed to provide to customers only the documents or papers
that have been authorized by banks. In turn, the banks have been advised to
design the terms and conditions in such a way that no dispute arises between
the customer and bank at a later date. Most of the complaints of misselling
are credited to DSAs/DMAs.

Understanding your credit card

The Stripe on Credit card
The stripe on the back of a credit card is a magnetic stripe, often called a
magstripe. The magstripe is made up of tiny iron-based magnetic particles in
a plastic-like film. Each particle is really a tiny bar
magnet about 20-millionths of an inch long.

20
Your card has a magstripe on the back and a place for your all-
important signature.

The magstripe can be "written" because the tiny bar magnets can be
magnetized in either a north or south pole direction. The magstripe on the
back of the card is very similar to a piece of cassette tape.

A magstripe reader (you may have seen one hooked to someone's PC at a

bazaar or fair) can understand the information on the three-track stripe. If
the ATM isn't accepting your card, your problem is probably either:

• A dirty or scratched magstripe

An erased magstripe (The most common causes for erased magstripes are
exposure to magnets, like the small ones used to hold notes and pictures on
the refrigerator, and exposure to a store's electronic article surveillance (EAS)
tag demagnetizer.)

There are three tracks on the magstripe. Each track is about one-tenth of an
inch wide. The ISO/IEC standard 7811, which is used by banks, specifies:

Track one is 210 bits per inch (bpi), and holds 79 6-bit plus parity bit read-
only characters.
Track two is 75 bpi, and holds 40 4-bit plus parity bit characters.
Track three is 210 bpi, and holds 107 4-bit plus parity bit characters.

Your credit card typically uses only tracks one and two. Track three is a
read/write track (which includes an encrypted PIN, country code, currency
units and amount authorized), but its usage is not standardized among banks.

The information on track one is contained in two formats: A, which is reserved

for proprietary use of the card issuer, and B, which includes the following:

Start sentinel - one character

Format code="B" - one character (alpha only)
Primary account number - up to 19 characters
Separator - one character
Country code - three characters
Name - two to 26 characters
Separator - one character
Expiration date or separator - four characters or one character
Discretionary data - enough characters to fill out maximum record length
(79 char total)
End sentinel - one character
Longitudinal redundancy check (LRC) - one character
LRC is a form of computed check character.

21
The format for track two, developed by the banking industry, is as follows:

Start sentinel - one character

Primary account number - up to 19 characters
Separator - one character
Country code - three characters
Expiration date or separator - four characters or one character
Discretionary data - enough characters to fill out maximum record length
(40 characters total)
LRC - one character

There are three basic methods for determining whether your credit card will
pay for what you're charging:

Merchants with few transactions each month do voice authentication using

a touch-tone phone.
Electronic data capture (EDC) magstripe-card swipe terminals are
becoming more common -- so is swiping your own card at the checkout.
Virtual terminals on the Internet

This is how it works: After you or the cashier swipes your credit card through
a reader, the EDC software at the point-of-sale (POS) terminal dials a stored
telephone number (using a modem) to call an acquirer. An acquirer is an
organization that collects credit-authentication requests from merchants and
provides the merchants with a payment guarantee.

When the acquirer company gets the credit-card authentication request, it

checks the transaction for validity and the record on the magstripe for:
Merchant ID
Valid card number
Expiration date
Credit-card limit
Card usage

Single dial-up transactions are processed at 1,200 to 2,400 bits per second
(bps), while direct Internet attachment uses much higher speeds via this
protocol. In this system, the cardholder enters a personal identification
number (PIN) using a keypad.

The PIN is not on the card -- it is encrypted (hidden in code) in a database.

(For example, before you get cash from an ATM, the ATM encrypts the PIN
and sends it to the database to see if there is a match.) The PIN can be either
in the bank's computers in an encrypted form (as a cipher) or encrypted on
the card itself. The transformation used in this type of cryptography is called
one-way. This means that it's easy to compute a cipher given the bank's key
and the customer's PIN, but not computationally feasible to obtain the plain-

22
text PIN from the cipher, even if the key is known. This feature was designed
to protect the cardholder from being impersonated by someone who has
access to the bank's computer files.

Likewise, the communications between the ATM and the bank's central
computer are encrypted to prevent would-be thieves from tapping into the
phone lines, recording the signals sent to the ATM to authorize the dispensing
of cash and then feeding the same signals to the ATM to trick it into
unauthorized dispensing of cash.

What Credit card numbers mean

Although phone companies, gas companies

and department stores have their own
numbering systems, ANSI Standard X4.13-
1983 is the system used by most national
credit-card systems.

The front of your credit card has a lot of

numbers -- here's an example of what they
might mean.

Here are what some of the numbers stand

for:The first digit in your credit-card number signifies the system:

3 - travel/entertainment cards (such as American Express and Diners Club)

4 – Visa
5 – MasterCard
6 - Discover Card

The structure of the card number varies by system. For example, American
Express card numbers start with 37; Carte Blanche and Diners Club with 38.

American Express - Digits three and four are type and currency, digits five
through 11 are the account number, and digits 12 through 14 are the card
number within the account and digit 15 is a check digit.

Visa - Digits two through six are the bank number, digits seven through 12 or
seven through 15 are the account number and digit 13 or 16 is a check digit.

MasterCard - Digits two and three, two through four, two through five or two
through six are the bank number (depending on whether digit two is a 1, 2, 3
or other). The digits after the bank number up through digit 15 are the
account number, and digit 16 is a check digit.

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What is a credit card scam?
A credit card scam can come in many forms. For example, scammers may use
spyware or some other scam to obtain your credit card details. A scammer
might steal or trick you into telling them your security code (the three or four
digit code on your card) and then make purchases over the internet or the
telephone. If they know your PIN, they could get cash advances from an ATM
using a ‘cloned’ credit card (where your details have been copied onto the
magnetic strip of another card).

Of course, there is also a danger of someone using your credit card if it has
been physically lost or stolen.

5 Credit Card Scams to Beware

1. Cramming
Completely fictional companies pass these charges onto people's credit
card bills and bank accounts and cellphone bills. The processing
companies just pass them on and it's up to consumers to monitor their
bills and dispute the charges. So the fake company is just very nice
about canceling all the charges from the people who complain, and then
they rake in from all the people who don't check their bills close
enough.
2. Shaving
Thieves try out 16-digit number sequences until hitting one that works.
Then they take gift cards from stores and shave off the digits and glue
them onto a credit card. They scratch the magnetic strip so the clerk
has to enter the credit card number by hand.
3. Minting
Identity thieves hack into retailer's computers and get people's debt
card information, manufacture new debit cards, and start making ATM
withdrawals. People living in Brooklyn with their debit card inside their
file cabinet all of a sudden start seeing deductions in the thousands
from Bulgaria.
4. Skimming
Thieves fit electronic readers over the face of ATM machines, store
terminals, gas machines, etc which record your credit or debit card info.
Sometimes they also use pinhole cameras so they can also get your PIN.
The information can then be used for minting, or bartered and sold
online.
5. Universal Default
If you fall behind your payments with a completely different lender or

24
 service provider, your credit card company gets to raise your interest
rates to the default rate, usually around 20%. Since this scam is written
into your contract, it's completely legal.

Credit cards today – an abounding industry

There are five leaders in the credit card industry today:

• Visa International
• MasterCard
• American Express
• Discover
• Diner’s Club

There are other check processing companies trying to penetrate the market,
like Euro Card, JCB and ATM companies, but credit cards still account for over
90% of all e-commerce transactions.

Visa has been a leader in credit card innovation. This has brought them the
recognition as the world’s leading credit card association, with over one
billion cards being issued, and carrying over 50% of all credit card
transactions conducted worldwide.

Credit Card Origination: Automation

Within the realm of credit card origination, automation is key. Financial
institutions that can't keep up with today's increasingly time-sensitive
consumer are going to lose that consumers business to an institution that
can.
The whole idea behind automation in credit card origination is speed. Because
credit cards' simple nature and wide appeal, credit card origination is a high
volume, low risk undertaking. In these types of situations, automation is
crucial. Because they are comparatively low risk, credit cards can be
automatically originated through a credit decisioning system with virtually no
manual intervention. Because credit cards are a popular, high volume
business, financial institutions require an efficient automated process for
originating, approving, and issuing credit card products.

25
There are many credit decisioning solutions in the marketplace that meet the
basic requirements for an automated origination system. However, there are
additional requirements for an automated credit card origination system that
are driven by the unique characteristics of credit card products as mentioned
above.
The first requirement that a credit card origination solution should support is
Straight through Processing. Straight through Processing allows a decision
engine to process credit card applications from beginning to end in a
completely automated fashion. Any time a manual review is required, the
system can drop the application into a manual review queue. Once the
manual review is completed, the application can immediately be re-
introduced into the automated process right were it left off. Straight through
Processing allows financial institutions to efficiently process the high volume
of applications generated by their credit card origination initiatives.
The second requirement involves the end of the credit card origination
process. Once a customer is approved for the product and the account is
booked to the appropriate system of record, the consumer wants to start
using their new card. Unfortunately, most banks can't fulfill this desire. The
account may be created, but the consumer will not have the actual credit
card for a couple weeks. Instant Issuance, allows consumers to start using the
card the second after their account is created. Either by providing an interim
credit card (like a receipt) or by actually printing off the final card at the point-
of-sale, financial institutions can enable their customer to start utilizing their
product immediately.

Credit Cards: Their Popularity, the Criticism and the

Risks
Credit cards are quite popular and most people often having several credit
cards with them. The idea of credit is essentially a good one for those people
who like to purchase things, but may not have the cash amount available with
them at that time. The credit facility serves them in such times and they can
repay the amount later, in a manner and amount that suits them – either by
repaying the entire amount or by paying it in small chunks.
However, one must know that credit cards charge a very high interest rate for
the service that they are providing. And depending upon the tendency of the
individual towards spending when he / she does not have the money, having a
credit card may often turn out to be a curse, rather than a boon.
It has become quite common to come across individuals who have had

26
several credit cards with high credit limits who are now in debt because of
spending all the money available on these cards.
The credit card issuing companies have also come under a lot of criticism for
inducing individuals to taking their credit cards, because they lure these
potential customers by offering them different facilities and higher credit
limits.
Apart from the risk of overspending and getting into debt, credit cards are
often at risk of fraud. Nowadays there are several unscrupulous people who
collect credit card numbers (either by copying the details during an actual
transaction or by stealing them from the Internet website databases). These
fraudsters then make purchases by using these details and suddenly the
credit card holder gets a statement which has transactions which he has not
done.
This creates a lot of problems for the card issuing companies as they have to
spend time and resources to trace and verify the fraudulent activity and then
ensure that the customer does not have to bear the brunt for those fraudulent
transactions. This often takes some time, and meanwhile the customer can
get quite hassled about making payments.
Thus, we have seen that having a credit card can be either a boon or a curse.

CREDIT CARD CHARGES

Before....Credit Card Application

Before we get into shopping for a card, let's go over some important terms
you'll encounter in credit-card brochures or discussions with potential lenders:

Annual fee - A flat, yearly charge similar to a membership fee

Many companies offer "no annual fee" cards today, and lenders who do
charge annual fees are often willing to waive them to keep your business.

Finance charges - The dollar amount you pay to use credit

Besides interest costs, this may include other charges such as cash-advance
fees, which are charged against your card when you borrow cash from the
lender. (You generally pay higher interest on cash advances than on

27
purchases -- check your latest bill to find out what you're paying for this
service!)

Grace period - A time period, usually about 25 days, during which you can
pay your credit-card bill without paying a finance charge
Under almost all credit-card plans, the grace period only applies if you pay
your balance in full each month. It does not apply if you carry a balance
forward. Also, the grace period does not apply to cash advances.

Annual percentage rate (APR) - The yearly percentage rate of the finance
charge
Interest rates on credit-card plans change over time. Some of these
adjustments are tied to changes in other interest rates, such as the prime rate
or the Treasury Bill rate, and are called variable-rate plans. Others are not
explicitly tied to changes in other interest rates and are called fixed-rate
plans.

Fixed rate - A fixed annual percentage rate of the finance charge

Variable rate - Prime rate (which varies) plus an added percentage (For
example, your rate may be PR + 3.9 percent.)

Introductory rate - A temporary, lower APR that usually lasts for about six
months before converting to the normal fixed or variable rate (This is a hot
topic -- more about it later.)
Experts say that if you're smart, you'll do the same kind of comparison
shopping for a credit card that you do when you're looking for a mortgage or
a car loan. This is a good idea because the choices you make can save you
money. The process is not a simple one -- here are some tips that should help
you get started:

Do some research - There are plenty of places, both online and offline,
where you can read about credit-card offerings and even get credit-card
ratings, but since rates and plans change so often, it's a good idea to call the
institutions you're interested in to confirm the information and to see if there
are other plans that might work for you.

A reliable and non-commercial resource is the Federal Reserve Board. Also,

the non-profit consumer credit organization U.S. Citizens for Fair Credit Card
Terms offers credit-card ratings from its research (and so do a lot of
commercial organizations -- many of whom are also credit-card issuers).

28
Make a list - Make a list of credit-card features that fit your financial needs
and rank the features according to how you plan to use the card and pay your
monthly bill.

Review the plans - Review all of the information you've gathered on

different plans. Pay special attention to the APR - - you want a low rate, but
not necessarily the lowest. This is because, depending on your lifestyle and
payment habits, you might benefit more from a card that offers cash rebates,
discounts or frequent-flier miles.

Check out credit unions - Look into the possibility of joining a credit union.
Credit unions are non-profit, and they have lower overhead so they can
charge lower interest rates. Credit unions are newer to the credit industry so
they are eager to generate credit-card loans. However, you'll probably be
required to open a share account or savings account to join.

Credit unions typically are limited to a particular employer and its employees,
but that's changing. Due to industry consolidations, credit unions are rapidly
expanding their fields of membership. To find out which credit union you may
be eligible to join, contact the Credit Union National Association (CUNA).

Compare plans - If you already have a credit card, be sure that you're
making a good move before you swap cards. If you are a current cardholder
and have a good credit rating, see if the institution that issued your card will
lower your current rate. Don't be afraid to negotiate!
These are steps to take when deciding on a credit card. But your actual
breadth of options depends in great part on your credit history.

SOURCE: WIKIPEDIA.COM,GOOGLE.COM

29
Different Types of Credit Cards are Available Today
Before getting and filing up any kind of credit card form the first and fore
most thing that you should do is to go through the types of credit cards
available in the market today.

There are number of credit cards varieties that are offered by the companies.
The main thing is the selection of the best credit card that suits you well. One-
size cards are not suitable for all. There is a good type of cards for the
selection that are offered by the companies. Some are provided for the
special groups and others credit cards are provided for those who want not
only the standard card but also more.

Standard cards are issued simply for your use. These cards will not provide
you any great deal but you can easily transfer your balances to this card.
Standard card is the very common sort of plastic currency in your pockets,
these cards provide you with that interest rate which is far beyond your
imagination and it is so because it does not provided you any kind of special
option or features. What all you need is just some amount of credit on your
name, and than this card is ready for you.

There are many cards available but those who have bad credit this credit card
is best for them. These cards are normally secured; they have less credit
limits as well as have great interest rates. If you had some credit issues in
past than these cards are best for you as these cards are the best mode to
reestablish the worthiness of your card and you will be able to obtain the
cards again in near future. These credit cards are normally secured, have less
credit limits as well as they have superior interest rates. If you ever had any
terrible credit history, then plastic money can assist you to start rebuilding
the credit scores.

There are many types of credit cards available in the market but one among
those is a specialty credit card. The term itself shows the distinction of this
card, the word "specialty" indicates to the particular group of customers.
Under this type you can also get cards such as, student credit cards that are
meant particularly for students. The student credit cards are good for
students as they have less interest rate as well as there is no need to pay
immediately. This facility given by this card is very attractive for the students.

Another kind of credit card is the card, which is used for business purposes

30
and is very useful for a businessman is business credit card. These cards are
issued to the employees through their trade, and business cards have long
credit limits as well as these cards have additional perks, which come all
along with the card. These cards are ideal selection done by the people who
are in to business. Business plastic normally has various features.

With the various amount of different credit cards out there, which one will you
choose.
Whether you are a spender or a saver, there are now a mind boggling variety
of credit card options from which you can make a selection. You will be spoilt
for choice - from the bland vanilla credit cards that offer one or two months of
interest free credit if you are lucky, to the fancy cards with a range of free
gifts, discounts and cash backs.

GOLD CARD

A gold-colored credit card, generally issued to customers with above average

incomes, that may include additional benefits, for example, an overdraft at an
advantageous interest rate, and may have an annual fee

CASH BACK CARDS

As the name suggests, you are refunded a percent of your monthly spending.
This percentage varies anywhere between 0.5 to 2% and may be dependant
upon factors such as your salary and the amount you spend every month.

REWARD CREDIT CARDS

Again, a suggestive name. Here, you get rewards or points if you make your
purchases from a certain store or a catalogue. Some retailers offer a
staggered points system whereby you earn points each time you use your
card, but receive an elevated number of points each time you spend with a
‘recommended retailer’. You can also get rewards in the form of air miles or
Nectar points. You may even get a discount on your next car if you opt for the
correct rewards card.

CHARITY CARDS

Every time you swipe this card, a charity gets a small benefit. When you
decide to sign up for a charity card, the credit card company are likely to
make a small, initial donation to the charity, after which they will receive a
donation relating to the percentage of your every spend. Although this sounds
like a good option it is important to be aware that the amount donated per
spend does tend to be minimal, 0.2% or so. However, charity cards do present
a convenient way to give something back every time you shop.

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BALANCE TRANSFER CARDS

You can use these cards to shuffle your debt from your older card to a newer
one for lesser or zero interest rates. Smart rate tarts are able to whittle down
the balance transfer fee from 3% to a negligible figure.

STORE CARDS

Store cards are often given to shoppers who make frequent or large
purchases in a certain store or are offered for promotional reasons. Such
cards charge a substantial rate of interest, often up to 30% on outstanding
balances. The smart shopper will use a store card for large purchases so as to
benefit from any introductory discounts offered, pay off the full amount, and
then retain the store card for sales previews, priority perks, and other
advantages.

PREPAID CREDIT CARDS

Such cards were born and have become popular because they were seen as a
solution to reduce risks related to internet fraud and spiralling credit card
debt. You first need to charge your prepaid card with the amount you wish to
allocate for online or offline purchases and then top up your balances as and
when you wish to make purchases. This prevents you from over spending and
it discourages internet fraud because only a limited amount of balance is
normally left on a prepaid card.

STATUS VALUE CARDS

Platinum and Gold cards lend a certain status to the owner and are a
reflection of your salary or your good credit score. They may not offer lower
interest rates but do carry higher purchase protection as well as other
benefits like a higher or unlimited credit limit.

PRETTY CARDS

For others, credit cards come in various shapes, sizes, colours, and an
imaginative display of artwork. While such cards may cause a bit of confusion
outside the UK, they are good fun to use everyday.

AFFINITY CARDS

These cards are offered by banks in association with airlines, car companies,
and hotels. Using these cards get you flying miles and points that can be
stored and redeemed later.

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UNSECURED CREDIT CARDS/REVOLVING CARDS

These cards allow you to pay a minimum due of 2 to 4 % and carry forward
the remaining balance to the next month. If you clear the entire balance and
later you make some purchases then you won’t be charged any interest on
these purchases till the next billing cycle begins. This period of non-interest is
called your grace period. If you have a balance to pay, then all subsequent
purchases attract the interest rate as per the APR (annual percentage rate.)

SECURED CREDIT CARD

This card asks you to have a savings account with specific balance in it. This
serves as collateral in case of default in payments. These are a good way to
repair bad credit reports. Make sure the issuer reports to credit bureaus and
does not mention the secured aspect. The associated fees should also be
looked into.

CONSOLIDATE CREDIT CARD

If you have more than one credit card with balance, you can combine them
into a single consolidated credit card. The card provider pays off all the
balances on the previous cards, and charges fees and interests for doing so.
These balances are then shifted to the new consolidated card. This is called
credit card balance transfer.

CHARGE CARDS

Charge cards fall into the category of credit cards, but the only difference is
that you have to clear the entire balance at the end of each month. Since
it does not allow you to carry forward your balance, it gives you very high
spending limit or may be no limit at all.

GOLD AND PLATINUM CREDIT CARDS: THE BIG DEAL

What's the big deal about Gold and Platinum credit cards? Well, apart from
the endless insurance, rewards and card-holder benefits, the ultimate bonus
is the status and privilege associated with ownership of one. Find out more
about Gold and Platinum cards in this article.

As far as most people are concerned, gold and platinum credit cards are at
the top of the personal credit card ladder. They are certainly the most desired
credit cards and everyone that gets involved in the business of keeping credit
cards hopes that they eventually will be able to get a credit card of the gold
and platinum variety. In addition to this hope, there is of course also the fact
33
that the imagery associated with gold and platinum credit cards is so
intensely positive and prestige.

They are associated with being able to do anything and buy anything and for
that reason are also associated with a lifestyle of prosperity that so many
people would like to live. Even the names of the actual credit cards inspire
that image, with gold and platinum arguably being the two most valuable
substances on Earth.

When you take a look at all of the different gold and platinum credit cards
that are currently on the market, a point of similarity between the different
credit cards is that they all tend to have really large credit limits.

In fact, you will find in most cases that gold credit cards have credit limits that
start in the five figure range while platinum credit cards usually do not even
have credit limits associated with them. This might confuse people that are
used to living in the realm of credit limits to curb the spending of people that
are not disciplined in their use of this device, but you also need to understand
the type of people that have gold and platinum credit cards. These are people
with large salaries and close to perfect credit ratings that they have been able
to maintain for years.

People do not get to the point of actually being eligible for a gold or platinum
credit card without showing their ability to pay off their credit card expenses
first. Once people have been given clearance to have these credit cards,
companies do not feel the need to saddle them with low credit limits.

Another major feature of gold and platinum credit cards is that people that
have them are usually the star customers of the credit card companies.
Therefore, credit card companies will often go out of their way to keep their
gold and platinum customers happy.

This means that people that are the owners of gold and platinum credit cards
are also people that have access to the best fraud protection, the best online
security, the most features to their account and quite often the best reward
programs as well if that is what they want.

They might get a better conversion rate between points and miles for
example or they might get a better starting point from which they can
continue to add points to their total. Anything is possible with a gold or

34
platinum credit card and it is precisely for that reason that they are so popular
to begin with.

It is also precisely for that reason that they are so difficult to come across. As
previously mentioned, you are going to have to be very good with your credit
rating over the course of at least a few years if you want to qualify for one of
these credit cards. All of the discipline and sacrifice is more than worth it
however because these are definitely the top of the line as far as personal
credit cards are concerned.

4 SMART WAYS TO USE CREDIT CARDS

Imagine if someone suddenly took away all of your plastic. Credit
cards are so much more convenient and safer than carrying cash, it's
hard to imagine life without them. As the credit card industry has
evolved, new products and features make using credit cards even
more appealing -- if you know how to play the game.

Here are four ways to get the most out of

your plastic.

1. Build a good credit rating.

Pay your credit card bills on time, stay well within your credit limits and be
careful not to take on too much debt with too many cards and you'll begin to
establish an excellent record on your credit reports from all three credit
reporting agencies. That information, in turn, is used to calculate your credit
score -- a number that tells potential lenders how likely you are to repay your
debt. Use your cards to boost your credit score and you'll not only qualify for
zero and low-interest rates on competing cards but you may also be eligible
for a better deal on your mortgage and auto insurance. Check out "3 steps to
boost your credit score."

2. Protect your big purchases.

If you buy something that's damaged or defective and you used a credit card,
you have the right to withhold payment under the Fair Credit Billing Act. You
do need to make a good-faith effort to solve the dispute with the merchant.
But if you can't, your credit company will investigate the problem. If after
contacting the merchant you are unable to settle and the card company sides
with you, the charge won't be added to your bill. Purchases made with debit
cards are not covered under the Fair Credit Billing Act. In addition, some cards
offer extended warranties and other protections for large purchases made on
the card. Check with your credit card company.

3. Make online shopping safer.

The Fair Credit Billing Act also covers online purchases, making a credit card
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the best way to pay in cyberspace. If you're worried about security, many
credit card companies offer a one-time use account number for large online
purchases that keeps your real account number off of the Web.

4. Use your card for a low-interest loan.

Robert Manning, research professor of consumer finance at the Rochester
Institute of Technology and author of "Credit Card Nation," once used a low
interest rate credit card to buy a car. The fixed-rate on the card was better
than what banks were offering on auto loans and he didn't have any of the
application hassles. (Of course, this only makes sense if you qualify for a very
low interest card and a very high credit limit -- and you can afford to pay the
big balance off quickly.) Manning even suggests young people strapped for
cash use a low-interest card to fund their 401(k)s in some instances. "Say you
borrow $4,000 to contribute to your 401(k)," explains Manning. "Maybe your
company makes a 50-percent match. Last year the stock market went up 10
percent. The free money from the match and the stock gains will far outweigh
the interest on the 'loan' you made to yourself if you pay off the card
responsibly."

Credit Card Index

The official Get Rich Slowly position on credit
cards is: DON’T USE THEM. Credit cards are
a trap. They’re designed to make money for
banks, not to be convenient for consumers.
There’s a reason that credit card companies
are making record profits. There’s a reason
that banks are eager to offer consumers new
credit cards. You have to question anything
that a bank is eager to do for you; you can be
sure it’s not in your best interest.

Having said that, for a minority of people, credit cards can be a valuable tool.
If you never carry a balance, if you never make spontaneous purchases with
plastic, if you never pay an annual fee, then there are some great options out
there.

Index Credit Cards is a site the catalogs 912 current credit card offers. The
site even provides lists of low interest credit cards, cash back credit cards,
credit card reward programs, travel and airline credit cards, and gas credit
cards.

Index Credit Cards offers lots of other great information, including a credit
card rate monitor, tips on how to get a free credit report and how to opt out of
credit card offers, and more.

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If you must use credit cards, Index Credit Cards is a solid resource.

CREDIT CARD TECHNOLOGY FLOURISHES - BUT SO

DOES FRAUD
Credit cards have become an integral part of our finances but as credit card
technology continues to develop, so do methods of credit card fraud.

Credit cards have become an increasingly integral part of our financial system
over the last century. Types of credit cards and consumer credit choices have
continued to flourish across the world and, while many credit card companies
have come under fire for misleading consumers and encouraging consumers
to get into debt, new credit card innovations mean constant changes in the
financial market.

For example, if you're one of the millions of people who hate accumulating
loose change in your pockets or your wallet every day, a new payment
system devised by Visa could change your life. Under the new 'wave and pay'
system, customers would be required to pass a credit card in front of an
electronic reader in order to make little payments, but wouldn’t actually need
to remove the card from their wallets. The system would, however, be limited
to monetary transaction amounting to less than £10 in total.

Visa's financial chiefs estimate that demand for this 'wave and pay' system
will expand in the future, thus promoting more efficient low-cash payments
and stimulating a move away from loose change. Visa Europe spokesperson,
Sandra Alzetta, stated:

"With over 75 per cent of all cash payments being less than £10, the
introduction of contactless payments will play a major role in encouraging the
use of cards over cash for low value transactions."

It is expected that 'wave and pay' readers will be introduced into London by
the end of 2007, and then spread across the UK afterwards. In fact, people
who live in London will be more familiar with the technology, since it is
already in widespread use for Oyster cards.

However, while credit card innovations constantly progress, so do methods of

credit card fraud. In 2005, studies done by the British Bankers' Association

37
(BBA) have shown that credit card fraud amounted to over £439 million -
although this figure was actually 13 per cent lower than the previous year. As
a result, consumers in Britain are being encouraged to take full responsibility
to fight this menacing threat by being extra careful with their credit cards and
their credit card practices.

There are however, many tips you can follow to successfully avoid credit card
fraud: for instance, make sure you don't keep personal financial details like
PIN numbers or confidential information written down. Also, make sure that
when you're making a financial transaction, you do not let your card or card
details out of your sight.

There are a variety of sources that consumers can turn to for advice when
choosing a credit card; financial comparison sites, for example, allow you to
view a selection of credit card offers before you make your decision. After all,
if you use your credit card wisely and take measures to ensure that you're not
a victim of credit card fraud, you're less likely to become a statistic.

5 RULES TO GET THE BEST CREDIT CARD

With all the credit card offers out there, how do you know you are getting the
best one? It would be foolish to marry the first person you date or buy the first
home you see with a for sale sign. As strange as that sounds many people
apply for credit card offers they get in the mail without comparing it with
others. If you are like me, you like to know you got the best deal and are
willing to do some homework to get it. This article will outline the major points
of comparison so you get the best credit card offer available.

Rule One: Use the power of the Internet to compare offers.

Using the Internet to compare offers levels the playing field. An offer that
looked good in the mail might be terrible compared to the cards online. Not
only will you save time but, you will almost always come out on top.

Rule Two: APR is king

Lower APRs (annual percentage rate) are best. Higher interest rates mean you
will be charged more for the debt on your card. Sometimes credit card offers
have introductory periods with no interest. Offers with zero interest range
from 6 to 18 month and apply to purchases, balance transfers, or both. There
are cards that have zero percent interest rates that still have reward points
too. These cards are rare but anytime you can have a credit card pay you to

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borrow money interest free, do it!

Rule Three: Watch out for Annual Fees

Annual fees are becoming a thing of the past. With all the competition
between cards you should never have to pay an annual fee. If a card has an
annual fee, send the offer to the shredder.

The only exception to this rule is if you need to repair your credit. Sometimes
paying a fee to get started on rebuilding credit is worth it.

Rule Four: Variable or fixed rate? Go with fixed if you can.

Fixed interest rates are a better option if you plan on carrying a large balance
on your card. If you don’t plan to use the card that much variable or fixed
interest rates don’t matter as much.

Rule Five: Choose the rewards that match your purchasing behavior.
Make sure the rewards you receive match your spending habits. Some cards
offer up to 5% cash back rewards for certain kinds of purchases. Some offer
rewards for gas station purchases and others offer rewards for using a certain
airline. Make sure to seek out those cards that will reward you for purchases
you are already making.

WHAT TO LOOK FOR IN A CREDIT CARD OFFER

When it comes to acquiring a credit card, there is a plethora of choices out

there for any credit consumer. However this makes the process of browsing
through the credit card offers and selecting the best one difficult for the
average consumer.

To choose the best credit card offer you have to decide how you will be using
your credit card and what options in a credit card contract are most important
to you. You have to take into account such things as the APR, reward
programs and security options, among other items before selecting the best
credit card offer for you.

One important part of the credit card offer is the APR. The annual percentage
rate (APR) tells you the interest that will be charged on your credit card
balance. Finding a low interest rate can save you a lot of money in the long
run.

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The Apr must be taken in conjunction with other factors of the credit card
offer. For example credit cards that offer a reward program often charge a
higher interest rate than cards that don‘t. If you are looking specifically for a
card that allows you to earn air miles on your purchases, then you have the
task of finding the low interest credit card that offers the reward program that
meets your needs. In addition to low APR, credit card offers should have
reasonable usage fees. Many credit card offers have zero annual fees.

Credit cards issuers are heavily relying on the reward programs in their credit
card offer to reel in customers. These rewards are based on the amount of
use of the credit card and include programs such as airline miles, cash back,
department store items and even free gas for your automobile. Thus choosing
the right reward program can allow you to work your way towards buying a
new computer or getting a free ticket to the destination of your choice. Again
these rewards should be taken in conjunction with the APR to find out if the
credit card offer is worthwhile.

Another part of a credit card offer is its security features. Most credit card
offers today guarantee a great deal of security measures for consumers.
These include steps to prevent identity theft and lessening the liability of
owners incase of unauthorized use of their credit card.

Different individuals will find different credit card offers best suited to their
needs. There is no one best credit card offer for all consumers. Therefore it is
important to know how you will be using your credit card and then to shop
around to find the most suitable credit card offer.

CHAPTER 5
INTRODUCING PUNJAB NATIONAL BANK (PUBLIC
SECTOR BANKING)

40
CREDIT CARDS DIVISION WORKING AND PROCESSING
PNB operates at the cutting edge of technology for its customers and offers
innovative services to its customers, such as Free Tele-banking / Fax Banking
facility, and Centralized Banking Solution (CBS), an inter-branch networking
and data sharing platform which makes 'Anytime Anywhere ' banking a reality
for its customers. It has also launched a Debit/ATM card which can be
accessed at 555 ATMs PNB ATMS and 11000 other ATMs through tie ups with
other Banks.

• DOCUMENTS REQUIRED FOR PROOF OF INCOME

various categories of applicants are required to submit documentary proof of
their income for ascertaining their repayment capacity and their credit card
limit. The documentary proof of income may be submitted in any of the under
noted forms:

Salaried in MNC/ Public Ltd. Cos. Form 16/Income Tax return/ Salary Certificate/
Latest salary slip
Salaried in any other organization Form 16/ Income Tax return
Self-employed (including Directors in Pvt. Personal Income Tax return
Ltd. Cos.)

• ADDITIONAL DOCUMENTS

The under noted additional documents will help in priority processing

of the application for issue of credit card:

In case applicant is holding any other credit card, last three

o
months credit card statements indicating regular payments. (Card
tenure should be more than 3 months). Photocopy of the front and
back of the card. OR
o Repayment on any other unsecured product (Personal Loans etc.),
proof of the loan account being greater than 6 months. OR
o Repayment schedule of Auto Loans for at least 6 months (Account older
than 6 months).

Please note that the above-mentioned documents will be required over

and above the standard documentation requirements.

NO "DOCUMENT FOR PROOF OF INCOME" OFFER TO PNB CUSTOMERS

PNB customers, who apply for the card, may be exempted from submission of
the documentary proof of income, in case they fulfill the under noted criteria:

41
No. Details Savings Account Fixed Deposit
Holders Holders
a) Vintage/ Account more than 1 year + 6 months +
b) Average balance in the account Rs. 25,000 Rs 25,000
(over last 3 months)

All applicants applying under this guideline must be above 18 years

old. Minors cannot apply under this scheme.
There should be no bounced cheques on the account during the
preceding 12 months or other unsatisfactory conduct on the part of
the account holder.

CHARGES
When we become a customer, we will be given upfront details of any
charges applicable to the products chosen by us.

• WE can also find out about their charges by:

o asking our staff at the branch where you have your account

o phoning our help-line or

o looking on our website

• If we increase any of these charges or introduce a new charge, it will be

notified at least 15 days before the revised changes are levied/become
due.

• We will tell you the charge for any other service or product before we
provide that service or product, and at any time you ask.

• We will give you details of any charges we levy for using ATMs.

TERMS AND CONDITIONS

• When you become a customer or accept a product for the first time,
we will give you the relevant terms and conditions for the service
you have asked us to provide.

• All written terms and conditions will be fair and will set out your
rights and responsibilities clearly and in plain language. We will only
use legal or technical language where necessary.

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Changes to Terms and Conditions
• When you become a customer, we will tell you how we will let you
know/ notify about changes to terms and conditions.

• Normally, changes {other than interest rates} will be made with

prospective effect giving notice of at least 15 days. If the changes
are to your disadvantage, you may close the account at any time up
to 30 days from the date of notice without having to pay any extra
charges or interest for doing this.

• Changes in the interest rates on our products {deposits and

advances} from time to time will be notified as per the bank’s
policy/practice.

ACCOUNT OPERATIONS
STATEMENTS

• To help you manage your account and check entries on it, we will give
you account statements at regular intervals unless this is not
appropriate type of account for the type of account you have [like an
account where you have a passbook]

• We will normally provide you with a statement periodically as per our

policy. You can ask us to provide you with account statements more
often than is normally available on your type of account, but there may
be a charge for this service.

• You will also be able to see your last few transactions on ATM or
through your internet account wherever such facilities are available
with us.

• We will also send you statement of accounts by e-mail, if you so desire,

provided we have such facility with us.

PROTECTING YOUR ACCOUNT

• We will tell you what you can do to help protect your accounts. You can
find out more about what you can do to help in section 11 of this Code.
• In the event your cheque book, passbook or ATM/Debit card has been
lost or stolen, or that someone else knows your PIN or other security
information, we will, on your notifying us, take immediate steps to try
to prevent these from being misused.

43
44
CARDS AND PINS
• We will only send you a card if you ask for one or to replace a card you
already have.

• If you do not recognize a card transaction that appears on your

statement, we will provide you with more details. In some cases, we will
need you to give us confirmation or evidence that you have not
authorized a transaction.

• We will give your PIN (Personal Identification Number) separately from

your card. We will not reveal your PIN to anyone else.

• We will tell you about our systems to allow you to choose or change
your PIN. This should make it easier for you to remember the PIN of
your choice.

PNB Credit Card

• Keeping with its long tradition of sound banking and innovativeness,
PNB has entered the card business. At a time when new payment
systems are becoming popular in the country, PNB has joined the
ranks of banks that are offering card-based banking solutions.
• PNB International Credit Card is available in two variants, viz. Gold
Card and Classic Card. Our Credit card has much more than just
credit facilities.
• PNB International Credit Card will be issued only to customers who
have either their residence or their office in one of the cities where
PNB will provide the service. These services are initially being
provided at 22 cities viz.

Mumbai Thiruvanthapuram Hyderabad

Ahmedabad Bangalore Pune
New Delhi Vishakhapatnam Kochi/Cochin
Gurgaon Chandigarh Jalandhar
Calcutta Ludhiana Ghaziabad
Chennai Amritsar NOIDA
Jaipur Coimbatore Vadodara/Baroda
Faridabad

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 • Pre-approved Credit Card will be issued to customers maintaining a
prescribed minimum balance in their Savings Fund account and
availed Housing/Car loan from PNB, without any proof of income
documents, as a special case.Free credit card to Home Loan
Customers for 1st year.

All applicants whose names appear in any blacklist or defaulter list

referred to by PNB/ HSBC will not be issued a Card.

CONDITIONS APPLICABLE FOR APPLYING THE CREDIT CARDS OF PNB:

• The minimum annual income requirement for applying under the two
categories of the PNB Credit Card are as under:

PNB Gold Card - Rs.1, 75,000/- p.a.

PNB Classic Card -- Rs.72, 000/- p.a.

INTERNATIONAL OPERATIONS

 PNB INTERNATIONAL CREDIT CARD

PNB has announced the launch of their own global credit card.They are
collaborating with VISA for this new credit card offering.The card was
launched by the Deputy Chairman of the Planning Commission Montek Singh
Ahluwalia on Friday.PNB claims that this card would be acceptable in over 29
million merchant establishments and one million ATMs worldwide.

Of course, it can also be used online on shopping sites.K. C. Chakrabarty,

Chairman and Managing Director PNB said that they are launching two
versions of this card: PNB Global Gold and PNB Global Classic.

PNB's international credit card comes with a range of features such

as free credit period of up to 50 days, attractive reward point and no
annual fee. This is a fully loaded photo credit card that would offer
the facility of SMS alerts to all its respective customers in case of
high value transactions.

Punjab National Bank is happy to launch its co-branded international

credit card with Hongkong & Shangai Banking Corporation Ltd.
(HSBCL), one of the world's leading financial instititutions.

PNB International Credit Card is an unique and a world-class payment

proposition. It is set to bring about a revolution in retail banking and offers
value to customers.

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The PNB Credit Card will be issued in two variants – Gold and Classic
Card (MasterCard/ Visa).

CASH ADVANCES ON PNB INTERNATIONAL CREDIT CARD

The PNB International Credit Card will be accepted at over 18 million

merchant establishments worldwide. Cash can be obtained from over
5,50,000 ATMs that accept the MasterCard or Visa mark cards, including
nearly 80 in-branch and off- branch ATMs of HSBC in India.

Product features of PNB International Credit Card:

Acceptance at over 22 million establishments.
Worldwide ATM access for credit card accountholders at over
6,00,000 ATMs.
Free credit period of up to 48 days.
At new reduced fee rates, one can have the PNB International Card
for Rs. 350/- only. For details one can contact any PNB branch in the
22 cities where the card can be obtained.
Rewards programme earn points that can be redeemed against
renewal fees, gift vouchers etc.
Free remittance at PNB branches for remittances from cardholder’s
savings bank account up to Rs. 10,000/- once a month
2.5% discount on basic domestic air fares and 3.5% on
international air tickets with specified travel agents.
No surcharge on purchase of petrol ranging Rs 400/- to 2500/- pm
from any petrol pump having EDC terminal accpeting accepting
credit card.

 INSURANCE BENEFITS

Classic Card Gold Card

Air accident Rs.15 lacs Rs.40 lacs
Other accident Rs.1.5 lacs Rs.4 lacs
Credit Shield Rs.20,000 Rs.40,000
Purchase protection Rs.30,000 Rs.50,000
Baggage insurance USD 600 USD 1,200

47
 Enhanced Travel Insurance
Cover for Delayed baggage - USD 300
Cover for loss of travel documents - USD 500
Cover for hijack insurance - USD 250(>12 hours<36
hours)

SOURCE: PNBINDIA.COM

CHAPTER 6
INTRODUCING ICICI BANK (PRIVATE SECTOR
BANKING)

CREDIT CARDS DIVISION WORKING AND

PROCESSING

System and method for establishing and executing

functions to affect credit card accounts and transactions
A system and process for establishing a function having a corresponding
function identifier. The function is adapted to be processed during a
transaction such as a point-of-sale transaction that may involve a
credit card. The system and process involve identifying an account
having an account identifier, establishing a function having a function
identifier, and receiving a transaction request including the account
identifier, a transaction amount, and the function identifier. The
system and process also process the transaction in accordance with
the function to affect the transaction and, possibly, the transaction
amount. An affect on the account is also contemplated. Additionally,
the system and process are adapted to allow message to be presented
by customers and credit card holders during a transaction for later
appearance on a credit card statement or other notice.

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Claims
1. A method for determining the terms of a transaction, comprising the
steps of:
receiving, from a POS terminal, a request to process a transaction, the
request including a transaction amount, an account identifier and a function
identifier, the account identifier corresponding to an account, and the function
identifier corresponding to an operation defining special purchase
terms;recording data representing a link between the function identifier and
the transaction;transmitting, to the POS terminal, an authorization code in
response to the request; and processing the transaction in accordance with
the operation to affect the account.

2. The method of claim 1 wherein the operation represents application of a

discount amount.

3. The method of claim 1 wherein the operation represents application of a

percentage discount.

4. The method of claim 1 wherein the operation represents application of a

special interest arrangement.

5. The method of claim 1 wherein the operation represents a period of

reduced payment.

6. A method for identifying the terms of a transaction at a point-of-sale,

the method comprising the steps of:
receiving an account identifier and a function identifier, the account identifier
corresponding to an account, the function identifier corresponding to an
operation defining special purchase terms; determining a first transaction
amount;
transmitting a request for authorization, the request including the account
identifier, the function identifier and the first transaction amount;
receiving an authorization notice including a second transaction amount; and
processing the transaction based on the second transaction amount.

7. The method of claim 6, further comprising the step of transmitting a

request for the function identifier.

8. A method for processing a cardholder message, the method comprising

the steps of:
receiving a request to process a transaction, the request including a
transaction amount, an account identifier and a cardholder message identifier

49
representing a cardholder message;establishing an association between the
cardholder message and the transaction; and
storing at least one of the cardholder message identifier and the cardholder
message, thereby indicating the association between the cardholder message
and the transaction.

9. The method of claim 8 wherein the cardholder message is a message code

selected from a set of predefined message codes.
10. The method of claim 8, further comprising the step of transmitting a
request for the cardholder message.
11. The method of claim 8, further comprising outputting the cardholder
message on a billing statement associated with the account identifier.
12. A credit card central controller for determining the terms of a transaction,
the credit card central controller comprising:
a processor;a memory connected to said processor storing a program to
control the operation of said processor;the processor operative with the
program in the memory to:
receive, from a POS terminal, a request to process a transaction, the request
including a transaction amount, an account identifier and a function identifier,
the account identifier corresponding to an account, and the function identifier
corresponding to an operation defining special purchase terms;
record data representing a link between the function identifier and the
transaction;
transmit, to the POS terminal, an authorization code in response to the
request; and
process the transaction in accordance with the operation to affect the
account.
13. A POS terminal for identifying the terms of a transaction at a point-of-sale,
the POS terminal comprising:
a processor;a memory connected to the processor storing a program to
control the operation of the processor;the processor operative with the
program in the memory to:
receive an account identifier and a function identifier, the account identifier
corresponding to an account, the function identifier corresponding to an
operation defining special purchase terms;
determine a first transaction amount;transmit a request for authorization, the
request including the account identifier, the function identifier and the first
transaction amount;
receive an authorization notice including a second transaction amount; and
process the transaction based on the second transaction amount.
14. The POS terminal of claim 13, wherein the processor is further operative

50
with the program to transmit a request for the function identifier.
15. A credit card central controller for processing a cardholder message, the
credit card central controller comprising:
a processor;a memory connected to the processor storing a program to
control the operation of the processor;the processor operative with the
program in the memory to:
receive a request to process a transaction, the request including a transaction
amount, an account identifier and a cardholder message identifier
representing a cardholder message;
establish an association between the cardholder message and the
transaction; and store at least one of the cardholder message identifier and
the cardholder message, thereby indicating the association between the
cardholder message and the transaction.
16. The credit card central controller of claim 15, wherein the processor is
further operative with the program to transmit a request for the cardholder
message.
17. The credit card central controller of claim 15, wherein the processor is
further operative with the program to output the cardholder message on a
billing statement associated with the account identifier.
18. A credit card central controller for determining the terms of a transaction,
comprising:
means for receiving, from a POS terminal, a request to process a transaction,
the request including a transaction amount, an account identifier and a
function identifier, the account identifier corresponding to an account, and the
function identifier corresponding to an operation defining special purchase
terms;
means for recording data representing a link between the function identifier
and the transaction;
means for transmitting, to the POS terminal, an authorization code in
response to the request; and
means for processing the transaction in accordance with the operation to
affect the account.
19. A POS terminal for identifying the terms of a transaction at a point-of-sale,
comprising:
means for receiving an account identifier and a function identifier, the
account identifier corresponding to an account, the function identifier
corresponding to an operation defining special purchase terms;
means for determining a first transaction amount;means for transmitting a
request for authorization, the request including the account identifier, the
function identifier and the first transaction amount;

51
means for receiving an authorization notice including a second transaction
amount; and
means for processing the transaction based on the second transaction
amount.
20. The POS terminal of claim 19, further comprising means for receiving a
request for the function identifier.
21. A credit card central controller for processing a cardholder message, the
credit card central controller comprising:
means for receiving a request to process a transaction, the request including
a transaction amount, an account identifier and a cardholder message
identifier representing a cardholder message;
means for establishing an association between the cardholder message and
the transaction; and
means for storing at least one of the cardholder message identifier and the
cardholder message, thereby indicating the association between the
cardholder message and the transaction.
22. The credit card central controller of claim 21, further comprising means
for transmitting a request for the cardholder message.
23. The credit card central controller of claim 21, further comprising means
for outputting the cardholder message on a billing statement associated with
the account identifier.
24. A computer-readable storage medium encoded with processing
instructions for implementing, a method for determining the terms of a
transaction, said processing instructions for directing a computer to perform
the steps of:
receiving, from a POS terminal, a request to process a transaction, the
request including a transaction amount, an account identifier and a function
identifier, the account identifier corresponding to an account, and the function
identifier corresponding to an operation defining, special purchase
terms;recording data representing a link between the function identifier and
the transaction;transmitting, to the POS terminal, an authorization code in
response to the request; and
processing the transaction in accordance with the operation to affect the
account.
25. A computer-readable storage medium encoded with processing
instructions for implementing a method for identifying the terms of a
transaction at a point-of-sale, said processing instructions for directing a
computer to perform the steps of:
receiving an account identifier and a function identifier, the account identifier
corresponding to an account, the function identifier corresponding to an

52
operation defining special purchase terms;
determining a first transaction amount;transmitting a request for
authorization, the request including the account identifier, the function
identifier and the first transaction amount;
receiving an authorization notice including a second transaction amount; and
processing the transaction based on the second transaction amount.
26. A computer-readable storage medium encoded with processing
instructions for implementing a method for processing a cardholder message,
said processing instructions for directing a computer to perform the steps of:
receiving a request to process a transaction, the request including a
transaction amount, an account identifier and a cardholder message identifier
representing a cardholder message;establishing an association between the
cardholder message and the transaction; and storing at least one of the
cardholder message identifier and the cardholder message, thereby indicating
the association between the cardholder message and the transaction.

CREDIT CARD Eligibility & Fee Structure

Eligibility Criteria
Cards Cities For the For the Self-
Salaried Employed
Amway / Big Bazaar / Mumbai, Delhi, Chennai, Bangalore, 1,44,000 p.a. 1,50,000 p.a.
HPCL Silver / Mini Card / Hyderabad
Pru Life / Sterling Silver / Pune, Ahmedabad, Surat, Nagpur,
Trinethra / True Blue / True Chandigarh, Kanpur, Lucknow,
1,20,000 p.a. 1,25,000 p.a.
Value / Affinity Silver/ Jaipur, Vishakapatnam, Coimbatore,
Cash card -silver / Cochin, Kolkata
American Express® Green Other Cities 72,000 p.a. 72,000 p.a.
Solid Gold / HPCL Gold / Mumbai, Delhi, Chennai, Bangalore,
1,44,000 p.a. 1,50,000 p.a.
Affinity Gold / Cash Card - Hyderabad
Gold / American Express®
Gold Other Cities 1,20,000 p.a. 1,25,000 p.a.

EMI Card All Cities 1,20,000 p.a. 1,20,000 p.a.*

Titanium All Cities 4,80,000 p.a. 4,80,000 p.a.
Platinum All Cities 4,80,000 p.a. 4,80,000 p.a.
Signature 12,00,000 p.a 12,00,000 p.a
Platinum Identity 4,80,000 p.a 4,80,000 p.a

* Other bank card documents / Specific club memberships required

53
 Age Criteria

Minimum Age
For the Salaried 21 years
For the Retired N.A.
For the Self-Employed 21 years

Applicable Fees and Charges

54
Interest Free Credit Period 18-48 days (applicable only on retail purchases and if
previous month's balance outstanding is paid in full)
**Finance charges on extended 0.99% (Monthly) 12.55% (Annually) for Easy Deposit Card
credit 1.75% (Monthly), 23.14% (Annually) for Spouse Card
1.99% (Monthly), 26.68% (Annually) for Home Card
2.75% (monthly),38.48%(Annually) for Platinum card w.e.f
March 1st 2008
3.15% (monthly),45.09%(Annually) for Private Banking
credit card w.e.f March 1st 2008
2.75% (Monthly) 38.48% (Annually) for ICICI Bank
Signature Credit Card
3.15% (monthly),45.09%(Annually) forTitanium, Platinum
Premier credit card w.e.f March 1st 2008
3.40% (Monthly) 49.36% (Annually) for all Blue silver &
Gold cards, irrespective of the date of transaction
0% (with Annual fee) /1.49%/1.99% (monthly) for EMI
Card. Applicable from the day of transaction.
Finance Charges on extended credit and cash
Advance:2.75% (monthly), 38.48% (annualy) for ICICI
Bank Platinum identity Credit Card.
1.99% (Monthly) 26.68 % (Annually) for Fixed Deposit
Instant Credit Card.
**Finance charges on cash 1.99%(Monthly), 26.68% (Annually) for Cash Card.
advances
1.99% (Monthly), 26.68% (Anually) for Fixed Deposit
Instant Credit Card .
2.75% (Monthly), 38.48% (Annually) for ICICI Bank
Signature Credit Card.
3.40% (Monthly), 49.36% (Annually) for Blue silver & Gold
cards, irrespective of the date of transaction
0% (with Annual fee) /1.49%/1.99% (monthly) for EMI Card
(as per applicable Finance Charges on Retail transaction).
Cash Advance - Transaction Fee On Easy Deposit Card - Nil for ICICI Bank ATM
withdrawals
Rs. 151 per transaction for Cash Card
2.50% on advanced amount, subject to a minimum of Rs.
300
2.50 % on advanced amount, subject to mimimum of Rs. 300
for Fixed Deposit Instant Credit Card.
2.99% on advanced amount, subject to a minimum of Rs.
299 on EMI Card
Dial-a-Draft – Transaction Fee 3% of the draft value amount subject to a minimum of

55
 Rs.300
2.99% on draft value amount, subject to a minimum of Rs.
299 on EMI Card
Minimum Ticket Size ** Rs. 1,000
Late Payment Charge 30% of minimum amount due, subject to min. of Rs. 400 and
max. of Rs. 600
Charges in case of excess Rs. 199 for every payment above the EA
payment over EMI Amt Due
(EAD) **
Transaction fee ** Rs. 149 per transaction on EMI Card
Over-Limit Charge 2.5% of over limit amount, subject to a minimum of Rs. 500
Return of Cheque Rs. 250
Outstation Cheque processing Fee 1% of the cheque value, subject to a minimum of Rs. 100
Duplicate statement request Rs. 100
(beyond 3 Months)
Replacement Card Rs. 100
Fee on Cash payment at Branches Rs. 100
Cheque Pickup Fee Rs. 100 per cheque pickup w.e.f. January 1, 2009
Fuel Surcharge 2.5% or Rs.10 whichever is higher (Nil on select cards)
0% at select HPCL pumps on select cards (maximum of
Rs.3,000 per transaction)
Services Charge - Utility Bill Nil
Payment
Foreign Currency Transactions 3.50%
Service Tax As may be applicable from time to time, presently @ 10.30%
(Applicable on all fees, interest and other charges only)
Annual Fee** For 0% finance rate and EAD of Rs.2,000, the annual fee
would be Rs.2,000. For 0% finance rate and EAD of
Rs.4,000, the annual fee would be Rs.3,500. Joining Fee:Rs
25000 + applicable service tax and Rs 2000 annual fee from
2nd year onwards for ICICI Bank Signature Credit Card.
Annual fee of Rs.2000 for 1st year and Rs.1000 from 2nd
year onwards for ICICI Bank Platinum identity Credit Card.
DOCUMENTS REQUIRED
Documents Required
For the Salaried Public Ltd. company / MNC / Govt. organization:
Any one of: Pay slip / Salary Certificate / Income Tax returns / Form 16

Proprietorship / Partnership / Pvt. Ltd. company:

Pay slip / Income Tax returns / Form 16

56
For the Self- Income Tax returns
Employed Other bank card documents / Specific club memberships required for the
EMI card

ICICI CREDIT CARD SERVICES

• ICICI Bank Credit Cards gives you the facility of anytime cash,
convenience of using it anywhere in the world and a whole bunch of
benefits. These benefits range from Lifetime free cards, Global
emergency assistance service, Discounts, Utility payments, Travel
discounts and a lot more.
• Other ICICI Bank Credit Cards Special Offers include payment in
monthly EMIs on your Credit Card, Family Plus - a complete
insurance plan that is flexible enough to cover every member of
your family and a pair of Reebok shoes at an unbelievable discount
of 50%.
• Heavy Discounts!! Best Shopping Deals Ever! Exclusively for ICICI
Bank Credit Card Holders.
• With an ICICI Bank Credit Card in your wallet, you will not be
strapped for cash ever again. You can withdraw cash on your card,
24 hours a day from any VISA or MasterCard participating
member bank ATM using your APIN*. During banking hours you can
also draw cash over-the-counter, from any ICICI Bank branch in
cities where the ICICI Bank Credit Card has been introduced.
• For each cash transaction, there is a fee of 2.5% levied on the
amount withdrawn subject to a minimum of Rs.300. In addition to
the Transaction fee, an Interest charge will also be levied from the
date of transaction to the date of repayment.
• This feature will be activated for select logos after 90days of issue of
card.

OTHER SERVICES

• Global Emergency Assistance Service

The next time you travel abroad, please remember that you have
the option of using the Global Emergency Assistance Services
provided by Visa/MasterCard for our cardholders. These can be
availed for:

1. Reporting lost/stolen credit cards

2. Requesting an emergency card replacement

57
 3. Emergency cash advance
4. Miscellaneous enquiries.

The toll-free telephone numbers for accessing these emergency

assistance Helplines are available in local telephone directories /
yellow pages and other local listings in each country. For availing of
Visa Global Assistance Services, charges as applicable including
telecom costs will be levied to your card account like Lost/Stolen
Card reporting, Emergency Card replacement, Emergency Cash
Disbursement and Miscellaneous Customer Service Enquiries.

• Wide Acceptance
ICICI Bank Blue Cards are welcomed at all merchant establishments
displaying the VISA logo (over 1,10,000 establishments) and
MasterCard logo (over 77,000) across India and Nepal and the
Silver and Gold Cards are accepted globally by over 22 million
VISA Card and 22 million MasterCard accepting establishments.

• Photo Card
You have the option of having your photograph and signature
digitally imprinted on the front of the Card. This provides you extra
security at any of the merchant establishments. In fact, it can be
used as a proof of identification. In the interest of your own security,
we strongly recommend that you opt for a photo-Card.

USING CREDIT CARD ICICI

• Using your ICICI Bank Credit Card is extremely simple.
After making your purchase or availing of the service
provided by the Merchant Establishment, present your ICICI
Bank Credit Card.

58
 • Upon processing your Card transaction, the Merchant will request you to sign a charge slip
(refer to the image alongside). This contains details about the amount to be billed to your
ICICI Bank Credit Card. Please check and confirm that all details have been correctly
filled in.
• Should you wish to leave a tip or miscellaneous charge, you can do so by filling in the
same on the charge slip. After filling in this section, in the interest of your own safety, we
recommend that you write out the total amount in the charge slip before signing.
• Please ensure that you sign on the charge slip in the same way you have signed on the
reverse of the Card.
• The Merchant Establishment will return the copy of the bill(s) and the charge slip along
with your Card. Please match the amounts before leaving the establishment.
• It is recommended to retain your copy of the charge slip and the corresponding bill till
such time as the amount is reflected in you Card billing statement.

CHAPTER7
COMAPRING VARIOUS CREDIT CARDS PNB V/S ICICI

Reasons for making a credit card comparison

Credit card comparison is very important during a credit card application
process and if you are aware of your credit card purchases and spending you
can choose the right card for you.

Credit card comparison is the most important

aspect while you apply for a credit card. It
allows you to minimize your monthly spending
and overall purchases on the credit card. If you
are aware of your credit card spending habits,
you can easily apply this while making a credit
card comparison so as to choose the right
credit card for you.

Hidden fees or costs

There are certain hidden fees which are
associated with the credit card when you acquire or use it. These fees are
charged to the credit card holder either annually or based upon use.
Normally, these are outlined in the terms and agreements signed by the
credit card holder and as such are legally binding but are not right front so as
the credit card holder can see them. Credit card comparison for hidden fees
includes reading all terms and conditions and includes talking to the
company’s sales representative. Annual charges, late payment fees, over
limit fees should be reviewed during credit card comparison process.

59
Card limits
While you make a credit card comparison, you should consider what should
be your personal spending limits. If you are going to make a big purchase,
then you need to have a higher card limit for the card you choose. While you
apply for a new credit card, it might not be easy to access your card limits
because this will depend upon your card history and income. You can take the
help of the customer sales representative to guess the card limits when your
new card is going to be approved.

Interest rates
While making a credit card comparison, you should always look at the interest
rates of each credit card. Interest is the amounts of money that you need to
pay along with the money you have spend on credit card purchases to the
credit company. This amount should be kept as minimum as possible. Here,
you need to review interest rates in three important areas, one is interest rate
charged on normal purchases, one charged to balance transfers and the one
charged on cash advances. Then you can easily access what features you are
going to use and choose a card which has low interest rates as such.

60
CHAPTER 8
FINDINGS
Banking sector

Due to growing competition, market share of various groups of banks has changed,
though public sector banks still dominate the market.

DISTRIBUTION OF BANKS

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The above graphical representation clearly shows that the public sector banks
have the maximum share as far as the branches ,staff,deposits,advances,and
net profit is concerned. Whereas private sector banks lags far behind followed
by the foreign banks.

PUNJAB NATIONAL BANK

PNB India or Punjab National Bank of India was established by Lala Lajpat
Rai in the pre-independence India in 1895 in Punjab, with Lahore as its head
office. Today it is the second largest public sector bank in India. It was
nationalized in 1969 along with 13 other major commercial banks.

The profile of the bank shows superior banking services in corporate,

personal and international banking, industrial and agricultural
finance and finance of trade. Punjab National Bank boasts of a varied
clientele consisting of small and medium industrial units, exporters, multi-
national companies, Indian conglomerates and NRI.

PNB has over 4500 branches and offices bringing the Punjab National Bank to
your doorstep. Around 2400 offices come under the network of Centralized
Banking Solution or CBS. A need for centralized banking system prompted
PNB to go computerized and what followed was the establishment of CBS in
Punjab National Bank branches in all the leading cities like Delhi, Pune,
Chennai, Mumbai, Ahmedabad, Chandigarh, Gurgaon, Hyderabad, Jalandhar,
Kolkata, Ludhiana, Noida and Bangalore.

Internet Banking Services are provided to all customers in the CBS branches.
A branch and ATM locator is also available on the official website of Punjab
National Bank. For an overview of the annual report or the bank profile, the
site can be resourceful. The website also provides info on the careers and
recruitments at PNB and the exam results. The careers at nationalized banks
like PNB are the most sought after one and candidates are selected on the
basis of their exam result.

The credit services of PNB are quite limited as far as choice is

concerned but when we talk about quality it’s giving one of the best
quality services, in the reasonable prices as compared to ICICI. Also
the procedures and processes are more or less similar but the scale
of operation is lesser than that of ICICI .the reason for the same is

62
that ICICI provides huge variety in credit card services whereas PNB
only provides with 3 major credit cards.

FINDING CREDIT CARDS

Credit card companies can change their terms at will. There is nothing to
prevent issuers from changing their terms. Interest rates are not regulated.
Fees are not regulated. Due dates on Sundays and holidays are intentional,
and designed to generate late fees. It is unsurprising that the credit card
industry is the most profitable sector of banking.

REGIONAL AND SERVICE QUALITY

Comparing various banks on the basis of their geographical and service quality scale,
especially PUNJAB NATIONAL BANK and ICICI.

63
Looking at the above graph it’s concluded that punjab national bank being a public sector
bank its service quality varies from one region to another, whereas icici being a private
sector bank provides good quality services in urban regions. Whereas in regional level
service quality of pnb is comparatively low as far as their credit card services are
concerned. Also due to urban rural mentality of government and private sector icici is not
much established in rural areas.

CARD COMAPRISON TABLES:

1. ICICI PLATINUM VIZ PNB GLOBAL GOLD ---TABLE 1
2. ICICI PLATINUM VIZ PNB GLOBAL CLASSIC---TABLE 2
3. ICICI TRAVEL SMART GOLD VIZ PNB GLOBAL CLASSIC---
TABLE 3
4. ICICI THOMAS COOK VIZ PNB GLOBAL CLASSIC---TABLE 4
5. ICICI PLATINUM IDENTITY VIZ PNB GLOBAL GOLD VIZ PNB
GLOBAL CLASSIC---TABLE 5
INFRENCES:
• It can be seen that icici charges interest on various credit cards offered
varying from 2-3.5 % whereas PNB charges interest rate varying from
1.5-2% max ,which is comparatively quite low.

• Also the credit period in case of ICICI varies from 18 to 52 days whereas
in case of both the PNB gold and classic cards it’s up to 50 days.

• Also the cash advance limit in case of PNB is 30-40%

• ICICI offers variety of credit card offerings ranging from gold cards to
titanium cards with variety of features and are multispecialty cards
,travel cards ,shopping cards etc. whereas PNB offers 2 standard cards
for shopping travelling etc. namely PNB GLOBAL GOLD CARD AND PNB
GLOBAL CLASSIC CARD.

64
 • There are various other features on the basis of which we can
differentiate them as each card is an unique identity in itself.

CHAPTER 9
CONCLUSION
Consequent to nationalization in 1969 and economic liberalization in 1991,
banks in India are on fast track growth in size, technology and deliverables to
customers.

Every aspect of banking will be transformed by new technology by 2020.

Customer friendly products, delivery channels, relationship banking,
dependency on IT systems and competitive pricing would be the driving
forces, but a pressure cooker atmosphere cannot be avoided.
The most successful institutions will be those that combine visionary
technology and very competitive pricing with strong relationships and brands
built on trust with previous indepth experience of the client business.
There is no way banks can remain lukewarm in their attitude and lackadaisical
in their approach to hi-tech banking and yet hope to grow. It is clearly a
choice of either survival or extension, and that which survives would provide
core commercial activity, instead of providing just financial services.
Business to Business (B2B) involving business organization as buyer and
seller; Business to Consumer (B2C) involving customization of business would

65
all pave way for a radical change in the banking habits of the Indian
consumer. E-commerce through client and server and M-commerce through
mobile agent would fuel the change in banking requirements. Companies
need visionary leadership; mere management skills are not enough
Quality people often need more than money to relocate themselves. Nearly
four decades ago, man landed on the moon. Within a decade and a half from
now, perhaps man can avail of banking services there, if the exponential
technology boom both in the art and science of banking can be taken as an
indicator.

Analyzing the detailed study of public and the private sector banks with
respect to their credit card divisions, it can be clearly chalked out that both
the banks are serving well in their lines of operations. Also the credit card
services of both the banks are eqully good its just the matter of choice and
utility ,that the customer wants.ICICI serves its customers with huge product
variety as far as their credit cards are concerned .they are providing their
customers with EMI ,travel,shopping platinum,titanium etc. credit cards
whereas Punjab national bank provides its customers with just 2 major credit
cards namely pnb global classic and pnb global gold.its recent innovation that
Punjab national bank has come up with its international credit card services.

Since ICICI is providing its customers with almost complete customized credit
cards so its obvious to pay a price to balance the equation.whereas PNB as
compared to ICICI provides nominal credit cards at quite a nominal rate of
interest.

Similarly if we conclude with these various credit card services of two banks
from 2 different sectors we can see that one provides with variety and choice
to its customers at a premium end (ICICI) whereas the other bank provides
with services at a middle level .

Looking at the emerging Trends in Banking, the traditional distinctions

between banking and other financial services like insurance on one side; and
between commercial banking, developmental banking and investment
banking are getting blurred.
The emergence of universal banking and bank assurance are clearly pointers.
This global convergence of financial services may gather further momentum
in the years to come.

The banking and insurance sector reforms have encouraged private sector
players to make forays into the business in collaboration with major
international companies.

This new scenario will witness financially sound and experienced players
transforming the industry with best practices in product development,
operational efficiency, marketing capability, service focus, and tech savvy
orientation.

66
REFRENCES
The information has been collected from the
secondary sources:
Internet

67
SITES REFFERED:

• Google.com

• Askjeeves.com

• Pnbindia.com

• Icicibank.com

URL:

• buzzle.com/creditcard offers.htm

• studentsguide.in/electronic banking.html

• Wikipedia/Punjab national bank.html

• Itlocus.com/visa card.htm

• Teachmefinance.com/credit card.htm

• Rupee times.com/card comparisons.htm

BOOKS REFFERED

• Khan M.Y., 1999, Second Edition, Indian Financial

System, Fourth Edition, Tata McGraw Hill Publishing
Company Limited.

•Kohn,M. 3rd Reprint, 1998, Financial Institutions and

Markets, Tata McGraw Hill Publishing Company Limited.

68
APPENDIX
• REFER PUNJAB NATIONAL BANK CREDIT CARD FORM
AND CREDIT CARD ISSUE.

69