Ch.

1 Introduction

Plastic money or polymer money, made out of plastic, is a new
and easier way of paying for goods and services. Plastic money was
introduced in the 1950s and is now an essential form of ready money which
reduces the risk of handling a huge amount of cash. It includes debit cards,
!"s, smart cards, etc. #redit cards, variants of plastic money, are used as
substitutes for currency. !his book on plastic money is divided into two
sections titled #oncepts and $%periences. !he former covers articles on the
the emergence of plastic money, different types of plastic cards and their
growth in India and other related issues. n e%perience discusses the
e%periences of banks like &tandard #hartered, #itibank, which deal with
plastic money and their growth in the market.
Meaning
Plastic money refers to credit cards, you use them whenever you want
and pay later 'with interest, of course(. It makes it too easy for people to
buy things they normally could not afford, which makes it easier to get into
debt.
1
Definition
slang phrase for credit cards, especially when such cards used
to make purchases. !he )plastic) portion of this term refers to the plastic
construction of credit cards, as opposed to paper and metal of currency. !he
)money) portion is an erroneous reference to credit cards as a form of
money, which they are not. lthough credit cards do facilitate transactions,
because they are a liability rather than an asset, they are not money and not
part of the economy*s money supply.
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Ch.2 The History Of Credit Cards and Debit Cards In
Plastic Money
#redit cards have evolved into a safe and secure manner to
purchase goods and services. !he Internet has given credit card users
additional purchasing power. ,anks have options like cash-back rewards,
savings plans and other incentives to entice people to use their cards. .ebit
cards allow people the convenience of cards without the worry of racking
up debt. !he convenience, security and rewards offered by credit and debit
cards keep shoppers using their cards as opposed to checks or cash.
Credit Card Origins
!he first credit cards were issued by individual stores and
merchants. !hese cards were issued in limited locations and only accepted
by the businesses that issued them. /hile the cards were convenient for the
customers, they also provided a customer loyalty and customer service
benefit, which was good for both customer and merchant. It was not until
1950 that the .inner*s #lub card was created by a restaurant patron who
forgot his wallet and reali0ed there needed to be an alternative to cash only.
1
!his started the first credit card specifically for widespread use, even though
it was primarily used for entertainment and travel e%penses.
Plastic Becomes the Standard
!he first .iner*s #lub cards were made out of cardboard or celluloid.
In 1959 merican $%press changed all that with the first card made of
plastic. merican $%press created a system of making an impression of the
card presented at the register for payment. !hen that impression was billed
to the customer and due in full each month. &everal merican $%press cards
still operate like this as of +010. It was not until the late 1920s that
merican $%press began allowing people to pay their balance over time
with additional card options.
Bank Card Associations
In 1933, ,ank of merica created a card that was a general purpose
card or )open loop) card. !hese )closed loop) agreements limited cards like
.iners #lub and merican $%press to certain merchants, unlike the new
)open loop) cards. !he new general purpose system re4uired interbank
cooperation and additional regulations. !his created additional safety
features and began building the credit card system of today. !wo systems
emerged as the leaders--5isa and "aster #ard. 6owever, today there is
little difference between the two and most merchants accept both card
associations.
7
Debit Cards Emerge
!he 5isa association of cards took credit cards to a new level in 1929
when they introduced debit cards. !hese cards linked consumers to their
checking accounts. "oney was now drawn from a checking account at the
point of sale with these new cards and replaced check writing. !his helped
the merchants check that money was available and made it easier to track
the customer if the funds could not be obtained. #onsumers liked the
convenience of not having to write checks at the point of sale, which made
debit cards a safe alternative to cash and checks.
The Future
!here were almost +9 million debit card users as of +003, with a
pro8ected 17.7 million users by +013. 6owever, online services like PayPal
are emerging as a way for people to pay their debts in new, secure and
convenient ways. !echnology also e%ists to have devices implanted into
phones, keys and other everyday devices so that the ability to pay at the
point of sale is even more convenient.
5
Ch.3 TYP! O" P#$!TIC MO%Y
Different ty&es'(
Credit card
9 credit card is plastic money that is used to pay for products and
services at over +0 "illion locations around the world. ll you need
to do is produce the card and sign a charge slip to pay for your
purchases. !he institution which issues the card makes the payment
to the outlet on your behalf: you will pay this *loan* back to the
institution at a later date.
Debit card
3
9 .ebit cards are substitutes for cash or check payments, much the
same way that credit cards are. 6owever, banks only issue them to
you if you hold an account with them. /hen a debit card is used to
make a payment, the total amount charged is instantly reduced from
your bank balance.
9 .on*t borrow on your credit card; 6ere*s why
9 debit card is only accepted at outlets with electronic swipe-
machines that can check and deduct amounts from your bank balance
online.
Charge card
9 charge card carries all the features of credit cards. 6owever, after
using a charge card you will have to pay off the entire amount billed,
by the due date. If you fail to do so, you are likely to be considered a
defaulter and will usually have to pay up a steep late payment charge.
9 /hen you use a credit card you are not declared a defaulter even if
you miss your due date. +.95 per cent late payment fees 'this
differs from one bank to another( is levied in your ne%t billing
statement.
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$)e* card
9 me% stands for merican $%press and is one of the well-known
charge cards. !his card has its own merchant establishment tie-ups
and does not depend on the network of "aster#ard or 5isa.
9 #redit cards= >emember these dos and don*ts.
9 !his card is typically meant for high-income group categories and
companies and may not be acceptable at many outlets. !here are a
wide variety of special privileges offered to me% cardholders.

Dinner club card
9 .iners #lub is a branded charge card. !here are a wide variety of
special privileges offered to the .iners #lub cardholder. ?or
instance, as a cardholder you can set your own spending limit.
2
,esides, the card has its own merchant establishment tie-ups and
does not depend on the network of "aster#ard or 5isa.
9 6owever, since this card is typically meant for high-income group
categories, it may not be acceptable at many outlets. It would be a
good idea to check whether a member establishment does accept the
card or not in advance.

+lobal card
9 @lobal cards allow you the fle%ibility and convenience of using a
credit card rather than cash or travelers che4ue while traveling abroad
for either business or personal reasons.

Co(branded card
9
9 #o-branded cards are credit cards issued by card companies that have
tied up with a popular brand for the purpose of offering certain
e%clusive benefits to the consumer.
9 debit card with a difference
9 ?or e%ample, the #iti-!imes card gives you all the benefits of a
#itibank credit card along with a special discount on !imes "usic
cassettes, free entry to !imes "usic events, etc.
Master card , -isa
9 "aster#ard and 5isa are global non-profit organi0ations dedicated to
promote the growth of the card business across the world.
9 !hey have built a vast network of merchant establishments so that
customers worldwide may use their respective credit cards to make
various purchases.
10

!)art card
9 smart card contains an electronic chip which is used to store cash.
!his is most useful when you have to pay for small purchases, for
e%ample bus fares and coffee. Ao identification, signature or payment
authori0ation is re4uired for using this card.
9 !he e%act amount of purchase is deducted from the smart card during
payment and is collected by smart card reading machines. Ao change
is given. #urrently this product is available only in very developed
countries like the Bnited &tates and is being used only sporadically in
India.
Photo card
11
9 If your photograph is imprinted on a card, then you have what is
known as a photo card. .oing this helps identify the user of the credit
card and is therefore considered safer. ,esides, in many cases, your
photo card can function as your identity card as well.

Ch.. C/DIT C$/D
I%T/OD0CTIO%
credit card is a small plastic card issued to users as a system of
payment. It allows its holder to buy goods and services based on the
holder*s promise to pay for these goods and services. !he issuer of the card
grants a line of credit to the consumer or the user( from which the user can
borrow money for payment to a merchant or as a cash advance to the user.
Bsage of the term )credit card) to imply a credit card account is a metonym.
/hen a purchase is made the user would indicate consent to pay by
signing a receipt with a record of the card details and indicating the amount
to be paid. Issuer agrees to pay the merchant and the credit card user agrees
to pay the card issuer.
1+
D"I%ITIO%'(
!he credit card can be defined as C small plastic card that allows its
holder to buy goods and services on credit and to pay at fi%ed intervals
through the card issuing agency.
M$%I%+'(
credit card is a card or mechanism which enables card holder to
purchase goods, travels and dine in a hotel without making immediate
payments. !he holders can use the cards to get credit from banks up to 75
days.
!he credit card relieves the consumers from the botheration of
carrying cash and ensures safety. It is a convenience of e%tended credit
without formality. !hus credit card is a passport to, Csafety, convenience,
prestige and credit.
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$D-$%T$+! , DI!$D-$%T$+! O"
C/DIT C$/D
$D-$%T$+! O" C/DIT C$/D
The benefits of credit card can be grou&ed as follo1s'
2$3 4%"IT! TO TH 4$%5
17
a3 credit card is an integral part of banks ma8or services these days. !he
credit card provides the following advantages to the bank= the system
provides an opportunity to the bank to attract new potential costumers.
b3 !o get new customers the bank has to employee special trained staff.
!his gives the bank an opportunity to find the latent talent from among
e%isting staff that would have been otherwise wasted.
c3 !he more important function of a credit card, however, is simply to yield
direct profit for the bank. !here is a scope and a potential for a better
profitability out of income D commission earned from the traders turn over.
d3 !his also provides additional customer services to the e%isting clients. It
enhances the customer satisfaction.
e3 "ore use by the car holder and conse4uently the growth of banking
habits in general.
f3 ,etter network of card holders and increased use of cards means higher
popularity and image of the bank
g3 &avings of e%pense on cash holdings, i.e. stationery, printing and man
power to handle clearing transactions while considerably is reduced. It
increases
15
243 4%"IT! TO C$/D HO#D/

The &rinci&al benefits to a card holder are'
a3 6e can purchase goods and services at a large number of outlets without
cash or che4ue. !he card is useful in emergency, and can save
embarrassment.
b3 !he risk factor of carrying and storing cash is avoided. It is convenient
for him to carry credit card and he has trouble free travel and may purchase
his without carrying cash or che4ue.
c3 "onths purchases can be settled with a single remittance, thus, tending to
reduce bank and handling charges.
d3 !he card holder has the period of free credit usually between 10-50 days
of purchase
e3 #ash can usually be obtained with the card, either on card account or by
using it as identification when encasings a che4ue at the bank.
f3 vailing credit with minimum formality.
g3 !he credit card saves trouble and paper work to traveling business man.
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2C3 4%"IT! TO TH M/CH$%T !T$4#I!HM%T
The &rinci&al benefits offer credit card to the retailer is
a3 !his will carry prestigious weight to the outlets.
b3 Increases in sale because of increased purchasing power of the
cardholder due to unbilled credit available to the card holder.
c3 !he retailers gain from the impulse buying and trading up the tendency to
buy the bigger or better article
d3 #redit card ensures timely and certainly of payments.
e3 &uppliersDsellers no longer have to send reminders of outstanding debits.
f3 &ystematic accounting since sales receipts are routed through banking
channels.
g3 dvertising and promotional support on national scale.
h3 .evelopment of prestigious clientele base.
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DI!$D-$%T$+! O" C/DIT C$/D
The follo1ing are the co))on disad6antages of the credit card'
a( &ome credit card transactions take longer time than cash transactions
because of various formalities.
b( !he customer tends to overspend out of immerse happiness.
c( .iscounts and rebates can rarely be obtained.
d( !he cardholder is responsible for charges due to loss or theft of the card
and the bank may not be party for loss due to fraud or collusion of staff, etc
e3 #ustomers may be denied cash discount for payment through card.
f3 It might lead to spending habits and cardholders may end up in big debts
i3 void the entire cost and security problem involved in handling cash.
73 Eosses to bad debts and reduced an additional li4uidity is
83 It also allows him to delegate spending power to add on members
12
l3 #redit card is considered as a status symbol.
!TP! "O#O9D I% C/DIT C$/D
T/$%!$CTIO%
1. $0THO/I:$TIO%

?or Internet "erchants, the shopping card is connected to or
integrated with a Payment @ateway. ?or >etail "erchants, the card is
swiped through a magnetic reader on the point of sale terminal the
authori0ation is transmitted to the appropriate card issuer for
approval. !he issuing bank of card issuer authenticates the card
holder and approves or declines the transaction amount.
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It is important to note that no money changes hands during the
authori0ation. "erchants must re-present the transaction to receive
payment.
2. Merchant balancing
!his is also known as batching out. "ost pos terminals and all
payment gateway per firm an auto close functions at the and of the
day and batch out automatically.
3. Ca&ture
!he front end processor matches the authori0ation data to the
settlement data and transmits the card capture file to a back end
processor for 5D"# transactions or to the appropriate card issuer for
other card types.
.. Clearing
.uring this stage the back end processor performs compliance checks
and risk management procedures and transmits the transaction to
5D"# or to the appropriate card issuer for other card types.
;. Interchange 2-!<MC Only3
.uring this stage the 5D"# ssociation sort the transactions by
issuing bank and transmit them to the appropriate issuing banks for
settlement.
+0
=. !ettle)ent

.uring this stage the Issuing ,ank calculates fees and deductions and
routs the net funds to the appropriate #ard Issuer which determines
the daily deposits for the merchants.
>. Merchant $CH
.uring this stage the ac4uiring bank or card issuer transmits the
merchant deposit to the merchantFs checking account.

Different Ty&es of Credit Cards
#redit cars are of various types, every one has to select credit cards
on the basis of the pros and cons of each type of credit card and at the same
time the nature of use. !his article gives an insight into the several types of
credit cards available in the market
!oday, credit card customers en8oy more options and choices than ever
before. !o gain new customers, credit card companies compete by offering
new services and cards to customers. Ao matter what your needs, chances
are good that there is a card out there that would be ideal for you. If you are
+1
looking for the right card, you can begin by considering the many types of
cards available to you=
#o1 Interest Credit Cards
!hese types of credit cards offer very low interest. In some cases,
these cards 8ust charge a few percent interests. !he reasons for this are
numerous. In most cases, the low interest rate is for a limited time only.
fter a set number of months, you will begin paying higher interest rates. In
some cases, low interest credit cards are not really credit cards at all - they
are debit cards linked to a low-interest loan such as a line of credit. #heck
your agreement to find out what type of card you have. If you need to
consolidate debts or if you like the idea of having low interest for a while,
this type of credit card can be perfect for you.
Instant $&&ro6al Credit Cards
!hese cards are really a product of our fast-paced society. !he idea
behind this type of credit card is that once you fill out your application, you
will be told whether you are approved or not right away. !he approval
process only takes a few minutes. Instant approval credit cards are very
popular online and applicants can apply via the internet or over the phone.
If you are very impatient or need credit right away, these types of
cards can be for you. 6owever, you should be aware that these cards do not
guarantee that you will be approved right away - sometimes, more time is
needed to process your application. nother drawback to these cards is that
++
they rely heavily on your credit score. If you have poor credit or any
e%tenuating financial circumstances, these types of cards may not be for
you.
4alance Transfer Cards
,alance transfer cards are a type of temporary low-interest card that
is meant to help you consolidate your debt. !hey work this way= if you have
several credit cards with a balance, you can get a balance transfer card. Gou
then transfer all your credit card debt onto the new card and work to pay it
off. &ince the new card has a low interest rate, you can 4uickly repay your
bills.
If you are in debt, a balance transfer card can be a great way to get
out of debt. It offers the convenience of one bill and low rates. 6owever,
some cards have high fees. lso, if you run up your other cards after
consolidating your debts or if you are unable to pay off your new card in the
limited time before the low interest rate increases, you may find yourself
even more in debt than before.
/e1ards Credit Cards
>ewards credit cards offer you points, rewards, or bonuses for
every cash purchase made with your credit card over time. s you
accumulate rewards or points, you can redeem your bonus for entertainment
events, purchases, travel, and other fun pri0es. &ome cards even offer
customers e%tra automatic-enter sweepstakes and draws. $ach time you use
+1
your card, you are entered into a draw to win specific pri0es.
!hese types of cards are really a marketing tool for card companies.
#ompanies know that customers love rewards and pri0es and so offer these
enticements to lure customers. !he ma8or advantage of these cards is that
they can help you get more cash value for your money. !hey can also be
fun and rewarding for almost any credit card customer. 6owever, not all
reward credit cards are a deal. &ome charge high fees to offset the costs of
the bonuses. &ome also have very low points systems, meaning that you
need to spend a lot with your credit card to get any rewards at all. >ead the
fine print carefully before signing.
Cash 4ac8 Credit Cards
#ash back credit cards give you money rewards. /hen you make a
purchase with this type of credit card, you get some points based on the
amount of money you have spent with your credit card. /hen you
accumulate enough points, you get cash back. Hn most cards, you can get
back about 1I of your total purchases.
!hese cards are great for those who are budget-conscious as they give
you some money back from your purchases. 6owever, there are several
drawbacks to these types of cards. &ome cards have low cash-back
percentage rates. &ome charge high fees or have limits on how much money
you can get back each year. "ost cards only offer you cash back advantages
+7
on purchases - not on your balance. If you decide this card is right for you,
do compare several card offers to find the best cash back credit card option.
$irline Credit Cards
!his type of card allows you to accumulate fre4uent flyer points on
all your credit card purchases. If you travel a lot or love to travel, this card
can help you accumulate points for a free trip or for a discount ticket. In
many cases, these cards are great because they allow you to gather points
for every purchase. 6owever, these cards can also charge high fees. In
some cases, your points will e%pire if you do not use them within a
specified time. /orse, some airline credit cards make use of a point system
that is not very user-friendly. Gou may have to slowly accumulate an
enormous amount of points to 4ualify for a trip. If you do not love to travel
and if you do not use your #redit card a lot, then, your ability to get rewards
you like may be very limited.
Pre&aid Debit Cards
!hese cards are sometimes called 8unior credit cards. !hey are not
truly credit cards at all, since you are not getting credit or loans from the
credit card company. Instead, these cards work by having you deposit some
money into the card account. Gou can then use your card to charge any
amount up to the amount in the account. /hen you add more money, you
can charge more to your card.0000000000000000000000000000000000
+5
!ecured Credit Cards
&ecured credit cards use collateral to ensure that the card company
will be paid back. Hften, these cards are used by people with no credit or
bad credit. /ith secured credit cards, you can en8oy credit card convenience
even if you do not 4ualify for traditional cards. 6owever, you will also have
to cope with the additional fees and low credit limits that these credit cards
have.
Credit Cards for 4ad Credit
,ad credit credit cards are designed for people with poor credit
histories. !hese cards generally have very low credit limits and charge e%tra
fees. !his is because they are designed for people who are considered far
less likely to repay their debts. If you have a bad credit rating, these types of
credit cards can be a great way to rebuild your credit history. !hese cards
can also allow you to have credit even if you would be re8ected for most
other cards due to your credit history.
!tudent Credit Cards
&tudent credit cards are cards meant to attract college and university
students. !hese cards often offer sign-up bonuses for students. !hey are also
easier to apply for, since credit card companies recogni0e that students have
much shorter credit histories than the average customer.000000000000
+3
If you are a student, student credit cards can be a great option. !hey
are simple to use and can help you build a good credit rating before you
graduate. 6owever, there are some disadvantages to student credit cards.
!hese cards may have no reward programs and may have fewer benefits,
including fewer bonuses and services, than other cards.
4usiness Credit Cards
,usiness credit cards are created especially for business use. !hey
offer many of the same advantages as traditional credit cards, but also offer
services that can really help a business. /ith some business credit cards, for
e%ample, you can en8oy higher interest rates, e%tra cards for business
employees, monthly reports on your e%penses, and services that let you
keep your personal and business e%penses separate on the same card. !hese
advantages mean that using this card for your business is more convenient.
+<
Ty&es of Credit Cards offered by Indian 4an8s
!il6er Cards

!il6er credit cards rank lowest among the metal named cards, and,
because of lower prestige when compared to gold and platinum cards, are
commonly known as basic and standard credit cards. &ilver credit cards
come with advantages such as lower annual membership fees if there is any,
and a lower threshold salary which banks use to evaluate your application in
case you should apply.
&ilver credit cards will provide you with almost the same credit limit
as other cards provided you have a good credit history. Gou can also avail
+2
of 0I interest balance transfer schemes which are made available for a
period of 3-9 months for silver card holders.
!here are also some disadvantages to using silver credit cards. Hne
would be the lower cash advance limits, less rewards and promotional
packages, and less travel perks compared to gold and platinum cards. 6.?#
,ank, I#I#I offer silver credit cards through their 6.?# ,ank &ilver cards
and I#I#I &terling &ilver credit card
+old and Platinu) Cards

@old and platinum credit cards are a status symbol for any credit card
holder, bringing prestige since getting gold and platinum cards usually
re4uire that you have good credit rating and a higher income levels. @old
and platinum cards offer higher limit for cash advance withdrawals and
sometimes can provide higher credit limits as compared to standard or silver
cards.
If you have a gold or platinum card, you also get better perks and
privileges such as travel insurance, e%tended warranties for appliance
purchases and special deals on specific products, and purchase protection
insurance.
Gou can also engage in some loyalty schemes that are offered for gold and
platinum credit card holders which can sometimes involve cash back
promos and reward points systems.
+9
&ome popular gold and platinum cards available are the merican $%press
@old card, and the I#I#I &olid @old #redit #ard.
It is not possible to cover them the e%act offerings of these cards but I
will highly advice you to check all these websites of the banks to get all the
info about the credit cards they are offering. lso try to talk to your friends
who are having credit cards to get more info.
10
Types of Credit
Cards offered
By
Indian Banks
11
Credit Card Data
#redit #ard is either 5isa or "aster#ard which is the "ost popular and in
some instance merican $%press.000000000000000000000000000000
The To& 1? Credit Card Issuers in India are as follo1s@
I#I#I ,ank - 5.0< "n
6.?# ,ank - 7.7+ "n
&,I #ards - +.35 "n
#itibank - - +.57 "n
6&,# #ards - 1.1 "n
,A mro - 0.<2 "n
%is ,ank - 0.5< "n
.eutsche ,ank - 0.795 "n
merican $%press - 0.75 "n
Data Courtesy - The Reserve Bank of India
1+
Ch.; D4IT C$/D
debit card 'also known as a bank card or check card( is a plastic
card that provides an alternative payment method to cash when making
purchases. ?unctionally, it can be called an electronic che4ue, as the funds
are withdrawn directly from either the bank account or from the remaining
balance on the card. In some cases, the cards are designed e%clusively for
use on the Internet, and so there is no physical card.
In many countries the use of debit cards has become so widespread
that their volume of use has overtaken the che4ue and, in some instances,
cash transactions.
Eike credit cards, debit cards are used widely for telephone and
Internet purchases and, unlike credit cards, the funds are transferred
immediately from the bearer*s bank account instead of having the bearer pay
back the money at a later date.
.ebit cards may also allow for instant withdrawal of cash, acting as
the !" card for withdrawing cash and as a che4ue guarantee card.
"erchants may also offer cash back facilities to customers, where a
customer can withdraw cash along with their purchase.
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Ty&es of debit card syste)s

Online Debit !yste)
Hnline debit cards re4uire electronic authori0ation of every
transaction and the debits are reflected in the userFs account immediately.
!he transaction may be additionally secured with the personal identification
number 'PIA( authentication system and some online cards re4uire such
authentication for every transaction, essentially becoming enhanced
automatic teller machine '!"( cards. Hne difficulty in using online debit
cards is the necessity of an electronic authori0ation device at the point of
sale 'PH&( and sometimes also a separate PIA pad to enter the PIA,
although this is becoming commonplace for all card transactions in many
countries. Hverall, the online debit card is generally viewed as superior to
the offline debit card because of its more secure authentication system and
live status, which alleviates problems with processing lag on transactions
that may only issue online debit cards. &ome on-line debit systems are using
the normal authentication processes of Internet banking to provide real-time
on-line debit transactions. !he most notable of these are Ideal and PHE.
Offline Debit !yste)
Hffline debit cards have the logos of ma8or credit cards 'e.g. 5isa or
"aster#ard( or ma8or debit cards 'e.g. "aestro in the Bnited Jingdom and
other countries, but not the Bnited &tates( and are used at the point of sale
like a credit card 'with payer*s signature(. !his type of debit card may be
17
sub8ect to a daily limit, andDor a ma%imum limit e4ual to the
currentDchecking account balance from which it draws funds. !ransactions
conducted with offline debit cards re4uire +K1 days to be reflected on usersF
account balances. In some countries and with some banks and merchant
service organi0ations, a )credit) or offline debit transaction is without cost
to the purchaser beyond the face value of the transaction, while a small fee
may be charged for a )debit) or online debit transaction 'although it is often
absorbed by the retailer(. Hther differences are that online debit purchasers
may opt to withdraw cash in addition to the amount of the debit purchase 'if
the merchant supports that functionality(: also, from the merchant*s
standpoint, the merchant pays lower fees on online debit transaction as
compared to )credit) 'offline( debit transaction.
lectronic Purse Card !yste)
&mart-card-based electronic purse systems 'in which value is stored
on the card chip, not in an e%ternally recorded account, so that machines
accepting the card need no network connectivity( are in use throughout
$urope since the mid-1990s, most notably in @ermany '@eldkarte(, ustria
'Luick(, the Aetherlands '#hipknip(, ,elgium and &wit0erland '#&6(. In
ustria and @ermany, all current bank cards now include electronic purses.
Pre&aid Debit Card
Prepaid debit cards, also called reload able debit cards or reload able
prepaid cards, are often used for recurring payments. !he payer loads funds
15
to the cardholder*s card account. Prepaid debit cards use either the offline
debit system or the online debit system to access these funds. Particularly
for companies with a large number of payment recipients abroad, prepaid
debit cards allow the delivery of international payments without the delays
and fees associated with international checks and bank transfers. Providers
include #a%ton ?M prepaid cards, N$scape prepaid cards and !ravele%
prepaid cards. N /hereas, web-based services such as stock photography
websites 'stockpot(, outsourced services 'odes(, and affiliate networks
'"edia /hi0( have all started offering prepaid debit cards for their
contributorsDfreelancersDvendors.
13
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Hbtaining a debit card is easy. If we 4ualify to open a bank account, we
usually get a debit card, if our bank offers the service.
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/hen we are applying for a debit card, the ban does not need to look into
our credit history. ll we need is the documentation to open a bank,
account, and money in our bank when we use our debit card.
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!he customer can withdraw a minimum of >s. 100D- and a ma%imum >s.10,
000D- per day
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.ebit card fees us from carrying a lot of cash or a che4ue book. In case,
we are an international traveler, we donFt need to stock up on !ravelerFs
#he4ues or cash. /e can use our debit card to withdraw #ash from over
500,000 !"s around the world in over 100 countries. /e can withdraw in
the local currency of the country we are in, limited only by the money we
have back home in our account, and ,usiness !ravel Luota ',!L( limit
arability.
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If we return merchandise or cancel services paid for with a .ebit card, the
transaction is treated as if it were made with cash or a check. #ustomers
usually get cash back for offline purchases: for on-line transactions, the
amount is credited to our account.
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statement of transactions can be obtained from the customerFs branch. ?or
e%ample, a mini statement containing the last four transactions and balance
can be obtained at a &tate ,ank @roup during the working hours of the
customerFs branch.
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Gour .ebit card can be used as !" card at any !" across the world, as
well as for making purchase at merchant locations. Gou can also withdraw
cash from any of the 1+000 !"s in India.
12
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The follo1ing are features of Debit cards
$3 It is a combination of a #he4ue and !" card. !herefore, there are no
fees for using the !" for cash withdrawal, or as a debit card for purchase.
43 !he .ebit #ard services in meant for withdrawals against the balance
already available in the designated account.
C3 It is the card holderFs obligation to maintain sufficient balance in the
designated account to meet withdrawals and service charges.
D3 .ebit card is more affordable than credit card. /e 8ust our bank
account for all our transactions. Ao credit period. Hur bank account is
debited immediately.
3 Ao credit check is re4uired to get a .ebit card.
"3 Bse of card is terminated without notice, upon the death, bankruptcy or
insolvency of the cardholder or for other valid reasons.
19
+3 &pending is limited to our bank balance.
Process Debit Card Transactions
successful business will usually accept debit cards as a part of their
overall profile of payment solutions. If you donFt process debit cards, you
may not be taking full advantage of all the potential that your merchant
account can deliver. !here are essentially two ways you can accept debit
cards, online and offline.
Off line debit card transactions
n offline debit card transaction is still the way most merchants
accept debit cards. !his is essentially the same as processing credit cards.
Gou swipe your customerFs debit card through a credit card terminal and
have them sign the receipt.
If you choose to accept debit cards offline, be sure that the debit card
has a -I!$ or MasterCard logo. Htherwise, the debit card wonFt be
approved and you wonFt be able to process the debit card offline
Online debit card transactions
70
!he most advantageous way to process debit cards is to do it online.
Gou will still be able to accept debit cards at the point of sale, but you will
need to install a PIA pad on your credit card terminal.
n online debit card transaction works much like a credit card
transaction, e%cept that after your customer swipes his or her debit card,
they will enter a PIA instead of signing the receipt.
t this point the encrypted debit card information is sent to the
customerFs bank for authori0ation, and youFll receive the funds 8ust as you
would for a credit card transaction.
Gour business has many advantages when you accept debit cards.
?or e%ample, you pay a flat fee for each debit card transaction that
you process, instead the flat fee plus percentage rate that you are charged
when you accept credit cards. Hver time, this can potentially save you a lot
of money. 0000000000000000000000000000000000000000000000000
nother advantage when you process debit cards is that you canFt be
charged higher CdowngradeO fees.
In a credit card transaction, you are usually charged the Cdiscount
rate.O 6owever, some transactions are considered to be a higher risk or
e%pense to the bank, and you are charged a higher rate as a result.
,ut when you accept debit cards, you always pay the same flat rate,
with no danger of the rate increasing.
71
Gou can also cut down on checkout time when you accept debit
cards. It takes an average of 10 seconds to hand over the pen, wait for the
customer to sign the receipt, and then take the pen back.
If you process +0 credit card transactions a day, youFre losing 100
minutes a day 8ust passing a pen back and forth; !hatFs almost two hours.
7+
Plastic "raud
&tate-of-the-art thieves are concentrating on plastic cards. In the past,
this type of fraud was not very common. !oday, it is a big business for
criminals. Plastic cards bring new convenience to your shopping and
banking, but they can turn into nightmares in the wrong hands. !his
pamphlet describes credit and debit cards and some common schemes
involving card fraud with tips to help you avoid them
The follo1ing are the ty&es of frauds
1. !tolen Cards at the Office
2. *tra Co&ies of Charge !li&s
3. Discarded Charge !li&s
.. 0nsigned Credit Cards
;. #oss of Multi&le Cards
=. !trange /eBuests for Your PI% %u)bers
>. #egiti)ate Cards
C. $ltered Cards
D. Counterfeit Cards
71
Ch.= $d6antages , Disad6antage
$d6antages
Plastic money, unlike paper money, will not burn easily and can resist
higher temperatures than paper money.
Gou have no fear to be theft. nd its easy to use.
Plastic money, unlike paper money, will not burn easily and can resist
higher temperatures than paper money.
Paper money also picks up dirt and stains more easily than plastic
money.
Plastic money is the debit and credit cards. Plus point of plastic money is
that you won*t have to carry your cash around all the time.
It also doesn*t wear after time as paper does nor does it rip and tear.
@ive you incentives, such as reward points, that you can redeem.
,e more convenient to carry than cash.
77
Provide a convenient payment method for purchases made on the
Internet
and over the telephone.
6elp you establish a good credit history.
Disad6antage
#ost much more than other forms of credit, such as a line of credit or a
Personal loan, if you don*t pay on time.
.amage your credit rating if your payments are late:
llow you to build up more debt than you can handle:
6ave complicated terms and conditions:
It also doesn*t wear after time as paper does nor does it rip and tear.
Paper money also picks up dirt and stains more easily than plastic
money.
I can*t really see any advantages to have paper money, unless it is
cheaper to make.
75
Its disadvantage is that, some e%tra money will be deducted for the
bank services.
ItFs around +.5I of the money you spent.
Ch.> TCH%O#O+Y $%D I%"/$!T/0CT0/
Hne of the most important features that Plastic "oney offers is the
technology associated with this business.
#redit card businesses rely on very reliable and secure technology and
demands very &trong connectivity backbone.
lthough a third world country, with lot of insecurities and almost no
infrastructure, Pakistan has no e%ception when it comes to credit card
business.
!here is appro%imately 1000 Point of &ale !erminals 'PH&!( present
on merchant*s sites connected with bank host system.
Inter-city connectivity is accomplished through M.+5 networks.
Perhaps, it is the most important time in the history of Pakistan as the
parameters of its Infrastructures are coming into e%istence.
73
!here is an immense need of reliable wide area connectivity and this
market is so huge and lucrative that it can accommodate many more
industry giant
Ch.D CO%C#0!IO%
+1
&!
#entury banking has become wholly customer-driven P
technology driven by challenges of competition, rising customer
e%pectations P shrinking margins, banks have been using technology to
reduce cost P enhance efficiency, productivity P customer convenienence.
!echnology intensive delivery channels like net banking, mobile banking,
etc have created a win-win situation by e%tending great convenienence. P
multiple options for customer.
?rom educating customers about credit cards there is a need to
educate them about the differentiating factors of the cards. ,ecause visa
and master card are advertising regularly and thereby increases awareness.
!he strategy should be to emphasi0e on its differentiating characteristics.
7<
!hey also need to identify potential customers and target those using
mailers. s internet is growing at a fast rate the net users can be targeted by
having interactive sites. !he prospective companyFs card personality could
also be used in the home page to solve customer 4ueries in the Q,est
Possible "annerF.
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