Tiderc Drac [Credit Card]
THIS IS 100 MARKS PROJECT ON CREDIT CARD FOR BMS STUDENTS...
Credit is a method of selling goods or services without the buyer having cash in hand. A credit card is only an automatic way of offering credit to a consumer.. A credit card is basically a plastic card with a magnetic strip invented with the intention to simplify the complicated banking process for an individual in case he/she is short of cash, be it something casual like shopping or something severe like an emergency situation. The dictionary defines a credit card as 'A card which can be used to obtain cash, goods or services up to a stipulated credit limit. The supplier is later paid by the credit card company which in due course is reimbursed by the credit card holder who will be charged interest at the end of the credit period if money is still owing.' The word credit comes from Latin, meaning "trust. This means that using a credit card is effectively like taking-out a loan. That loan must be re-paid to the credit card company (the lender) within the credit cycle (billing is usually every 30 days and thus the credit period can vary from 7 days to 45 days depending on when the purchase was made). If the money is not repaid within this time an interest charge is levied (applied) to the remaining balance. A credit card generally works by giving its holder an immediate authority to purchase services and goods such as travel and hotel reservations as well as shopping for merchandise in and outside country. 1|Page
Credit Cards All the credit card comes with a credit limit, a predetermined amount of money which its lender is offering as credit to a credit card holder to spend wherever he wants to. Before issuing a credit card to an individual, the bank or the financial institution has a look at his/her credit rating along side verifying his/her credit history. After receiving the needful information about the applicant, the lender company issues the credit card to him. Now if the credit card holder goes shopping with his credit card, he pays the vendor through the card which is actually reimbursed to the vendor through the bank or the lender company. And finally, the cardholder then repays the bank for the entire credit amount that he has used, by paying it back through regular monthly payments. It is part of a system of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services. The 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. Credit card works differently from the debit card. It is issued after a credit card application has been made to the issuer. The issuer then lends money to the credit card holder generally on different rates of interest. And if a consumer is using credit cards then it means he can reconcile his balance at the cost of charging interest and it would make his payment period longer than before. Most credit cards are having almost the same shape and size around the globe. Credit cards work in a very simple way, a consumer is issued a credit card after his application for credit card has been approved by concerning authorities and a credit company shows its consent to issue the applicant a credit card. Now the customer who has purchased the credit card will be able to buy things on credit up to the limit of credit which was agreed upon by both parties in terms and conditions. A consumer can also used credit card online facilities to get benefit from his credit card. This online credit card facility is easy to use and it is faster than the actual procedures of cash transactions.
Credit Cards A customer can apply credit card on different outlets and he can also make purchase online by using his credit card in a case he does not have liquid cash. Every credit card is supported by a credit card companies. Some of credit cards companies are best and they offer very user-friendly credit cards. This kind of credit card is one of the best credit card and their characteristics have no comparison with any other type of credit cards. In these cards the widely known cards are Visa Credit Cards & Master Credit Cards they are used all over the world. Different credit card companies and credit banks also maintain a system of credit check to get their credit in times. So a consumer will not be able to deceive them by using their credit cards. This credit check is maintained regularly and if a credit card holder is not able to pay his payments in the assigned time of payment then he will be given a grace period and in a case he would not be able to pay his credit. His credit card would be blocked. And he will not be able to make any further purchases from his credit card. Most credit cards are issued by local banks or credit unions, and are the shape and size specified by the ISO/IEC 7810 standard as ID-1. When a purchase is made, the credit card user agrees to pay the card issuer. The cardholder indicates consent to pay by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a Personal Identification Number (PIN). Also, many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet, known as a 'Card/Cardholder Not Present' (CNP) transaction. Electronic verification systems allow merchants to verify that the card is valid and the credit card customer has sufficient credit to cover the purchase in a few seconds, allowing the verification to happen at time of purchase. The verification is performed using a credit card payment terminal or Point of Sale (POS) system with a communications link to the merchant's acquiring bank. Data from the card is obtained from a magnetic stripe or chip on the card. Other variations of verification systems are used by ecommerce merchants to determine if the user's account is valid and able to accept the charge. These will typically involve the cardholder providing additional information, such as the security code printed on the back of the card, or the address of the cardholder.
HISTORY As far back as the late 1800s, consumers and merchants exchanged goods through the concept of credit, using credit coins and charge plates as currency. It wasn't until about half a century ago that plastic payments as we know them today became a way of life. Credit was first used in Assyria, Babylon and Egypt 3000 years ago. The bill of exchange the forerunner of banknotes - was established in the 14th century. Debts were settled by onethird cash and two-thirds bill of exchange. Paper money followed only in the 17th century. The first advertisement for credit was placed in 1730 by Christopher Thornton, who offered furniture that could be paid off weekly. Early Beginning: According to Encyclopedia Britannica, "the use of credit cards originated in the United States during the 1920s, when individual firms, such as oil companies and hotel chains, began issuing them to customers." However, references to credit cards have been made as far back as 1890 in Europe. Early credit cards involved sales directly between the merchant offering the credit and credit card, and that merchant's customer. Around 1938, companies started to accept each other's cards. Researchers also say that credit cards back in those days were not made of plastic but most probably from metal coins, metal plates, celluloid, metal, fiber or paper. In the early 1900s, oil companies and department stories issued their own proprietary cards, according to Stan Sienkiewicz, in a paper for the Philadelphia Federal Reserve entitled "Credit Cards and Payment Efficiency." Such cards were accepted only at the business that issued the card and in limited locations. While modern credit cards are mainly used for convenience, these predecessor cards were developed as a means of creating customer loyalty and improving customer service. In 1946, John Biggins of the Flatbush National Bank of Brooklyn in New York invented the first bank credit card. Biggins invented the "Charge-it" program between bank customers and local merchants where merchants deposited sales slips in the bank after which the bank billed the customer. When a customer used it for a purchase, the bill was forwarded to Biggins' bank. The bank reimbursed the merchant and obtained payment from the customer. The catches: Purchases 4|Page
Credit Cards could only be made locally, and Charge-It cardholders had to have an account at Biggins' bank. In 1951, the first bank credit card appeared in New York's Franklin National Bank for loan customers. It also could be used only by the bank's account holders. The Diners Club Card was the next step in credit cards. According to a representative from Diners Club, the story began in 1949 when a man named Frank McNamara had a business dinner in New York's Major's Cabin Grill. When the bill arrived, Frank realized he'd forgotten his wallet. He managed to find his way out of the pickle, but he decided there should be an alternative to cash. McNamara and his partner, Ralph Schneider, returned to Major's Cabin Grill in February of 1950 and paid the bill with a small, cardboard card. Coined the Diners Club Card and used mainly for travel and entertainment purposes, it claims the title of the first credit card in widespread use. Plastic Debuts: In 1950, Diners Club and American Express launched their charge cards in the USA, the first "plastic money". In 1951, Diners Club issued the first credit card to 200 customers who could use it at 27 restaurants in New York. But it was only until the establishment of standards for the magnetic strip in 1970 that the credit card became part of the information age. By 1951, there were 20,000 Diners Club cardholders. A decade later, the card was replaced with plastic. Diners Club Card purchases were made on credit, but it was technically a charge card, meaning the bill had to be paid in full at the end of each month. According to its archivist, American Express formed in 1850. It specialized in deliveries as a competitor to the U.S. Postal Service, money orders (1882) and traveler's checks, which the company invented in 1891. The company discussed creating a travel charge card as early as 1946, but it was the launch of the rival Diners Club card that put things in motion. In 1958 the company emerged into the credit card industry with its own product, a purple charge card for travel and entertainment expenses. In 1959, American Express introduced the first card made of plastic (previous cards were made of cardboard or celluloid). American Express soon introduced local currency credit cards in other countries. One million cards were being used at about 85,000 establishments within the first five years, both in and out of the U.S. In the 1990s, the company expanded into an all-purpose card. 5|Page
Credit Cards Closed Loop System: The Diners Club and American Express cards "functioned in what is known as a 'closed-loop' system, made up of the consumer, the merchant and the issuer of the card," Sienkiewicz writes. "In this structure, the issuer both authorizes and handles all aspects of the transaction and settles directly with both the consumer and the merchant." In 1959, the option of maintaining a revolving balance was introduced, according to MasterCard. This meant cardholders no longer had to pay off their full bills at the end of each cycle. While this carried the risk of accumulating finance charges, it gave customers greater flexibility in managing their money. Bank Card Associations: "The general-purpose credit card was born in 1966, when the Bank of America established the BankAmerica Service Corporation that franchised the BankAmerica brand (later to be known as Visa) to banks nationwide," Sienkiewicz writes. In 1966, a national credit card system was formed when a group of credit-issuing banks joined together and created the Interbank Card Association, according to MasterCard. The ICA is now known as MasterCard Worldwide, though it was temporarily known as Master Charge. This organization competes directly with a similar Visa program. "The new bank card associations were different from their predecessors in that an 'open-loop' system was now created, requiring interbank cooperation and funds transfers," Sienkiewicz says. Visa and MasterCard still maintain "open-loop" systems, whereas American Express, Diners Club and Discover Card remain "closed-loop." Visa and MasterCard's organizations both issue credit cards through member banks and set and maintain the rules for processing. They are both run by board members who are mostly high-level executives from their member banking organizations. As the bank card industry grew, banks interested in issuing cards became members of either the Visa association or MasterCard association. Their members shared card program costs, making the bank card program available to even small financial institutions. Later, changes to the association bylaws allowed banks to belong to both associations and issue both types of cards to their customers.
Credit Cards Credit Card Processing Evolves: As credit card processing became more complicated, outside service companies began to sell processing services to Visa and MasterCard association members. This reduced the cost of programs for banks to issue cards, pay merchants and settle accounts with cardholders, thus allowing greater expansion of the payments industry. Visa and MasterCard developed rules and standardized procedures for handling the bank card paper flow in order to reduce fraud and misuse of cards. The two associations also created international processing systems to handle the exchange of money and information and established an arbitration procedure to settle disputes between members. Other Issuers Join The Party: Although American Express was among the first companies to issue a charge card, it wasn't until 1987 that it issued a credit card allowing customers to pay over time rather than at the end of every month. Its original business model focused on the travel and entertainment charges made by business people, which involved significant revenue from merchants and annual membership fees from customers. While these products are still in its tool chest, the company has developed numerous no-annual fee credit cards offering low introductory rates and reward programs, similar to as traditional bank cards. Another relatively recent entry into the card business is Discover Card, originally part of the Sears Corporation. According to Discover, its first card was unveiled at the 1986 Super Bowl. Discover Card Services sought to create a new brand with its own merchant network, and the company has been successful at developing merchant acceptance. A 2004 antitrust court ruling against Visa and MasterCard -- initiated by the U.S. government and the Department of Justice -- changed the exclusive relationship that Visa and MasterCard enjoyed with banks. It allows banks and other card issuers to provide customers with American Express or Discover cards, in addition to a Visa or MasterCard.
Credit Cards History Of The Shape of Credit Cards: Credit cards were not always been made of plastic. There have been credit tokens made from metal coins, metal plates, and celluloid, metal, fiber, paper, and now mostly plastic cards. First Bank Credit Card: The inventor of the first bank issued credit card was John Biggins of the Flatbush National Bank of Brooklyn in New York. In 1946, Biggins invented the "Charge-It" program between bank customers and local merchants. Merchants could deposit sales slips into the bank and the bank billed the customer who used the card. The Popularity of Credit Cards: Credit cards were first promoted to traveling salesmen (more common in that era) for use on the road. By the early 1960s, more companies offered credit cards, advertising them as a time-saving device rather than a form of credit. American Express and MasterCard became huge successes overnight. By the mid-'70s, the U.S. Congress begin regulating the credit card industry by banning such practices as the mass mailing of active credit cards to those who had not requested them. However, not all regulations have been as consumer friendly. In 1996, the U.S. Supreme Court in Smiley vs. Citibank lifted restrictions on the amount of late penalty fees a credit card company could charge. Deregulation has also allowed very high interest rates to be charged. The first use of magnetic stripes on cards was in the early 1960's, when the London Transit Authority installed a magnetic stripe system. San Francisco Bay Area Rapid Transit installed a paper based ticket the same size as the credit cards in the late 1960's
TYPES OF CREDIT CARDS There are many types of credit cards which are used by different types of customers and account holders. Mostly business personnel use credit cards which are convenient in their use and which suit businessmen. Similarly students would use student credit cards and a layman will use general purpose cards. There are some most used types of credit cards. For example Interest Credit Cards are mostly used by businessmen and company CEOs because there is a charge of interest if credit card payment has not been annulled in time. Another important and commonly used type of credit cards is those in which 0 APR (Annual Percentage Rate) is charged as its introductory price similarly cash cards are also used which are just like cash but in the form of plastic card. It is because the cash card holder has paid the cash price of that card and he can use it as cash now. In this card the annual percentage rate is always zero and it is used by millions of people around the globe. There is another kind of credit cards which are called Payments Card. A payment card is one with which a person can make the payment of something and they are also widely used in the business field and in different areas of financing. American Express Credit Cards is another type of credit cards these American cards are used almost all over the world due to their world wide acceptability. And they are acceptable almost in every area of the world. Some other cards in which the price of card is paid instantly on their purchase they are called Prepaid Credit Cards but in fact they are not credit card in nature. On the other hand prepaid debit cards are also used in the market and in the banks to deposit some amount or to make some payment. In some types of credit card the interest rate is very low as compared to general interest rate applied in normal credit cards and these types of cards are called Low Credit Cards. Low rate credit card is mostly used by those who can't bear the price of interest charge so it is a facility for them to use the low rate card for their convenience. There are some cards which are issued by the credit cards providers to their customer on the basis of interest in those credit cards there is not any secured amount and those cards are called No Credit Credit Cards.
Credit Cards These are some major types of Credit Cards. Secured Credit Cards Travel Credit Cards Rewards Credit Cards Bad Credit Credit Cards Airline Credit Cards Business Credit Cards Cash Back Credit Cards Instant Approval Credit Cards Low Interest Credit Cards Student Credit Cards Secured Credit Cards: Secured Card or Secured Credit Card is a sort of credit card in which the card is secured with some deposit by the card holder. In a general sense the credit card holder must deposit between the 100% to 200% amount of desired credit and in this way the credit card is secured. It is because after depositing an amount the chances of bad credit history become low as compared to unsecured credit cards hence credit card secured by using the deposit from the credit card holder. These secured cards are used and provided by the card issuers due to the fact that if the credit card holder has a bad credit history or he makes an intentional attempt to delinquent credit cards secured against his fraud. The secured credit card holder is expected to make the regular payment of its usage of cards and in most circumstances the card holders make the regular payments. So these secured credit cards help the credit card issuers and banks to get the payment in time as compared to the payments of unsecured credit card. An account holder in some bank can make an application for the secured credit card and after the secured credit card application has been approved he can use his bank secured credit card now for different modes of payment up to the secured deposit which he has deposited in the bank.
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Credit Cards Similarly an application can also be submitted for unsecured credit card and after the approval of unsecured credit card application a person can use his unsecured credit card. If a person does not make his due payments within 180 days then usually the rules of secured credit card apply and the bank or credit card issuer can freeze the account of the card holder. There is another type in which the card is not secured with any deposit but a guarantee has been given for the payment and that is called Guaranteed Unsecured Credit Cards and it is mostly used by the companies for their employees. These cards are also useful for those people who can't make regular payments by using unsecured credit cards or unsecured credit card debt. In this way these cards are very helpful for these people also. Most terms and conditions are described in the form at the time of issuing the secured credit card in the application form. And an account is opened after the signature on the agreement by the applicant. Secured cards are less expensive to those card holders who have bad credit history than unsecured cards. Travel Credit Cards: A travel card is like having cash with us everywhere and that cash is acceptable almost every part of world. And we don't need to convert the cash after going to conventional money exchange centers. And travel credit cards are offered for this purpose to the travelers and tourists. They are easy to use and the tourist and traveler can also earn different types of points and rewards on these cards on every purchase. And afterwards he can use these travel rewards in his tour or he can take back these rewards in the shape of cash. Hence a travel credit card also serves as travel reward card and a tourist or traveler can use this travel reward which he gets from different ways in his shopping and in air mile discounts. The best travel credit card which has travel credit is either travel MasterCard or Travel Visa cards because of the fact that American Express Travel credit card is not acceptable everywhere in the world. Most ATM machines have the MasterCard and Visa Card logos so it is easy for the traveler to use these cards and get rewards if he's using travel reward credit card. He can simply use these rewards later on in his journey to get points or to get discount.
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Credit Cards There is another type of travel credit cards which are available for business personnel and executives of different companies to use them in their travel. And these cards have special features for such prestigious people around the world. These cards are well known by their name Travel Business Cards. And traveling while someone has these travel credit cards in his pocket is the best credit card travel or at least if not best than it is one of the best ways to use these cards. Though express card which is backed by American Express Card system is not acceptable all over the world but it is acceptable in major parts of the world and in almost all free countries so it is not a bad choice even to use this card. But its acceptability is not as wide as Visa or Master Cards. Many travel credit card providers also offer credit card travel insurance to their credit card holder however this insurance doesn't apply to their cardholder when he has reached his destination but some credit card providers also give this facility and a travel credit card holder can find these types of card providers for a safer journey. In this way travel credit cards work and there is another plus points in these travel credit cards and that is their acceptability in some major and famous money exchangers. This can help the traveler if he needs to have cash in liquid form. Then it is another opportunity for him to use his travel credit card because they are acceptable to currency exchangers so a traveler does not need to look around for the ATM machine in this case. Rewards Credit Cards: Different rewards are given on different types of credit cards which are provided by either credit card companies or banks. These types of reward cards are called reward credit cards. In the past not every company of credit card provider was offering this types of credit cards but now almost all credit card companies and banks offers credit cards with rewards. Though there is a classification for each type of credit card. A reward credit card functions in the same way as other type of credit cards perform their functions but on a reward card different types of bonus and honorariums are given which are called reward and these credit rewards can be used in getting discount or getting some cash back or in some other ways. Reward cards are being offered now by almost every major credit card provider and bank. And these cards work in very simple way. Whenever the card holder makes a transaction by using a reward credit card he would get some points and this 12 | P a g e
Credit Cards will be called credit card reward which is given to him on the usage of reward credit card. On each transaction credit card reward is given in most cases. Later on these rewards can be used in getting some discount or some cash back on purchases. After some transactions has been taken place through reward credit cards now a card holder can use his credit card rewards which he has earned by using his credit card in different ways. He can get some discount from shopping, or he can also get some cash back or he can win some gifts and prizes through these rewards as well. Wherever the rules of reward credit card apply, credit card holder can use his credit card rewards there. For example if someone is using American Express Reward Credit Card then he can earn some American Rewards by using this card. Almost every reward card is good in its usage. But some reward credit cards have really earned the reputation in the minds of customers. And these are Visa Reward Credit Cards, MasterCard Reward Credit Cards, & American Express Reward Credit Cards. In these brands many types of reward credit cards available, depending upon the status and income group of the card holder. And a person can choose the best reward credit card from these brands which is suitable to him and his pocket. Having these reward credit cards is not only helpful but it is also a good source of enjoyment. And it provides a sensation of security and conformability in the mind of the card holder. Bad Credit Credit Cards: Credit cards come in different types and for different class of people. So there is a type of credit card which is available for those people who have bad credit repute. And these cards are called Bad Credit Credit Cards these are credit cards for bad credit people. Almost every famous group of credit card provider offers such cards to its bad credit card holders. And these people can use bad credit cards in their transactions. So a person can use credit card with bad credit and he can get a credit card from credit card providers. But he just needs to apply for that type of credit card. People apply for bad credit cards because of the fact that their credit rating has been decreased from the required level. And they face credit cards bad credit so the credit card providers restrict them and they cannot use their credit so frequently because of having defaulting behavior. So many companies offer cards for bad credit people and these cards are offered to the different income-groups and different types of people. 13 | P a g e
Credit Cards People can come out from the situation of credit cards with bad credit after they focus and determined to come out from such situations. Following factors are most important which makes a person and compel it to use credit cards with bad credit. These are failure to make payments in time, failure to pay house hold bills, rents and another important reason is their postal location. Hence they can use these types of cards to make their necessary payments and they can use credit cards for bad credit. They just have to apply for these cards and bank or credit card providers will consider his case before issuing him a bad credit credit card. Bad credit credit card can be used up to the limit which is specified in the agreement which has been signed by the credit card holder. If a person has increased his credit rating then he can use his credit card bad credit to gain a secured credit card and he can also make bad credit consolidation while he's doing this thing. In this way he can use his bad credit card and it will help him to regain his repute and his credit history would be better than before provided he must use these cards with a realistic approach. He can also get rid from the credit card for bad credit people in this way if he would manage his bad credit credit card very well. It does not need a specialization to do so but the card holder must use his bad credit credit card with common sense and he must not indulge himself in useless activities and purchases. There is another type of bad credit credit card available that can also help the card holder and he can obtain that type of card if it is a right selection for him and this type is called Unsecured Bad Credit Card. And by using this card he can improve his credit history. Airline Credit Cards: Air line credit card or air line card is a type of credit card which is used by those people who travel frequently through different air line services. These cards give them different opportunities. Airline cards are not only useful in traveling through air but they also give different facilities in shopping and purchasing to the traveler. Every credit card provider company and different types of financial services providers and banks as well offer a wide range of credit cards and in those cards one can choose a card from the best air line credit cards which is most appropriate to him in his traveling. Airlines credit card can be used in different ways, a card holder can get free air miles by using the card and these miles are called credit card airline miles which the card holder earned by using the airline card. 14 | P a g e
Credit Cards Different airline services also offer their own cards with the cooperation of credit card providers. For example Alaska airline provides airline card with the corporation of different credit card providers and this type of card is called Alaska Airlines Credit Card. There is another type of airlines credit cards and these cards are used to get some miles by using the credit card. They are specially designed for those who travel frequently and upon using these cards they get free air miles and on air miles card a card holder can get up to the 5000 free air miles. Normally upon using a dollar through miles credit card a card holder gets one mile of free travel. So as his spending grows his free air miles also grow with it. Some cards are solely offered as air miles cards and they are typically for those people who travel too much in a single week. Almost all companies offer airline miles credit card but 2 international brands are most famous they are Visa and MasterCard airline credit cards. When a person uses these brands of cards he not only get free mileage but he also get a bonus upon crossing a specific limit and there are also free miles upon approval of the card. Hence he can use credit card airline miles in his journey later on. The packages for airline miles card vary from card to card depending upon the nature and class of card. For example some air miles cards have low annual percentage rate while on the other hand some other cards have higher annual percentage rate as compared to first type of cards. Similarly the annual program fee for each card is different depending upon the credit line of the card. And almost all air miles credit cards can be accessed online easily by the card holder. Business Credit Cards: Among all types of credit cards the business credit cards are those cards which are used by most of the people after the general purpose cards. Anyone can make a business credit card application by person or online to get a business credit card. After the approval of application different terms and conditions can be finalized by the applicant about his business credit line on which he gives his signature. As soon as this agreement has been finalized the credit card issuer registers the card holder in their data. Business credit cards are not only good for business personnel but they also help them to get some other facilities which a lay businessman doesn't have.
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Credit Cards Credit card business is done by almost all the major credit card providers in the world. And MasterCard and Visa are 2 brands which are leader in this business. Citi Business Credit Card is also one of these brands which are running most successful business in credit cards. If an individual or the company goes into the state of business bad credit then in this case grace period is also offered to that company of individual for a certain time so that he can come out from the crisis. Business credit cards are not offered only to giant business entities but these cards also come in other dimensions and for small business these are small business credit cards. And an account holder of business credit card can check his business credit report online 24 hours in a day. This is one of the most entertaining facilities given by the credit card providers. Credit card small business type is one of the most successful industries in the small business and in the banking sector because there are not many giants group but there are lots of people who have small businesses. Many banks make a business credit card offer to their regular customers who already have businesses and using credit cards. And these banks also give the facility of using business credit card online. These offers gave a boost of small business cards. A person who is looking for a small business credit card can search for search card online and he can also make a proper analysis of each card to select a card which is most suitable to meet his business needs. After selecting the small business card of his choice he can correspond with the concerned credit card provider online and he can also apply for getting that card at the spot. The processing of small business card is fast and he would get cards with in the minimum possible time. This is the fastest way to get a small business credit card. In fact, in this way the applicant can also save his time by making an application for small business credit card online. Many companies offer zero APR as an introductory price on small business cards. So an applicant can take this benefit easily.
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Credit Cards Cash Back Credit Cards: A cash back credit card users have to deposit some amount of cash in their credit account in order to get a certain amount of cash discount. The typical obligation that these cash back credit cards put on their card holders is to make use of the card to buy or make payments for the objects that are sold by related organizations or companies. When a credit card is used to buy items of these partners then the cash back points or discounts are awarded to card holders. Several cash back credit cards do not offer cash but they hand out gift certificates that can be exercised to get objects from partner organizations. When patrons need extra advantages from credit cards they will seek for the best cash back credit card available in the market. Out of all the rewards presented by different company's credit cards to the customers, cash rewards are the most attractive one like cash back reward credit card. Many individuals think that the best cash back credit cards one would get is %5 cash back credit cards. These cash back cards generally have set rules and standards. The 5% cash back credit card offer the cash back reward which is normally valid for certain elected commodities. Customers can also go for 2% cash back credit card which doesn't enforce too much limitation. The business credit card with cash back can work in similar way. Different reward can be given to different sorts of credit. The cash back business credit card provides the cash back rewards that are very appealing. Cash back credit cards will pay back a percentage of the cash used for office purchases of a small business. Through a business credit card, cash back can be introduced after doing purchases for business, depending on the policies placed by the credit card provider. There are numerous business credit cards with cash back potential, but users have to discover which ones are appropriate for their business.
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Credit Cards Instant Approval Credit Card: Almost the major companies of the world in credit card fields provide instant approval of their credit card but there are still some flaws in the credit card instant approval process. Credit cards instant approval is not a problem in developed countries but problem lies with under develop countries or developing countries. In general terms as soon as a card holder uses his credit card he gets instant credit card approval from the credit card machine after his credit card has been processed. Generally the ATM machines and credit card machines apply credit card instant approval method within seconds but there are some machines which really make the card holder worry because their timing of processing of card is longer than normal and they also reject the card sometimes. Such functions of instant credit cards make them easy and user-friendly to their customers and card holders. On the other hand if an instant credit card shows some problems then it is really irritating for the card holder and he wants to slam his head into a wall. Due to these facts mentioned above the instant approval credit cards are replacing themselves against those cards which don't give fast approval so now in the recent time everyone is looking for instant approval credit card. If a person is using bad credit credit card then it is important to notice that bad credit credit cards instant approval functions work in the same way as other credit cards functions work. Now the modern development in IT and E-commerce sectors has mad it possible for the credit card applications to give credit card applications instant approval, this is the great opportunitywhich was never offered before. In these way instant approval credit cards help customers and card holders in many ways and make their transactions fast but there is another cost in these transactions and that is the transaction charges of using the credit card and this is considered one of the worst things in credit cards system. But if a person can make the rational use of his credit cards then he can overcome this problem.
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Credit Cards Low Interest Credit Cards: There are many types of credit cards available nowadays. In these credit cards on some cards the interest charges are lower than other cards this low interest credit is a facility for the card holder especially for those card holders who can't afford a higher rate of interest on their credit cards. And a person can use and obtain the low interest card if he can't afford the credit card with normal interest rates. Now many companies offer low interest credit cards. It is very simple to apply for low interest credit card and a candidate can apply for it online or he can apply in the written form after the approval of his application low interest credit card will be issued to him. Low interest cards are helpful to customers and card holders in many ways. Their transaction charges are also low than other credit cards and credit card low interest makes it easy to pay it back thus the customer does not get a very heavy burden of the interest by using low interest rate credit cards. Hence credit cards with low interest are in the favor of customer rather than the issuing company or bank. And a card holder does not have to pay back the high percentages of interest on his credit. Companies offer different credit cards low interest rates on their different cards depending upon the pocket situation of the customer and upon his choice to choose a credit card with low interest. By making a deep analysis and different reviews a person can select a low interest rate credit card for his use. It is possible to get and apply for these cards online. These low interest cards are helpful in using as well and when a person uses these cards he uses them with a sense of comfort and ease. They are not like other cards that when a person is thinking to use them he thinks twice before using his credit card only a single time. And these credit cards low interest goes in the favor of credit card holder but companies also take good benefit by issuing these types of cards to their customers.
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Credit Cards Student Credit Cards: Student Card of Student Credit Card is a new way for students to use their money. Many types of student cards are available from different credit card companies and many banks also offer student credit cards for the convenience of students and for expanding their business of student credit cards. These types' students' credit cards are available for the student of different levels. For example there are cards available for university students and college credit card is for those students who are studying in colleges. These credit cards for students are helpful for them in getting their books in time and to use their cards whenever it becomes necessary for them as it is a best way to keep money with them without any fear of stolen because it is backed by high security and a student can freeze his credit card with just a phone call if it is stolen. Credit card for student is now in use and the first thing for which students look when they go to the new university is the option of credit card for students. Now almost every student in develop countries is using this option and using plastic money in the shape of students credit cards. This is not only helping students but it is also expanding the business of credit card providers and due to this reasons now credit card providers are issuing students credit card with different packages. For example there are different ranges of cards for university and school students while college student credit card is issued to the college students. In the present times students credit cards are mostly use because they are the most moderate credit cards among other student cards and credit cards student like to use these cards due to their moderation. There is another benefit of using student credit cards and that is the option of making student loan consolidation or school loan consolidation by using the student credit cards of the students. And this option is very useful and it is highly supported by the students and their parents. Normally the introductory APR in student credit cards is zero and that attracts many students to gain a student credit card.
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HOW ARE CREDIT CARDS MADE? Design: Credit cards are designed with complex security features to prevent the possibility of fraud. These features involve the card's account number, its signature panel, and its magnetic stripe. The card's unique account number is the key piece of information needed to conduct a financial transaction and must be carefully protected. To prevent someone from using a wrong account number, or from making up a phony number, companies rely on the laws of statistics for protection. By using long account numbers they make it unlikely that a number can be faked. For example, the Visa card has 13 digits, American Express has 15, Diners Club 14, and MasterCard has 20. Mathematically, nine digits would provide one billion unique account numbers (000000000, 000000001, 0000000002, and so forth up to 999999999) which would be enough for all the customers of a given company. (The largest companies, Visa and MasterCard, only have about 65 million customers.) If only 65 million numbers are assigned out of a possible 10 trillion possibilities, it is unlikely that anyone will be able to mistakenly use another account number. If an incorrect account number is mistakenly entered by a store clerk, it will almost certainly not be accepted. This statistical security gives companies confidence that someone is not making up a number when conducting business over the phone. Of course, this security measure does not help if someone obtains a real number and uses it fraudulently. Another security design feature involves the signature panel on the back of the card. The signature is intended to document the owner's handwriting so a forged signature on a receipt can be detected. To prevent criminals from erasing the back panel of a stolen card and putting on their own signature, the panel is printed with a fingerprint design that is difficult to duplicate and that will come off when the original signature is erased. If the signature is erased, this design will disappear too leaving a white spot, which instantly indicates the card has been tampered with. Some card manufacturers imprint the word VOID beneath this panel, which is revealed upon erasure. Finally, some cards feature special features that make them hard to duplicate, such as complicated holograms.
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Credit Cards Raw Materials: Cards are made of several layers of plastic laminated together. The core is commonly made from a plastic resin known as polyvinyl chloride acetate (PVCA). This resin is mixed with pacifying materials, dyes, and plasticizers to give it the proper appearance and consistency. This core material is laminated with thin layers of PVCA or clear plastic materials. These laminates will adhere to the core when applied with pressure and heat. A variety of inks or dyes are also used for printing credit cards. These are available in a variety of colors and are designed for use on plastic substrates. Some manufacturers use special magnetic inks to print the magnetic stripe on the back of the card. The inks are made by dispersing metal oxide particles in the appropriate solvents. Additional special printing processes are involved for cards, like VISA, which feature holograms. The Manufacturing Process: The manufacturing process consists of multiple steps: first the plastic core and laminate materials are compounded and cast into sheet form; then the core is the printed with appropriate information; next the laminates are applied to the core; and finally the assembled sheet is cut into individual cards. Plastic Compounding And Molding: 1) The plastic for the core sheet is made by melting and mixing polyvinyl chloride acetate with other additives. The blended components are transferred to an extrusion molding apparatus, which forces the molten plastic through a small flat orifice known as a die. As the sheet exits the die, it goes through a series of three rollers stacked on top of each other that pulls the sheet along. These rollers keep the sheet flat and maintain the proper thickness. The sheets may then pass through additional cooling units before being cut into separate sheets by saws, shears, or hot wires. The cut sheets enter a sheet stacker that stacks them into place and stores them for subsequent operations.
2) The laminate films used to coat the core stock are made by a similar extrusion process. These thinner films may be made with a slot cast die process in which a molten plastic film is spread on a casting roller. The roller determines the film's thickness and width. Upon cooling the films are stored on rolls until ready for use. 22 | P a g e
Credit Cards Printing: The plastic core of the card is printed with text and graphics. This is done using a variety of common silk screen processes. In addition, one of the laminate films may also undergo subsequent operations where it is imprinted with magnetic ink. Alternately, the magnetic stripe may be added by a hot stamping method. The magnetic heads used to code and decode the iron oxide particles can only operate if the magnetic medium is close to the surface of the card, so the metal particles must be placed on top of the laminating layer. Upon completion of the printing process, the core is ready to be laminated. Lamination: Lamination helps protect the finish of the card and increases its strength. In this process, sheets of core stock are fed through a system of rollers. Rolls of laminate stock are located above and below the core stock. These rolls feed the laminate into the vacuum shoes along with the core stock. The vacuum holds the three pieces of plastic together while they travel to a tacking station. At the tacking station a pair of quartz infrared heat lamps warm the upper and lower plastic films. These lamps are backed with reflectors to focus the radiant energy onto a narrow area of the films, which optimizes a smooth bonding of the film to the core stock. The laminate films are then fully bonded to the core stock by pressing with metal plates, which are heated to 266° F (130° C) and applied with a pressure of 166 psi/sq inch. This lamination process may take up to 3 minutes. Die Cutting and Embossing: After lamination has been completed, the finished assembly is cut and completed by die cutting methods. Each assembly yields a sheet, which is cut into 63 credit cards. This is achieved by first cutting the assembly longitudinally to form seven elongated sections. Each of the seven sections is then cut and trimmed to form nine credit cards. In subsequent operations, the card is embossed with account numbers. The finished cards are then prepared for shipping, usually by attaching the card to a paper letter with adhesive.
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Credit Cards Quality Control: Key quality issues are associated with the compounding of plastic and color matching of the inks. The American National Standards Institute has a standard for plastic raw materials (ANSI specification x4.16-1973). As with any compounding procedure, ingredients must be properly weighed and mixed and blended under the appropriate temperature and sheer conditions. Similarly, the molding process must be monitored to avoid defects, which could cause the cards to crack or break. The final quality check is to make sure the correct numbers are stamped on the cards during the embossing process.
The Future Of Card Making: Future credit card manufacturing processes are likely to evolve in three key areas. First, continued improvements in plastic chemistry and molding technology are likely to allow cards to be made increasingly cheaper and easier. Second, breakthroughs in digital technology are likely to improve the way credit cards are kept secure with advanced magnetic coding. One recent advance is the use of a new generation of magnetic stripes which are harder to duplicate. This improvement combats the trend toward duplicating card information and copying it to phony cards. Perhaps even more importantly, new generations of credit cards will carry integrated computer chips, containing a variety of useful information. For instance, these future cards will be able to operate a frequent flyer program on the same card as a debit or credit account. Other services will allow users to participate in frequency or loyalty programs with merchants, including storing hotel reservation preferences. Financial institutions may develop partnerships with local mass transit systems so public transit could be paid for with these "smart" cards in various cities throughout the world. Third, marketing initiatives resulting from these advances in card technology are likely to make credit cards even more pervasive in society. For example, American Express has just launched a new Blue card that is expected to reach new levels of worldwide acceptance.
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Credit Cards Credit Card Number: 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 creditcard systems.
The front of 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 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, 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.
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The Stripe on a 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.
Credit card has a magstripe on the back and a place for
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 can understand the information on the three-track stripe. 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. 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.
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Credit Cards 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 characters total) End sentinel - one character Longitudinal Redundancy Check (LRC) - one character LRC is a form of computed check character. 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 27 | P a g e
Discretionary data - enough characters to fill out maximum record length (40 characters total) LRC - one character There are three basic methods for determining whether credit card will pay for what it is 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 own card at the checkout. Virtual terminals on the Internet
This is how it works: After a credit card is swiped 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
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HOW CREDIT CARD WORKS
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MERITS & DEMERITS A credit card can be an asset to ourr lifestyle, but if not handled carefully it can become a liability, especially if we find it so convenient and easy to use that we lose control of ourr spending. MERITS: Are Credit cards good or bad? It depends on the ways of using them. Credit cards ensure & allow us to make large amount of payments up to as much as millions of dollars. This is so for most laws in all states do not allow persons to carry a lot of cash with them but to use cheques or other means of payment. By this way credit cards serve is used as the alternative method that facilitates to make such payments. Credit card has another advantage. Online transactions are allowed to carry out by credit cards. This is very good especially when we want to travel we can pay for services such as car rentals and hotel accommodation before leaving for our travel destination. When we are traveling to abroad then our credit card will allow us to make purchases in that country as the funds in our credit card can be converted into the currency of that country using facilities such as VISA. That means we will be able to carry on making our payments as if we were still in ourr country. This is one of the important media of global exchange. Our recreation can be possible through using Credit cards as payment. Such as pizzas and other takeaways, we can pay for items. Even in a casino, we can also use our credit card. In order to buy chips so we can gamble, casinos allow us to withdraw our credit card funds. After winning, we can have our money deposited into our account thus making it convenient for us .we do not need to handle any cash.
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Credit Cards Essentially A Credit Card Allows Us To: Purchase products or services whenever and wherever we want, without ready cash and paying for them at a later date. Have the option of paying only a part of the total expenses. The balance amount can be carried forward, with an interest charged. Withdraw cash whenever, wherever we are, through ATMs and other withdrawal centers. Enjoy a revolving credit limit without any charges for a limited period (mostly 20 to 50 days). Transact money of more than one currency, from one country to another. They allow us to make purchases on credit without carrying around a lot of cash. This allows us a lot of flexibility. They allow accurate record-keeping by consolidating purchases into a single statement. They allow convenient remote purchasing - ordering/shopping online or by phone. They allow us to pay for large purchases in small, monthly installments. Under certain circumstances, they allow us to withhold payment for merchandise which proves defective. They are cheaper for short-term borrowing - interest is only paid on the remaining debt, not the full loan amount.
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Credit Cards Other facilities afforded on a credit card include reward points on card usage, insurance cover against air and road accidents, loss of baggage, and so on. All credit cards have built-in safety features like signatures and personal identification numbers. International credit cards us financial flexibility when we travel abroad. Many cards offer additional benefits such as additional insurance cover on purchases, cash back, air miles and discounts on holidays. Purchase Power and Ease of Purchase : Credit cards can make it easier to buy things. If we don't like to carry large amounts of cash or if a company doesn't accept cash purchases (for example most airlines, hotels, and car rental agencies), putting purchases on a credit card can make buying things easier. Protection of Purchases: Credit cards may also offer additional protection if something we have bought is lost, damaged, or stolen. Both our credit card statement (and the credit card company) can vouch for the fact that we have made a purchase if the original receipt is lost or stolen. In addition, some credit card companies offer insurance on large purchases. Building a Credit Line: Having a good credit history is often important, not only when applying for credit cards, but also when applying for things such as loans, rental applications, or even some jobs. Having a credit card and using it wisely (making payments on time and in full each month) will help to build a good credit history. Emergencies: Credit cards can also be useful in times of emergency. While we should avoid spending outside our budget, sometimes emergencies (such as car breaking down or flood or fire) may lead to a large purchase (like the need for a rental car or a motel room for several nights. Credit Card Benefits: In addition to the benefits listed above, some credit cards offer additional benefits, such as discounts from particular stores or companies, bonuses such as free airline miles or travel discounts, and special insurances (like travel or life insurance.) 35 | P a g e
Credit Cards The advantages of using a credit card include convenience, security, and even earning rewards based on ourr purchases. However, credit cards can tempt us to spend beyond our means which leads to paying high interest rates and possibly sinking into debt. Before opening a new credit card, take the time to understand its benefits and how to take advantage of them without getting ourself in debt. With any credit card, the best plan is to pay off the balance on time every month. If there are no annual fees, we can earn rewards while deferring our payments and keep from carrying around a wallet full of cash. Yet, if we carry a balance forward from one month to the next or pay our bill late, the interest rates and late payment penalties will quickly outweigh the advantages of using our credit card. Convenience: One does not have to worry about carrying around enough cash to cover purchases or take the time to write out checks. Credit cards make it easy to shop online and may speed up some transactions as we do not have to wait for the seller to receive our check or complete a PayPal transaction before sending our purchase. Security : Most credit cards offer some form of buyer protection. If a payment is in dispute, the charge can be often be canceled from card. In the case of identity theft, many credit card companies will flag suspicious purchases, put a hold on card and contact for confirmation before letting allowing more purchases. If credit card is stolen and we promptly contact the credit card company, the credit card can be canceled and we will not be liable for purchases made after the theft. Reward Plans: Many credit cards offer reward programs that earn items or even cash back based on how much we use the credit card. There are many different reward programs to choose from. Specific store credit cards may earn points toward a gift certificate to be used at the store. Some cards may offer points to use for airline tickets. Some credit cards can even be connected to college savings plans, so our purchases help save for our child's education.
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Credit Cards Deferred Payments: By charging high ticket items to our credit card, we buy our self some time before having to pay for the item. During that time, our money can be earning money in our bank account. For example, if we buy a $2,000 computer with our credit card on August 5th and the credit card payment is not due until September 15th, that $2,000 can stay in our bank account and earn another month's worth of interest before we pay the bill. By paying off our bill in full each month, we can enjoy these advantages of using a credit card. Additionally, using a credit card responsibly in this way will also help raise our credit rating which will come in hand when we decide to take out a loan to buy a car or a new home. One of the major advantages is called "buy now, pay later". This opportunity is allowing people to use the grace period to purchase goods and pay much later. The incentives are another major advantage. Credit cards issuers are offering loyalty schemes, attractive point reward systems and air miles. The credit card owner can make excellent savings using its credit card often and always paying off the balance when he has a good reward scheme. Incentives are often changing, and the new reward systems are more and more attractive.
No cash needed is, maybe, the main credit card advantage. The cardholder is carrying only a small plastic card in his wallet. The cardholder will not make payments in cash; he will not worry about the robbers tempted by an attractive wallet. Many transactions are made everyday using credit cards. Cash not allowed is an important condition when someone wants to rent a car or check to the hotel. Often the credit card is used as a deposit.
Credit cards are also presenting another kind of advantage: The Travel Advantages. If someone needs to travel and must change its money (from USD to Euros, for example) he can have the unexpected surprise to get a very poor exchange rate. He will also need to pay some commissions at the bank. The credit card is making these operations more costeffective and much simpler. Most countries accept all major credit cards, especially hotels and tourist resorts.
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Credit Cards The conveniences of credit cards come with many advantages for credit card users. From rewards programs to introductory offers which allow card holders to make interest-free purchases during the grace period, credit cards come with many advantages. Rewards and cash back programs. These programs are available for a variety of credit cards and many come without an annual fee. Most programs offer 1 reward point per dollar spent on the credit card, with special offers available at certain retail outlets, or for the purchase of specific products. When signing up for a credit card, search for rewards programs which offer a sign-on bonus, and get enough points for a gift certificate from our favorite store, or even points which can be used for a cash-back reward on our first monthly statement. Interest free purchases are available to customers that pay for purchases within the grace period. For most credit card companies, the grace period lasts from twenty to twenty eight days after the item has been purchased using the credit card. Paying for items within the grace period isn‟t the only way to get interest free purchases. Many credit card companies offer interest free rates on purchases and balance transfers through the first six to twelve months after the account has been opened. Be sure to make the minimum monthly payments on time and avoid missed payments to maintain this introductory rate. Credit cards are a great way to establish and increase a credit rating. Credit card companies report to the three main credit agencies each month and are therefore a great way to establish and improve our credit rating. Be sure to maintain minimum monthly payments and stay well under the limit to make the most of the credit rating. Purchase protection allows the consumer to protect their purchases for up to one to two months after the date of purchase for faulty items. Be sure to check our credit card agreement for exactly what is covered – as some companies also offer extended warranties on certain items purchased with the credit card. Buy now, pay later. This is a great reason to use a credit card. As long as the purchase is paid within the grace period, interest won‟t accumulate. When using a credit card to fund the oversight between income and expenses, it can be far less expensive than obtaining a pay-day loan. Many people use credit cards for convenience, paying off the balance when they receive their paycheck.
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Credit Cards Advantages of credit cards: Credit cards can work out cheaper than a short term personal loan. Credit cards can offer a high degree of loan flexibility i.e we can pay the minimum amount or the whole debt. No redemption penalties for early repayment of loan. Many credit cards offer an interest free period. Credit cards offer online purchasing power. The key benefit to credit cards is really the added protection we enjoy when making purchases. Many credit cards offer enticing additional benefits such as insurance cover on purchases, cash back, air miles and discounts on holidays. A credit card can be a great convenience and provides the safety of not dealing with cash, which is more easily lost. Credit cards are also very useful in the sense that they offer protection under the Consumer Credit Act and we can often get our money back in a fraudulent purchase that we would be unable to do with any other payment method. Credit cards also offer “incentive” benefits such as air miles or credit toward future purchases. Credit cards also give back a percentage of our purchases to approved charities in some cases which is a really nice way to give back at the same time we are spending the money we normally would spend. Therefore there are most certainly benefits for using a credit card.
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Credit Cards DEMERITS: Now we will see the bad side of credit cards. Credit cards make money look as though it were virtual. That is why most people are able to make huge payments when using a credit card of which if it were cash they will be able see that the money they are using is too much. This is one of the reasons why credit card holders are usually big spenders. All our funds can be withdrawn that is also allowed by Credit and even we can get an overdraft such that our account goes to negative. This will mean that every month end we will be having a debt. This can be a problem for some people. This becomes a cycle such that either we cannot cover the deficit each time we pay or new funds get in they will be taken up by the negative balance so what we do is take another overdraft again. This can get so much out of hand such that such persons will start to sell some of their property just to offset some debts and in no time their lives will be ruined. Credit cards are a relatively expensive way of obtaining credit if one doesn‟t use them carefully, especially because of the high interest rates and other costs. Lost or stolen cards may result in some unwanted expense and inconvenience. The use of a large number of credit cards can get us even further into debt. Using a credit card, especially remotely, introduces an element of risk as the card details may fall into the wrong hands resulting in fraudulent purchases on the card. Fraudulent or unauthorized charges may take months to dispute, investigate, and resolve. Blowing Budget: The biggest disadvantage of credit cards is that they encourage people to spend money that they don't have. Most credit cards do not require us to pay off our balance each month, so even if we only have $100, we may be able to spend up to $500 or $1,000 on our credit card. While this may seem like 'free money' at the time, we will have to pay it off -and the longer we wait, the more money we will owe since credit card companies charge us interest each month on the money we have borrowed. „ 40 | P a g e
Credit Cards High Interest Rates and Increased Debt: Credit card companies charge us an enormous amount of interest on each balance that we don't pay off at the end of each month. This is how they make their money and this is how most people in the United States get into debt (and even bankruptcy.) Consider this: If we have a $100 in savings, most banks will give us at the most 2.0 to 2.5% interest on our money over the course of the year. This means we earn $2.00 - $2.50 a year on our $100 savings. Most credit cards charge us up to 10 times that amount of interest on balances. This means that if we have $100 balance that we don't pay off, we will be charged 20-25% interest on that $100. This means that we owe almost $30 interest (plus the original $100) at the end of the year. A good way to look at this is in comparison to what we would earn in interest from a bank or owe in interest to a bank loan: Savings accounts may pay us around 2% interest; if we have a loan from a bank we may pay them around 10% interest (5 times as much as we earn off our savings); if we owe money to a credit card company, we may pay them around 20% interest (10 times as much as we earn off our savings.) Credit Card Fraud: Like cash, sometimes credit cards can be stolen. They may be physically stolen (if we lose our wallet) or someone may steal our credit card number (from a receipt, over the phone, or from a Web site) and use our card to rack up debts. The good news is that, unlike cash, if we realize our credit card or number has been stolen and we report it to our credit card company immediately, we will not be charged for any purchases that someone else has made. Even if we don't realize our credit card number has been stolen (sometimes we might not know until we receive our monthly statement), most credit card companies don't charge us or only charge a small fee, like $25 or $50, even if the thief has charged thousands of dollars to our card. There are several things we can do to prevent credit card fraud: Some people have been swindled by giving their credit card numbers to dishonest salespeople over the phone. It becomes a loan when the credit becomes due and we do not pay for it. Adding monthly interest charges means we pay more for the goods and services.
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Credit Cards Consumers often have more than one credit card and each one has a credit limit. When the credit limits for all cards are added up, the total can be in the thousands of dollars. Consumers can fall into the habit of using credit cards to extend their income. Credit cards are easier to use than applying for loans even when a loan from a credit union, bank or other financial institution may provide the funds at a lower interest rate. High Interest Charges: One of the biggest disadvantages to using credit cards is the extremely high interest fees charges by the credit card companies. The interest fees are always significantly higher than the cost by the credit card companies. The interest fees are always significantly higher than the cost of obtaining a traditional bank loan, In fact, many credit companies charge as high as 20 percent for any purchases that aren‟t paid in full at the end of each month! The high interest charges are what keep the credit card companies in business so we need to check the fees of each particular card before one apply. Temptation to Overspend: Credit cards can be dangerous for individual who are not good at budgeting. The temptation is very easy to overspend because we don‟t need to pay for our purchases upfront. Regardless of how much money is actually in the current account, we can charge purchases up to our maximum credit card limit. Somehow signing a piece of paper at the time of purchase doesn‟t always feel like we are actually spending money Unpaid Balances: By spending more than they can actually afford each month, individuals end up paying very high interest charges each month. Because we are only billed once a month, it is also very easy to forget about purchases we have made using a credit card. We may end up with a very unwelcome surprise at the end of the month once we see just how many purchases we signed for during the past 30 days! Any unpaid balances are charged very high interest rates that can quickly add up. If we continue to pay only the minimum amount, we‟re unpaid balance can often become unmanageable.
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CREDIT CARD FRAUDS Today plastic is the convenient, easy and fashionable alternative to wads of paper. With one swipe, credit cards have changed the way we live. Unfortunately, along with the convenience has come related crime. Credit card fraud involves withdrawal of funds and obtaining of goods and services by using an unauthorized account. Otherwise inaccessible personal information stored on computers is stolen in order to use a card. Due to the virtual explosion of credit card business throughout the world, security has become critical in the entire process. There were about 60 million credit card holders in the sixties and according to an estimate, the number has gone up to more than a trillion now. In India, credit card companies make a provision in their contract with the client that they, the company, would not be liable for the fraudulent transaction unless the client loses his/her card and reports the loss immediately. Sometimes the banks and credit card companies try to save their skin by inserting a clause in the relevant contract. This is purported to absolve the company in case a fraud occurs on the stolen card and the client fails to notify the loss in time. This unilateral provision however has not stood the test of legal scrutiny. The courts have placed the burden of loss on the issuers. In India, the Mail Order Telephone Order (MOTO) type account for the bulk of credit card frauds. This occurs when the card is not actually presented, but the details are given on the application form to buy goods or services or when the transaction is done on the telephone. Fraud through fake cards is not as rampant in India as in the USA. Techniques have been developed whereby the number and other information on the magnetic strip is erased and a new number is embossed. When the card does not work on the swiping machine, the merchant manually processes the details of the card to complete the sale. This procedure is called skimming of the cards. In the USA, identity theft is also quite prevalent and is supposed to be one of the fastest growing offences in America. The fraudsters adopt another person‟s identity to gain access to their monetary sources. In the case of online transactions, „site cloning‟ is resorted to where 43 | P a g e
Credit Cards the site clone created is made to look like the original site in order to obtain the credit card details of unsuspecting customers. Similarly, false merchant sites are also created where cheap goods lure customers into giving their card details. Scared by the ever increasing cases of credit card fraud, the affected companies and banks have taken various steps to minimize it. Manual reviews of the transactions on the card are undertaken, but this requires a high level of human intervention and increases costs. In the USA, Address Verification System (AVS) has been developed for use in the „card not present‟ scenario. The system is designed to check whether the address given by the buyer matches with the one on record. Visa has devised a Payer Authentication System based on PIN similar to the system used on ATM cards. This is a channel between the bank and the customer used to authorize online transactions. With the increase in cross border ecommerce the issuers in India will have to update their arsenal to combat the forgers on the same lines as their Western counterparts. The Information Technology Act and Rules, passed in 2000, provide penalties for the tampering of computer source documents and hacking of computer systems. No specific mention has, however, been made of Credit cards or financial transactions. The RBI has formed the Credit Information Bureau of India (CIBIL) in collaboration with Dun and Bradstreet who will maintain the records of all individuals who want to avail of finance from banks and credit card companies in India. Credit card fraud is a wide-ranging term for theft and fraud committed using a credit card or any similar payment mechanism as a fraudulent source of funds in a transaction. The purpose may be to obtain goods without paying, or to obtain unauthorized funds from an account. Credit card fraud is also an adjunct to identity theft. According to the Federal Trade Commission, while identity theft had been holding steady for the last few years, it saw a 21 percent increase in 2008. However, credit card fraud, that crime which most people associate with ID theft, decreased as a percentage of all ID theft complaints for the sixth year in a row. The costs of card fraud in 2006 were 7 cents per 100 dollars worth of transactions. Due to the high volume of transactions this translates to billions of dollars. In 2006, fraud in the United Kingdom alone was estimated at £535 million, or US$750–830 million at prevailing 2006 exchange rates.
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Credit Cards The fraud begins with either the theft of the physical card or the compromise of data associated with the account, including the card account number or other information that would routinely and necessarily be available to a merchant during a legitimate transaction. The compromise can occur by many common routes and can usually be conducted without tipping off the card holder, the merchant or the issuer, at least until the account is ultimately used for fraud. A simple example is that of a store clerk copying sales receipts for later use. The rapid growth of credit card use on the Internet has made database security lapses particularly costly; in some cases, millions of accounts have been compromised. Below listed are some common Credit Card Frauds. Stolen Cards When a credit card is lost or stolen, it remains usable until the holder notifies the issuer that the card is lost. Most issuers have free 24-hour telephone numbers to encourage prompt reporting. Still, it is possible for a thief to make unauthorized purchases on a card until it is canceled. Without other security measures, a thief could potentially purchase thousands of dollars in merchandise or services before the cardholder or the card issuer realize that the card is in the wrong hands. The only common security measure on all cards is a signature panel, but signatures are relatively easy to forge. Some merchants will demand to see a picture ID, such as a driver's license, to verify the identity of the purchaser, and some credit cards include the holder's picture on the card itself. However, the card holder has a right to refuse to show additional verification, and asking for such verification is usually a violation of the merchant's agreement with the credit card companies. Self-serve payment systems (gas stations, kiosks, etc.) are common targets for stolen cards, as there is no way to verify the card holder's identity. A common countermeasure is to require the user to key in some identifying information, such as the user's ZIP or postal code. This method may deter casual theft of a card found alone, but if the card holder's wallet is stolen, it may be trivial for the thief to deduce the information by looking at other items in the wallet. For instance, a U.S. driver license commonly has the holder's home address and ZIP code printed on it.
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Credit Cards Card issuers have several countermeasures, including sophisticated software that can, before a transaction is authorized, estimate the probability of fraud. For example, a large transaction occurring a great distance from the cardholder's home might seem suspicious. The merchant may be instructed to call the card issuer for verification, or to decline the transaction, or even to hold the card and refuse to return it to the customer. The customer must contact the issuer and prove who they are to get their card back (if it is not fraud and they are actually buying a product). Compromised Accounts: Card account information is stored in a number of formats. Account numbers are often embossed or imprinted on the card, and a magnetic stripe on the back contains the data in machine readable format. Fields can vary, but the most common include: Name Of Card Holder Account Number Expiration Date Verification/CVV Code Card not Present: The mail and the Internet are major routes for fraud against merchants who sell and ship products, and impacts legitimate mail-order and Internet merchants. If the card is not physically present (called CNP Card Not Present) the merchant must rely on the holder (or someone purporting to be so) presenting the information indirectly, whether by mail, telephone or over the Internet. While there are safeguards to this, it is still more risky than presenting in person, and indeed card issuers tend to charge a greater transaction rate for CNP, because of the greater risk. To many people's surprise, telephone ordering is the most risky, far more risky than the Internet. It is difficult for a merchant to verify that the actual cardholder is indeed authorizing the purchase. Shipping companies can guarantee delivery to a location, but they are not required to check identification and they are usually not involved in processing payments for the merchandise. A common recent preventive measure for merchants is to allow shipment only to an address approved by the cardholder, and merchant banking systems offer simple 46 | P a g e
Credit Cards methods of verifying this information. Before this and similar methods were introduced, mail order carding was rampant as early as 1992, using a method in which the carder obtains the credit card information for a local resident and intercepts expensive computer equipment he ordered using the stolen card and shipped to the address, often by staking out the porch of the residence. Small transactions generally undergo less scrutiny, and are less likely to be investigated by either the card issuer or the merchant. CNP merchants must take extra precaution against fraud exposure and associated losses, and they pay higher rates for the privilege of accepting cards. Fraudsters bet on the fact that many fraud prevention features are not used for small transactions. Merchant associations have developed some prevention measures, such as single use card numbers, but these have not met with much success. Customers expect to be able to use their credit card without any hassles, and have little incentive to pursue additional security due to laws limiting customer liability in the event of fraud. Merchants can implement these prevention measures but risk losing business if the customer chooses not to use the measures. Identity theft Identity theft can be divided into two broad categories: Application fraud and account takeover. Application fraud Application fraud happens when a criminal uses stolen or fake documents to open an account in someone else's name. Criminals may try to steal documents such as utility bills and bank statements to build up useful personal information. Or they may create counterfeit documents. Account takeover Account takeover happens when a criminal tries to take over another person's account, first by gathering information about the intended victim, then contacting their card issuer masquerading as the genuine cardholder, and asking for mail to be redirected to a new address. The criminal then reports the card lost and asks for a replacement to be sent.
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Credit Cards Some merchants added a new practice to protect their consumers and their own reputation, where they ask the buyer to send a photocopy of the physical card and statement to ensure the legitimate usage of a card. Carding: Carding is a term used for a process to verify the validity of stolen card data. The thief presents the card information on a website that has real-time transaction processing. If the card is processed successfully, the thief knows that the card is still good. The specific item purchased is immaterial, and the thief does not need to purchase an actual product; a Web site subscription or charitable donation would be sufficient. The purchase is usually for a small monetary amount, both to avoid using the card's credit limit, and also to avoid attracting the card issuer's attention. A website known to be susceptible to carding is known as a cardable website. In the past, carders used computer programs called "generators" to produce a sequence of credit card numbers, and then test them to see which valid accounts were. Another variation would be to take false card numbers to a location that does not immediately process card numbers, such as a trade show or special event. However, this process is no longer viable due to widespread requirement by internet credit card processing systems for additional data such as the billing address, the 3 to 4 digit Card Security Code and/or the card's expiration date, as well as the more prevalent use of wireless card scanners that can process transactions right away. Nowadays, carding is more typically used to verify credit card data obtained directly from the victims by skimming or phishing. A set of credit card details that has been verified in this way is known in fraud circles as a phish. A carder will typically sell data files of the phish to other individuals who will carry out the actual fraud. Market price for a phish ranges from US$1.00 to US$50.00 depending on the type of card, freshness of the data and credit status of the victim.
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Credit Cards Profits, losses and punishment Who pays for credit card fraud? In the US the short answer is the merchant; in other countries it is the card issuer, and in others the cardholder. But even if the cardholder does not lose money, the inconvenience can be quite costly and tiring. And credit card companies have to pay for preventing fraud while maintaining a good customer experience. Credit card companies like Visa and MasterCard receive revenue from every transaction, typically 2% to 4% depending on the payment method. So they are motivated to increase total volume of transactions, consequently pursue policies to increase number of transactions. This creates conflict of interest for the credit card companies. On one hand they are obliged to fight credit card fraud, but on the other hand policies against credit fraud may impose certain restrictions that may negatively affect number of transactions and cumulative transaction volume. Besides fraud investigation costs tend to be higher than costs of write.
What is Online Credit Card Fraud? Credit card fraud has become such an issue that no precise number can truly defined the global losses. And while most financial institutions are rather sensitive about the subject, a report from the FBI indicated that credit cards were largely responsible for the $315 billion loss the U.S. endured from financial fraud in 2005. A recent study in Europe also revealed that well over 22 million consumers fell victim to credit card fraud in 2006. To truly understand the risk and likelihood of credit card fraud, we must first make our self familiar with a brand new lingo. Terms such as "phishing", "Pharming", "skimming" and "dumpster diving" may not sound malicious, but these are in fact just a few of many ways that money can be thieved from our credit card.
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Pharming: This new technique is one of the most dangerous of them all. Pharming involves a malicious perpetrator tampering with the domain name resolution process on the internet. By corrupting a DNS, (Domain Name System), a user can type in the URL for a legitimate financial institution and then be redirected to a compromised site without knowledge of the changes. Unaware of the background predators, the consumer types in their bank account details or credit card number, making them the latest victim of fraud.
Skimming: Skimming refers to a process in which a special device is used to copy encoding data from the magnetic strip of a credit or debit card. This device is usually secretly mounted to an ATM machine as a card reader.
Dumpster Diving: Dumpster Diving this act refers to a process in which an individual vigorously shift‟s through someone else's trash in search of personal and financial information. With a mere credit card approval that contains a name and address, a criminal can easily open up a credit card in our name and accumulate substantial debt in no time.
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CASE STUDY ON CREDIT CARD FRAUDS Amit Tiwari had many names, bank accounts and clients. None of them were for real. With a plan that was both ingenious and naïve, the 21-year-old engineering student from Pune tried to defraud a Mumbai-based credit card processing company, CC Avenue, of nearly Rs 900,000.He was arrested by the Mumbai Police on August 21, 2003 after nearly an year of hide and seek with CC Avenue. He's been charged for cheating under Section 420. Amit will remain in custody till Friday, August 29. Here's how it happened… CC Avenue verifies and validates credit cards of buyers for over a thousand ecommerce Web sites. It conducts checks like IP mapping, zip code mapping and reverse lookup of telephone numbers. Amit Tiwari found a way to bypass them.In May 2002, Col Vikram Tiwari signed up for CC Avenue's services. In November, he requested the company to deal with his son, Amit, who offered Web designing services on www.mafiaz.com. CC Avenue's security team confirmed his credentials through bank signature verification, driving license and his HDFC Bank debit card. Everything was genuine. Amit processed several transactions, worth Rs 311,508, via CC Avenue from November 2002 to February 2003. Then the transactions stopped. In April 2003, CC Avenue began receiving charge-backs from the credit card holders, who denied using mafiaz.com's Web designing service. Amit had assumed the identities of these 'customers', and purchased mafiaz.com's services with credit card details that he found on the Net. He was both the buyer and the seller. Calls to Amit's house in Lucknow went unanswered. Legal notices came back unclaimed. Amit had disappeared without a trace. Three-in-one fraudster In June 2003, Sachin Deshpande and Jeevan Palani signed separate agreements with CC Avenue to provide Web designing services through their sites www.infocreek.org and www.ewebsitestarter.com. The company's risk-management team found that both these sites had ripped off content and even the client list from foreign sites with similar names. The modus operandi was similar to Amit's.
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Credit Cards Vishwas Patel, the CEO of CC Avenue, spoke to Sachin over the phone and found that he sounded just like Amit - "young and immature". They decided to hold back payment. Then, a person called Shoaib Sharif sought the services of CC Avenue. Vishwas and his team again spotted a similar pattern. They held back payment on various pretexts. "He sounded desperate," says Vishwas. So they decided to trap him. Trapped CC Avenue's accounts manager asked Shoaib to come to Mumbai to collect a cheque of Rs 40,000. On August 21, a young man walked into Vishwas's office. He introduced himself as Shoaib Sharif. Vishwas immediately recognized him as Amit. (He had seen Amit's photograph from his driver's license). Vishwas then called the Mumbai Police, who rushed to his office and picked up the lad. At the Santa Cruz police station, the boy confessed right away. Flaw in law Despite his confession, Amit has not yet been booked under the cyber crime laws. Senior Inspector Kishore Patil said they would treat it as a case of fraud. Vishwas explains, "The biggest flaw in the IT Act is that credit card fraud is not covered. The lawmakers have framed the Act mainly to ensure the safety of individual digital certification companies." Ways and means Clad in t-shirt and jeans, Amit looks like any other collegian. But when this 21-yearold speaks of his exploits, he assumes the air of an expert. He got some credit-card details through a popular hacker chat room. But he created the rest. He explains, "Each credit card has a country code number, a bank code number and then some other digits. If you find out these first two sets of numbers, it is very easy to create a credit card number. That's what I did." Amit then used proxy servers to camouflage his real location and pass CC Avenue's IP checks. 52 | P a g e
Credit Cards Talent misused "I am Sachin Deshpande. I am Jeevan Palani," he says with a smile. He created different accounts with the HDFC and ICICI banks with these names. Posing as an office boy, he opened an ICICI bank account for his 'boss' Shoaib Sharif. Says Vishwas, "This reminds me of Leo's movie, 'Catch me if you can'." Amit seems proud of what he's done. Initially he did run a Web designing business. But when he signed up with CC Avenue, he got interested in their processes. He studied them closely and cut through them. Elder brother Anil says they were aware that Amit had launched a Web site. But they knew nothing of the fraud. In his confession, Amit corroborated his brother's statement. Amit says he used the money to pay capitation fees at the engineering college where he studies. But he continued to defraud CC Avenue because "it was easy". Listening to him, Vishwas is amazed at the boy's knowledge of the system. Vishwas says, "He has tremendous talent. I don't want to ruin his career. That's why I hope he will use his intelligence to plug security holes rather than exploit them."
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ICICI Bank tops list of credit card frauds, loses Rs11.47 cr A total of 703 and 2,484 cases were received by American Express Bank and HSBC Bank related to credit card frauds, in which they lost Rs6.04 crore and Rs4.90 crore respectively New Delhi: One of the largest private sector lending institutions ICICI Bank lost more than Rs11 crore due to over 8,000 cases of credit card frauds in 2008. There were 8,280 cases reported by the ICICI Bank to the Reserve Bank of India, in which it lost Rs11.47 crore between April and December 2008, minister of state for home Shakeel Ahmad said in reply to a question in the Lok Sabha onm Tuesday. A total of 703 and 2,484 cases were received by American Express Bank and HSBC Bank related to credit card frauds, in which they lost Rs6.04 crore and Rs4.90 crore respectively. According to the data, a total of 12,959 such cases were received during the said period in which various banks lost Rs36.54 crore. No cases were reported by IDBI Bank, Canara Bank and Indian Overseas Bank related to credit card frauds last year. Other banks, which lost significant amount to such practices, were Citibank, which bore a loss of Rs4.73 crore, Standard Chartered Bank Rs2.39 crore and Deutsche Bank with a loss of Rs2.09 crore. Many nationalised banks were also affected by the fraudulent activities.
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Credit Cards Credit card fraud: Pune tops India list At a time credit card frauds are increasing across the world, Pune leads the list in India. Pune was the worst victim of credit card fraud in the country in 2007-08, according to computer security expert Harshad Patil. Patil was delivering a talk on “Economic Offences through Credit Card Frauds Dissected” on Saturday at ClubHack 2008 – the international convention of hackers in Pune. “As per a survey by Google on credit card frauds in the world, Pune suffered the most in India with Mumbai coming second. Lack of awareness among card users is the major reason for the significant rise in the frauds,” Patil told the The Indian Express. “There is an international racket of cyber criminals. Credit card information in India is sold to cyber criminals in other countries. The information is misused for carrying out major financial frauds,” Patil added. “There are various ways like phishing, pharming, skimming and dumpster diving by which money can be extracted from your credit card. Due to lack of awareness, people submit personal details and credit card information to fraudulent emails. Sometimes, fraudsters steal credit card information. Some fraudsters go through trash to find discarded receipts or carbon for obtaining information and then use the account number illegally,” he said. He said there were underground “carder” forums where credit card numbers are bought and sold. These forums bring together people who steal the numbers and those who use them. An individual researcher in cyber crime and cyber laws, Patil said economic offences using credit cards have increased in India and countries like US. An FBI report indicated that credit cards were largely responsible for the $ 315 billion loss the US endured from financial fraud in 2005. A study in Europe revealed that over 22 million customers fell victim to credit card fraud in 2006. “The numbers are increasing,” said Patil.
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Credit Cards US companies and law enforcement agencies are facing fresh questions today about the ease with which hackers can penetrate their defences and make off with vital data about consumers, following the arrest and charging of a Miami man for what is allegedly the biggest credit card scam in history. Albert Gonzalez, a 28-year-old former informant for the US secret service who helped the authorities track hackers, was charged with conspiring to steal the details of 130m credit cards. The charge sheet detailed a complex history of online skulduggery in which Gonzalez used three internet aliases: segvec, soupnazi and j4guar17, each marking different stages in his life. The alleged fraud was perpetrated through devices that could penetrate computer networks, steal card data and send it to servers in the US and Europe, prosecutors say. The acting US attorney general, Ralph Marra, praised the investigators "in tracking down cutting edge hacking schemes committed by hackers working together across the globe". But computer security experts suggested that the ruse allegedly devised by Gonzalez and two other accused men from eastern Europe was actually relatively simple and that the real question was the failure of the big US companies involved to properly defend their computer systems. "None of this is revolutionary or the work of rocket scientists - it's the kind of thing we see every day," said Graham Cluley, a consultant with hi-tech security company Sophos. He added: "It seems to me that there was a concerted effort to target major retailers, and there is egg on the face of these large corporations for failing to protect their data adequately." The charge sheet says that Gonzalez, along with two others who "resided in or near Russia", in December 2007 injected "structured query language", a computer programming language designed to retrieve and manage data, into the computers of companies such as Heartland, one of the world's biggest credit and debit card payment processing companies. "Malware", malicious computer software, was used to identify, sort and export information. Other companies alleged to have been attacked include 7-Eleven and Hannaford Brothers, a supermarket chain. The charge sheet says Gonzalez "would identify potential corporate victims by, among other methods, reviewing a list of Fortune 500 companies". He would also "travel to retail stores of 56 | P a g e
Credit Cards potential corporate victims, both to identify the payment processing systems that the wouldbe victims used at their point of sale terminals [eg checkout computers] and to understand the potential vulnerabilities of those systems". If convicted, Gonzalez faces 25 years in jail. He had already been in jail after being charged last year in New York for allegedly hacking into a national restaurant chain. The charge sheet relating to the 130m credit cards does not say if any have actually been used illegally. But Linda Foley, founder of US consumer group the Identity Theft Resource Centre, suggested criminals may have auctioned off some of the data, and the true scope of the attack might only emerge over time, with the potential to drag in financial institutions, as well as other retailers, as more details become available. "Things may go quiet for six months, but the fear is that when the heat is off, they could start using the information again," she warned. Gonzalez, a Cuban-American, was brought up in Coral Gables, near Miami. He avoided a conviction for credit card theft in 2003 by turning informant for the US secret service, but then allegedly resumed a life of crime. Online magazine Wired said Gonzalez, who is alleged to have amassed about $1.6m (£965,000), had been a big spender, including $75,000 on a birthday party.
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CREDIT CARD FRAUD PREVENTION With the growing number of people shopping online and by phone, credit card fraud is on the rise in the U.S. and abroad. In fact, the number of online credit card fraud is soaring as more and more people opt out of shopping malls and embrace online shopping. Many savvy Internet shoppers know that it‟s more risky to give our credit card to a waiter in a restaurant than it is to purchase an item online through a secured connection. That is because nothing can prevent your waiter from writing down your credit card number and using it later. That's why finding more about credit card frauds, how it happens, and ways we can prevent it, is essential to safeguarding our money and identity. What Is A Credit Card Fraud? A credit card fraud is a transaction that is completed with our credit card by someone else. Often a fraudulent transaction is made hours after the credit card or card number is stolen or lost; often before the cardholder gets the chance to report the card as missing or stolen. How Do Credit Frauds Happen? Credit card fraud can occur in a number of ways. So it‟s important to treat credit cards like cash and to become aware of the common ways a fraud may occur. The common types of fraud and the ways they can happen include: Lost/Stolen Credit Card: someone uses lost or stolen credit card Identity Theft: someone applies for a credit card using our personal information Counterfeit Credit Card: Scammers duplicate legitimate credit cards for the use of fraudulent activities Non Receipt Fraud: new or replaced credit card gets stolen before we receive it in the mail No Card Fraud: credit number is being used to make transactions over the phone or Internet without our knowledge.
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Credit Cards Tips for Credit Card Fraud Prevention To prevent credit card fraud, as a cardholder, we should protect our card and card number to the best of our ability. Some tips for fraud prevention include: Sign the back of your credit cards Keep an eye on your credit card every time you use it Jot down your credit card number and keep it in a safe place Hold on to receipts of your credit card purchases Check your statements regularly and notify your credit card company if you see bogus charges on your bill Call your card company immediately after your card is stolen or lost Refuse to give out your credit card information over the phone unless you’re dealing with a trustworthy merchant Check that you’re on a secure website before making an online transaction Ignore emails that ask you to provide your credit card number via email Avoid ‘phishing’ scams by disregarding emails that require you verify your credit card information on a site Avoid lending your credit card
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CREDIT CARD IN INDIA (A SURVEY) Segment Performance The number of credit card base in India is increasing at a slower pace. The total number of credit cards outstanding during the year ending March 2008 was 275.47 Lakh with a growth of 10.32 % as compared to 39 % growth during the year ended March 2007. It is estimated that credit card growth rate may further reduce in the year 2008-09 with an increase of 6 % to 293.20 lakh cards by March 2009.
Chart 1: Credit Cards Issued (No. of cards in lakh).
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Credit Cards Market Share: ICICI Bank tops the chart when it comes to the highest credit card issuing bank, with 90 lakh credit cards in the market during the year 2008. It covers 33% of the market share. Both SBI and HDFC are having a market share of about 13% with a card base of 36 lakh and 35 lakh respectively. Chart 2: Comparative Market Share of Individual Players.
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Credit Cards Table 1: Market Share of Individual Players (Number of Credit Cards in Lakh).
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Credit Cards Sector Wise Market Share of the Banks: The market share of private sector banks has increased to 48% in 2008 from 44% in 2007. The private sector banks have shown an increase in their credit card base by 19 % from 109.90 lakh credit cards in the previous year to 130.77 lakh cards by March, 2009. The market share of foreign sector banks has fallen from 37% in 2007 to 34% in 2008 with 95 lakh credit cards in the market as on March, 2008. Public sector banks constitute 16 % market share, with 45.34 lakh credit cards. Other banks totaling to 4.36 lakh credit cards cover the balance 2 % of market share. Chart 3: Analysis in terms of Public, Private and Foreign Sector Players.
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Credit Cards Table 2: Analysis in terms of Public, Private and Foreign Sector Players (No. of Cards in Lakh)
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Credit Cards Industry Spend: More and more Indians are using credit card for purchasing essentials as well as luxurious goods. The credit card spend has increased significantly during the year by 34% to Rs. 57,985 crore during the year 2008 as compared to Rs. 43,169 crore in the previous year. The credit card spends is estimated to grow by 16% to about Rs. 67,383 crore during the year 2009.
Chart 4: Growth in the Value of Credit Card Transactions (Value Rs. in Crore)
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Credit Cards Chart 5: Market Share in Credit Card Spends.
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Credit Cards Table 3: Industry Credit Card Spend at the POS Terminals (Amount Rs. In Crore)
With 90 lakh credit card issued, ICICI Bank is not only the highest credit card issuer in the country but also leads the other banks in credit card spends with Rs. 19,944/- crore spent through its credit cards during the year 2008. ICICI Bank occupies 34% market share, followed by SBI and HDFC bank with 13% market share each.
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Credit Cards Credit Card Spending Pattern The Indian Credit Card Industry is still at a nascent stage, when compared to economies in West Asia. Only 14% of Indians currently own a credit card. 73% of Indians spend less than $ 35/- on an average each month, while 25% spend between $ 35/- and $ 300/-. Only 2% of Indians spend over $ 300/- on the credit card during a month. 72% of Indians use their credit cards 1-2 times a month, while 23% of Indians use their cards between 3-5 times and remaining 5% use their cards 6 times or more every month. Chart 6: Credit Card Spending Segments.
Source: The Hindu Business Line- December 27, 2007 The pie chart shows that 44% of Indians use their credit card most often for purchases of clothing, 14% for supermarket/grocery shopping, 9% at hotels and 6% at restaurants. The usage of credit cards at retail outlets has nearly doubled from 30-35% two years ago to 50-60% currently. (Source-The TOI, New Delhi – March 22, 2008)
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CONCLUSION Credit cards in India are gaining ground. A number of banks in India are encouraging people to use credit card. The concept of credit card was used in 1950 with the launch of charge cards in USA by Diners Club and American Express. Credit Card however became more popular with use of magnetic strip in 1970. Credit Card in India became popular with the introduction of foreign banks in the country Credit Cards are financial instruments, which can be used more than once to borrow money or buy products and services on credit. Basically banks, retails stores and other business issue. Major Banks issuing Credit Card in India: State Bank of India credit card (SBI credit card) Bank of Baroda credit card or BOB credit card ICICI credit card HDFC credit card IDBI credit card ABN AMRO credit card Standard Chartered credit card HSBC credit card Citibank Credit Card Global Player in Credit Card Market: MasterCard: MasterCard is a product of MasterCard International and along with VISA are distributed by financial institutions around the world. Cardholders borrow money against a line of credit and pay it back with interest if the balance is carried over from month to month. Its products are issued by 23,000 financial institutions in 220 countries and territories. In 1998, it had almost 700 million cards in circulation, whose users spent $650 billion in more than 16.2 million locations.
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Credit Cards VISA Card: VISA cards is a product of VISA USA and along with MasterCard is distributed by financial institutions around the world. A VISA cardholder borrows money against a credit line and repays the money with interest if the balance is carried over from month to month in a revolving line of credit. Nearly 600 million cards carry one of the VISA brands and more than 14 million locations accept VISA cards. American Express: The world's favorite card is American Express Credit Card. More than 57 million cards are in circulation and growing and it is still growing further. Around US $ 123 billion was spent last year through American Express Cards and it is poised to be the world's No. 1 card in the near future. In a regressive US economy last year, the total amount spent on American Express cards rose by 4 percent. American Express cards are very popular in the U.S., Canada, Europe and Asia and are used widely in the retail and everyday expenses segment. Diners Club International: Diners Club is the world's No. 1 Charge Card. Diners Club cardholders reside all over the world and the Diners Card is a all-time favorite for corporate. There are more than 8 million Diners Club cardholders. They are affluent and are frequent travelers in premier businesses and institutions, including Fortune 500 companies and leading global corporations.
Standard Segregation Of Credit Cards Standard Card - It is the most basic card (sans all frills) offered by issuers. Classic Card - Brand name for the standard card issued by VISA. Gold Card/Executive Card - A credit card that offers a higher line of credit than a standard card. Income eligibility is also higher. In addition, issuers provide extra perks or incentives to cardholders. Platinum Card - A credit card with a higher limit and additional perks than a gold card. Titanium Card - A card with an even higher limit than a platinum card.
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The following are some of the plus features of credit card in India Hotel discounts Travel fare discounts Free global calling card Lost baggage insurance Accident insurance Insurance on goods purchased Waiver of payment in case of accidental death Household insurance Future of Credit cards in India: With high and industry-favorable figures as above, there is no doubt that the rise in number of credit card providers and users have come of age. With these positivelyinfluencing trends expected to continue in the near and far-future, the writing is on the wall. The credit card industry is likely to soar more than any industry segment. To add to that, easy and continuous payments' structures with each passing day and with every Bank poised to expand its network, the Indian credit card user community is the biggest beneficiary. The intensifying competition prevalent in the present day Indian credit card market has further fuelled the usage of credit cards in the country like never-before. In an aim to overpower the peers and to sustain and prosper themselves, the Banks and financial institutions have started cutting down the interest rates and offering lucrative deals
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BIBLIOGRAPHY Credit Cards Books: i)
India: selected issues- By Jerald Alan Schiff (pg 62-69)
New concepts in banking - By S S Kaptan (pg 110-118)
Financial Services In India - By G. Ramesh Babu (pg 523 - 534)
History of Credit Cards Books: A History of Credit and Power in the Western World - By Scott B. MacDonald, Albert L. Gastmann (pg 222 – 224 ) Websites: i)
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Credit Cards Types of credit card i)
How are credit cards made i)
How does credit cards works i)
Merits & Demerits i)
Credit card frauds i)
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Credit Cards Case Studies On Credit Card Frauds i)
Credit Card Fraud Prevention i)
Credit Cards In India Survey Survey: Venture Infotek
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