AN OVERVIEW ON PLASTIC MONEY

Look in your wallet. If you are like an average middle-class, living in metropolitan you probably

must have at least one thin plastic card that you use to pay for things at many merchants. Take

out one of those cards. The card you picked is about 33/8”long, by 21/8”wide, weighs about a

fifth of an ounce, has magnetic stripe on the back and has a 13 to 16 digit account number

embossed on the front. It is called a payment card. Once cardboard, now plastic, the card itself

may become an anachronism. The plastic note is same as paper but the only difference is that they

are made of plastic.  The usage of plastic money (Cards) has increased in the mode of payment of huge

amount and time by time there are lots of different types of  plastic money introduced

which enhanced the features of plastic money like we can use it anywhere in the world and etc. Now the

world is getting globalized so every card is accepted everywhere with the power of VISA which

interconnect the different countries.

In the last half of the twentieth century, payment cards—credit, debit, and charge cards—have quietly

revolutionized how we pay for goods and services. It is increasingly common to find merchants

who do not take cash or cheques, and increasingly rare to find merchants who refuse payment cards.

Payment cards have also revolutionized how we coordinate the timing of when we purchase

goods and services and when we pay for them. The popular media often focus on how credit

cards is making it much quicker and easier to borrow, encourage people to spend beyond their

means and get mired in debt.. Credit cards enable them to do so.

There is agreement that credit cards are faster than checks, but there is disagreement as to how much faster one

industry source suggests that the difference in favor of cards is as large as fifty-six seconds. Whether cards

are as fast as cash is also a matter of dispute. To use cash, of course, requires spending some time

getting it. This is easier today with the proliferation of ATM machines and cards, but for the card

industry’s first few decades it required trips to the bank window. Time savings of only a

few seconds per transaction become worth quite a bit when billions of transactions are involved.

Around the Globe

With nearly 1.3 billion credit cards in circulation at the end of 2003, U.S. credit card use is larger

than in the rest of the world combined, according to David Robertson, publisher of industry

newsletter the Nilson Report. Behind the U.S., the U.K. is the next largest market with 59 million

credit cards, according to the Lafferty Group, a research firm in London.

In Europe

Debit cards are more popular in Europe by a long mark: The French have 39 million debit cards

and just 9 million credit cards; 82 million Germans hold 93 million debit cards, but just 20

million credit cards; and British citizens have 60 million debit cards. Usually combined with

overdraft protection, debit cards provide a cheaper alternative but offer lower lines of credit. The

Nationwide Building Society, a bank in the U.K., for example, charges 6.75 percent for a debit

card overdraft loan, but 15.9 percent for a credit card loan. German banks are legally bound to

offer every account holder an ongoing overdraft of three times the borrower's monthly salary,

lessening the need for credit. The average French debit and/or credit card holder pays between 11

and 14 percent interest; while the average British cardholder pays between 6 and 15 percent.

In Asia

In South Korea, the country with the region's largest number of credit cards, the total amount of

credit card spending leaped from $53 billion in 1998 to $519 billion in 2002, according to a 2004

report by the Korean Economic Institute in Washington. Total outstanding credit card debt

increased from $11.0 billion at the end of 1999 to $57.5 billion at the end of the third quarter

2003

Plastic Money

All about credit cards

Credit cards in India is 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 AmericanExpress. 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, retail stores and other businesses issue

these. 

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

Precautions taken after receiving credit card

To Avoid: 

Bending the Card.

Exposure to electronic devices and gadgets.

Direct exposure to sunlight.

Be cautious about disclosing your account number over the phone unless you know

you're dealing with a reputable company.

Never put your account number on the outside of an envelope or on a postcard.

Draw a line through blank spaces on charge or debit slips above the total so the amount

cannot be changed.

Don't sign a blank charge or debit slip.

Tear up carbons and save your receipts to check against your monthly statements.

Cut up old cards - cutting through the account number - before disposing of them.

Open monthly statements promptly and compare them with your receipts. Report

mistakes or discrepancies as soon as possible to the special address listed on your

statement for inquiries. Under the FCBA (credit cards) and the EFTA (ATM or debit

cards), the card issuer must investigate errors reported to them within 60 days of the date

your statement was mailed to you.

Keep a record - in a safe place separate from your cards - of your account numbers,

expiration dates, and the telephone numbers of each card issuer so you can report a loss

quickly.

Carry only those cards that you anticipate you'll need.

To Do:

Please sign on the signature panel on the reverse of the Card immediately with a non-

erasable ball-point pen (preferably in black ink). This will ensure that the benefits of

membership are yours and yours alone.

Keep the Card in a prominent place in your wallet. You will notice if it is missing.

Reasons credit card being rejected at retail outlet:

One may have exceeded the borrowing limit or defaulted (constantly) on minimum

payment due.

The Card is hotlisted.

The card has crossed its expiration date.

Non-receipt of dues of one-card blocks future transactions on any other card(s) held of

the same card-issuing bank.

The magnetic stripe on the reverse of the card is damaged i.e. has been scratched or

exposed to continuous heat/direct sunlight or magnetic field-like card kept near a TV set /

other electronic appliances.

Systems or technology failures have in rare instances also led to non acceptance of cards

when swiped through an Electronic Terminal.

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.

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 alltime favourite for corporates. 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.

JCB Cards

The JCB Card has a merchant network of 10.93 million in approximately 189 countries. It is

supported by over 320 financial institutions worldwide and serves more than 48 million

cardholders in eighteen countries world wide. The JCB philosophy of "identify the customer's

needs and please the customer with Service from the Heart" is paying rich dividends as their

customers spend US$43 billion annually on their JCB cards.

Grace / Interest Free Period

The number of days you have on a card before a card issuer starts charging you interest is called

grace period. Usually this period is the number of days between the statement date and the due

date of payment. Grace periods on credit cards are usually 2-3 weeks. However, there is likely to

be no grace for balances carried forward from previous month and fresh purchases thereafter if

any.

The following are some of the varieties of credit cards in India

ANZ - Gold

ANZ - Silver

Bank Of India - Indiacard

Bol - Taj Premium

Bol - Gold

BoB - Exclusive

BoB - Premium

Canara Bank - Cancard

Citibank - Gold

Citibank - Silver

Citibank WWF Card

Citibank Visa Card for Women

Citibank Cry Card

Citibank Silver International Credit Card

Citibank Women's International Credit Card

Citibank Gold International Credit Card

Citibank Electronic Credit Card

Citibank Maruti International Credit Card

Citibank Times Card

Citibank Indian Oil International Credit Card

Citibank Citi Diners Club Card

HSBC - Gold

HSBC - Classic

ICICI Sterling Silver Credit Card

ICICI Solid Gold Credit Card

ICICI True Blue Credit Card

SBI Card

Stanchart - Gold

Stanchart - Executive

Stanchart - Classic

Thomas Cook Standard Chartered Global Credit Card

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.

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 

Some facts of credit cards

The first card was issued in India by Visa in 1981.

The country's first Gold Card was also issued from Visa in 1986.

The first international credit card was issued to a restricted number of customers by

Andhra Bank in 1987 through the Visa program, after getting special permission from the

Reserve Bank of India.

The credit cards are shape and size, as specified by the ISO 7810 standard. It is generally

of plastic quality. It is also sometimes known as Plastic Money

FAQs

What does Grace / Interest Free Period Mean?

What is implied in Cash Advance?

How to make payments from Dubai to the already existing Citibank cards in India. How

to avail of the statements to know the current bank balance of each card. Is online facility

available?

Can I use my Global credit card on the net to pay some US company for web hosting

charges? or I have to obtain permission from RBI. If any permissions are needed, How to

get them?

How will I know if my Credit Card application has got approved?

How will I know if my Credit Card application has got declined?

What to do if Credit Card is Lost or Stolen?

What does Grace / Interest Free Period Mean?

The number of days given to you on your card before the card issuer starts charging you interest

is called grace period. Generally the grace period is the number of days between the statement

date and the due date of payment. Grace periods on credit cards are usually 2-3 weeks. However,

there is likely to be no grace for balances carried forward from previous month and fresh

purchases thereafter if any.

What is implied in Cash Advance?

Cash advances on Credit Cards are convenient and the easiest facility to utilise. Manority of the

banks in India charge a transaction fee as well as service fee / interest charge on cash advances.

This service fee accrues from the date of the advance (as soon as you receive the cash) to the

date of full payment. The charges varies from banks to banks. Cash advance facility is a part of

the overall credit limit assigned to a cardholder. The limit is of cash acvance is always lesser than

the borrowing limit or the credit limit.

How to make payments from Dubai to the already existing Citibank cards in India. How to

avail of the statements to know the current bank balance of each card. Is online facility

available?

According to RBI " Resident Indians may be nominated as additional/add-on card holders by

non-residents. However, the non-residents from their foreign currency funds should meet claims

arising out of use of such cards by residents only.In cases where the cards have been arranged by

NRIs these liabilities may be met out of NRE/FCNR accounts in India also. Under no

circumstances will any remittance be allowed by residents from India to settle their claims

against use of such additional/add-on cards". NRIs get rupee credit cards which are valid for use

in India, Nepal and Bhutan.

Can I use my Global credit card on the net to pay some US company for web hosting

charges? or I have to obtain permission from RBI. If any permissions are needed, How to

get them?

The RBI's exchange control manual mentions that 'International Credit Cards' can be used for

"Registration of Internet domain name, hosting charges for website/home pages overseas and

access fees for Internet related services through website". Before using your Global Credit Card

on the net for web hosting charges, you further clarify the aforesaid issue or seek permission

from your card issuer. Even get in touch with the card issuing bank or organisation directly for

such clarifications.

How will I know if my Credit Card application has got approved?

It is suggested to give your mobile number and e-mail id at the time of application for the Credit

Card. This will help the issuer to intimate you either through SMS or through e-mail with the

approved status of your application. You will also receive a letter by post informing you of the

Card approval. You should be receiving your Card around the same time as the approval letter. 

How will I know if my Credit Card application has got declined?

You will receive a letter from the Bank even if your application for Card is not approved. If in

case there is a further information of missing documents, you will be sent a letter asking for the

same. Then you need to fulfil with the documents to the specified address.

What to do if Credit Card is Lost or Stolen?

Report the loss or theft of your credit cards to the card issuers to the earliest through their 24-

hour helpline service. Follow up your phone calls with a letter. Include your account number,

when you noticed your card was missing, and the date you first reported the loss.

After doing these, check your homeowner's insurance policy to see if it covers your liability for

card thefts. If yes its fine otherwise change your policy to include this protection.

Before the intimation, different banks have their own limit of loss bearing by the card holder.

After the intimation, it is the bank who bears the loss if any amount is spent.

Plastic Money

All about Debit Cards

Debit cards, also known as check cards look like credit cards or ATM cards

(automated teller machine card). It operate like cash or a personal check. Debit cards are

different from credit cards. Credit card is a way to "pay later," whereas debit card is a way to

"pay now." When we use a debit card, our money is quickly deducted from the bank account.

Debit cards are accepted at many locations, including grocery stores, retail stores, gasoline

stations, and restaurants. Its an alternative to carrying a checkbook or cash. 

With debit card, we use our own money and not the issuer's money. 

In India almost all the banks issue debit card to its account holders. 

Features of Debit Card

Obtaining a debit card is often easier than obtaining a credit card.

Using a debit card instead of writing checks saves you from showing identification or

giving out personal information at the time of the transaction.

Using a debit card frees you from carrying cash or a checkbook.

Using a debit card means you no longer have to stock up on traveler's checks or cash

when you travel.

Debit cards may be more readily accepted by merchants than checks, especially in other

states or countries wherever your card brand is accepted.

The debit card is a quick, "pay now" product, giving you no grace period.

Using a debit card may mean you have less protection than with a credit card purchase

for items which are never delivered, are defective, or were misrepresented. But, as with

credit cards, you may dispute unauthorized charges or other mistakes within 60 days.

You should contact the card issuer if a problem cannot be resolved with the merchant.

Returning goods or canceling services purchased with a debit card is treated as if the

purchase were made with cash or a check.

Tips for responsible use of Debit Card

If your card is lost or stolen, report the loss immediately to your financial institution.

If you suspect your card is being fraudulently used, report it immediately to your

financial institution. 

Hold on to your receipts from your debit card transactions. A thief may get your name

and debit card number from a receipt and order goods by mail or over the telephone.

Your card does not have to be missing in order for it to be misused.

If you have a PIN number, memorize it. Do not keep your PIN number with your card.

Also, don't choose a PIN number that a smart thief could figure out, such as your phone

number or birthday.

Never give your PIN number to anyone. Keep your PIN private.

Always know how much money you have available in your account. Don't forget that

your debit card may allow you to access money that you have set aside to cover a check

which has not cleared your bank yet.

Keep your receipts in one place -- for easy retrieval and better oversight of your bank account.

Plastic money: Advantages & Disadvantages

It was the fact that thirty years ago, if you had a credit card and many people didn’t you probably

had only one, but now days the use of Plastic money has become so common that according to

the stats today, the typical American adult has four or five cards and uses them in one out of

every four transactions.

So with this rapid increase in the usage of plastic money as compare to paper money, there

involves various pros and cons with them. Let us study some of them.

Advantages of Credit cards or Plastic money:

Easy to handle- it prevents to carry out heavy wallets, hence, reducing the chances of theft.

Easy access to money- in the situation of instantaneous want for money, one can withdraw /

debit the demanded cash amount from the account and thus prevents any risk of getting

marooned in travelling.

Easy availability- Now a day’s every bank facilitates with Credit cards as long as the account

become active. The cash ATM machines are also open 24/ 7, therefore whenever in need one

does not have to wait for the banks to open, but can take out the money using the card.

MIles of Cards- Most credit cards companies offer miles on every purchase. This indicates

that by using the card for purchasing, there are points added which get aggregated in the

user’s account. Lastly, when a good amount of these points get collected, the consumer can

use them for purchasing any product for free, hence making a double use of money is another

advantage of plastic money.

Disadvantages of Credit cards or Plastic money:

Just a plastic- Besides all the advantages, Credit card is just a plastic which can get either lost

or stolen. This may results in crimes in which extensive purchases can be made under the

name of the account holder. These cases might get resolved in the benefit of the applicant,

but there is still an identity theft which is a very serious issue.

Shops using other vendors- There are numerous shops which accept credit cards of a specific

company only. In this situation the cash is the only way of payment for those who use a

credit card of another company.

Less Global availability- there are many cases where various companies do not permit their

cards to be used in areas where they have a regional dispute with.

Worn out Magnetic strip- The magnetic strip of a credit card can get worn out due to massive

use. If such a condition happens while travelling, and this is the only way of cash that the

consumer has, then he or she has to wait till the time they receive a new card, which can take

a minimum of 48 hrs.

PLASTIC CARD VULNERABILITIES

In one survey conducted in the United States in 1993, a group of 14 credit cardfraudsters admitted to employing

over 100 different ways of using credit cards toobtain funds dishonestly.

 Alteration and Counterfeiting

 The first area of vulnerability lies within the card itself. Ever since plasticcards were

introduced, attempts have been made to alter or counterfeit them in order to obtain funds

illegally.Cards used to perpetrate fraud are generally lost or stolen cards which could be used intact or

altered by re-embossing and re-encoding, or counterfeit cardsthat are entirely new.

In order to counterfeit a card it is necessary to know thedetails of a current valid

cardholder -- hence the desire of offenders to obtain legitimate credit card details from

sources such as the Internet (a method which is being used increasingly by offenders in

Australia). Blank, white plastic cards arethen embossed with stolen numbers, the magnetic stripe is

encoded with matchingnumbers, and the signature panel on the card installed. Identifying

logos andcolour printing are added to mimic a  real card. Sometimes information on

thecard's magnetic strip is obtained is "card skimming". This is when a

legitimatecard is obtained for a few seconds to enable it to be passed over a magnetic tapereader

so that a counterfeit copy may be

made.Another technique is "buffering", which involves modifying the 

informationstored in the magnetic strip of the card or obtaining security codes electronically.Although

magnetic stripe cards are relatively easy to forge, smart cards are moredifficult to counterfeit, but

there are claims that they are not absolutely tamper- proof.

PIN Fraud

Other vulnerabilities arise out of the way that the individual making use of the card

au then t i c a t e s h i s o r he r i den t i t y when u s ing t he ca rd . Th i s i s ma in ly

a  problem with debit cards used in electronic card reading machines, which can

verify the identity of cardholders by requiring them to enter a PIN or password. Inorder to enhance the

security of the system, the user's PIN is encrypted before it travels through the network, thus

making it difficult for the PIN to be discovered by hacking into the network. A more subs t an t i a l

s ecu r i t y r i sk a r i s e s f rom the manne r i n wh ich t he P IN i s communicated to the

cardholder, recorded and remembered by the cardholder, induced by the cardholder at a terminal

during a transaction. Although card holder sare clearly warned of the dangers associated with

disclosing their PIN, writing it on the card, or keeping it in the same place as the card, a

considerable proportion of cardholders refuse to heed such advice, thereby placing them at risk of loss -

for which they will be personally responsible.

Hacking

Credit card information is illegally obtained either by hacking into databases of account

numbers which are held by Internet service providers, or by intercepting account details

which travel in unencrypted form. In Sydney, on 27 March 1998,for example, a computer

hacker was sentenced to 18 months’ imprisonment for having illegally obtained

access to an Internet Service Provider’s database of  credit card holders

and published details relating to 1,225 cardholders resulting inthe business losing more

than $2 million .T h e r e   a r e   a l s o   m a n y   o n l i n e   s c a m s  perpetrated by

customers who make use of false credit card details, as well as merchants who fail

to honor online agreements. ATMs and EFTPOS terminals have also been targeted by

offenders who have done everything from stealing entire ATMs laden with cash, using

stolen

cardsan d  P IN s   t o  make  un au tho r i z ed   ca sh  w i t hd raw a l s ,   t o   i n t e r f e r i ng  

w i t h  ba nk   computers in order for sums in excess of account credit balances to be withdrawn. In

the United States it has been estimated that 40 per cent of ATMs have been

subjected to fraud.

FUTURE OF PLASTIC MONEY IN INDIA.

Starting from 'Diners Club', some 50 years ago, the card industry has beengrowing with a

rapid pace world over and so has been the growth in the

domesticca rd   i nd us t ry .  Wi t h  on l y   two  p l aye r s   i n   domes t i c   c a rd  

i ndus t r y ,  HS BC  and Citibank in the early 80s, the number swelled to over 25 in the

year 2001. Creditcards in India, made their debut in 1981, and are on the verge of an

unprecedented boom. Between 1987 and 2001, the market has virtually grown to over 4

millioncards with over 25-30% of compounded annual growth in new cardholder’s base.

It’s not that only the card numbers have increased, but even the types of  cards

on offer have seen a surge. Today the domestic card industry is flooded withdifferent types of cards

ranging from gold, silver, global, co-branded credit cards,smart to secure, the list is

endless. Foreign banks have shouldered the major  responsibility of increasing the

card base and adding value-added services to thecard products in the past. This is also

evident from the fact that the market shareof these foreign banks is estimated to be

well over 70%. But the scenario haschanged dramatically in the last of couple of years with

the entry of State Bank of India (SBI), a domestic major in the banking sector. More and

more nationalized banks and p r i va t e s ec to r banks l i ke IC ICI and HDFC

Bank a r e agg re s s ive ly launching credit card with value added features.There is immense

growth potential in the domestic card industry. A glanceat the Indian population

reveals that India's middle/upper middle class

(targets e g m e n t )   r e p r e s e n t s   a   p o p u l a t i o n   o f   o v e r   1 0   m .  

T h e r e   a r e   o n l y   2   t o   3   m cardholders, each possessing an average of 2 cards. This is a

very low figure givenIndia's huge middle to upper class population. There is no doubt that

the domesticca rd   i ndus t r y  ha s   t o   ye t   t o  ma t u r e   and  o f f e r s   s i gn i f i c a n t  

l on g - t e rm  g rowt h  potential.Given the lack of maturity of the domestic card

industry, its growth willdepend upon building core retail business, with more

sophisticated products. Inthe expansion of domestic credit card market, the existing

foreign players, SBI,other nationalized banks and the new domestic private sector banks

are expectedto play important role with complementary

What Does Credit Card Mean?

A credit card is a small plastic card issued to users as a system of payment. It allows its holder

to buy goods and services based on the holder's promise to pay for these goods and services.[1]

The issuer of the card creates a revolving account and 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.

A card issued by a financial company giving the holder an option to borrow funds, usually at

point of sale. Credit cards charge interest and are primarily used for short-term financing. Interest

usually begins one month after a purchase is made and borrowing limits are pre-set according to

the individual's credit rating.

How credit cards work?

Credit cards are issued by a credit card issuer, such as a bank or credit union, after an account

has been approved by the credit provider, after which cardholders can use it to make purchases at

merchants accepting that card. Merchants often advertise which cards they accept by displaying

acceptance marks – generally derived from logos – or may communicate this orally, as in "Credit

cards are fine" (implicitly meaning "major brands"), "We take (brands X, Y, and Z)", or "We

don't take credit cards".

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 not present transaction (CNP).

Electronic verification systems allow merchants to verify in a few seconds that the card is valid

and the credit card customer has sufficient credit to cover the purchase, 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; the latter system is

called Chip and PIN in the United Kingdom and Ireland, and is implemented as an EMV card.

For card not present transactions where the card is not shown (e.g., e-commerce, mail order, and

telephone sales), merchants additionally verify that the customer is in physical possession of the

card and is the authorized user by asking for additional information such as the security code

printed on the back of the card, date of expiry, and billing address.

Each month, the credit card user is sent a statement indicating the purchases undertaken with the

card, any outstanding fees, and the total amount owed. After receiving the statement, the

cardholder may dispute any charges that he or she thinks are incorrect (see 15 U.S.C. § 1643,

which limits cardholder liability for unauthorized use of a credit card to $50, and the Fair Credit

Billing Act for details of the US regulations). Otherwise, the cardholder must pay a defined

minimum proportion of the bill by a due date, or may choose to pay a higher amount up to the

entire amount owed. The credit issuer charges interest on the amount owed if the balance is not

paid in full (typically at a much higher rate than most other forms of debt). In addition, if the

credit card user fails to make at least the minimum payment by the due date, the issuer may

impose a "late fee" and/or other penalties on the user. To help mitigate this, some financial

institutions can arrange for automatic payments to be deducted from the user's bank accounts,

thus avoiding such penalties altogether as long as the cardholder has sufficient funds.

Features

As well as convenient, accessible credit, credit cards offer consumers an easy way to

track expenses, which is necessary for both monitoring personal expenditures and the

tracking of work-related expenses for taxation and reimbursement purposes. Credit cards

are accepted worldwide, and are available with a large variety of credit limits, repayment

arrangement, and other perks (such as rewards schemes in which points earned by

purchasing goods with the card can be redeemed for further goods and services or credit

card cash back).

Some countries, such as the United States, the United Kingdom, and France, limit the

amount for which a consumer can be held liable due to fraudulent transactions as a result

of a consumer's credit card being lost or stolen.

Benefits to customers

The main benefit to each customer is convenience. Compared to debit cards and cherubs, a credit

card allows small short-term loans to be quickly made to a customer who need not calculate a

balance remaining before every transaction, provided the total charges do not exceed the

maximum credit line for the card. Credit cards also provide more fraud protection than debit

cards. In the UK for example, the bank is jointly liable with the merchant for purchases of

defective products over £100

Many credit cards offer rewards and benefits packages, such as offering enhanced product

warranties at no cost, free loss/damage coverage on new purchases, and points which may be

redeemed for cash, products, or airline tickets.

Grace period

A credit card's grace period is the time the customer has to pay the balance before interest is

assessed on the outstanding balance. Grace periods may vary, but usually range from 20 to 50

days depending on the type of credit card and the issuing bank. Some policies allow for

reinstatement after certain conditions are met.

Usually, if a customer is late paying the balance, finance charges will be calculated and the grace

period does not apply. Finance charges incurred depend on the grace period and balance; with

most credit cards there is no grace period if there is any outstanding balance from the previous

billing cycle or statement (i.e. interest is applied on both the previous balance and new

transactions). However, there are some credit cards that will only apply finance charge on the

previous or old balance, excluding new transactions.

Parties involved

Cardholder: The holder of the card used to make a purchase; the consumer.

Card-issuing bank: The financial institution or other organization that issued the credit

card to the cardholder. This bank bills the consumer for repayment and bears the risk that

the card is used fraudulently. American Express and Discover were previously the only

card-issuing banks for their respective brands, but as of 2007, this is no longer the case.

Cards issued by banks to cardholders in a different country are known as offshore credit

cards.

Merchant: The individual or business accepting credit card payments for products or

services sold to the cardholder.

Acquiring bank: The financial institution accepting payment for the products or services

on behalf of the merchant.

Independent sales organization: Resellers (to merchants) of the services of the acquiring

bank.

Merchant account: This could refer to the acquiring bank or the independent sales

organization, but in general is the organization that the merchant deals with.

Credit Card association: An association of card-issuing banks such as Visa, MasterCard,

Discover, American Express, etc. that set transaction terms for merchants, card-issuing

banks, and acquiring banks.

Transaction network: The system that implements the mechanics of the electronic

transactions. May be operated by an independent company, and one company may

operate multiple networks.

Affinity partner: Some institutions lend their names to an issuer to attract customers that

have a strong relationship with that institution, and get paid a fee or a percentage of the

balance for each card issued using their name. Examples of typical affinity partners are

sports teams, universities, charities, professional organizations, and major retailers.

Security problems and solutions

This is the age of plastic money. It's not uncommon for the typical consumer in the western

world to go weeks at a time without ever handling a coin or bill. Everything we need is available

to us with the simple "swik-swik' sound of a credit card sliding through a reader. Supplies for the

office, flowers for the wife, meals and drinks out, and an endless supply of useful products

available for sale through the Internet can all be bought with naught a cent to be seen.  

The big question is: "How safe is all this plastic?" 

Cash has its obvious benefits. When you buy a sandwich for $2.95 and you hand the cashier a $5

bill, you know you haven't been ripped off when he hands you $2.05 right then and there. But

when you and your card to a waitress at the local chain restaurant, how do you know she hasn't

taken a moment to sneak into the office and copy your card number and signature? You don't,

and the implications of this question are having a serious effect on credit card companies and the

merchants they do business with.

In response to these issues, the big credit card companies have developed more secure ways to

do business. MasterCard International and Visa got together and came up with a set of guidelines

called the Payment Card Industry Data Security Standards. This is a list of 12 guidelines that

imposes strict regulations on all transactions taking place between the card company and the

merchants it trades with. While these standards have been in place since 2005, merchants are

taking some time to catch up to them. However, in the past year there has been marked

improvement, and both credit card companies have stepped up their tactics to the point where

merchants may be experiencing losses of service if they do not fall in line soon. (You can read

the 12 guidelines and the details of this plan on the homepages of Visa or MasterCard.)

Discover Card has responded to the pressure for more secure methods with it's own program.

They call it the Secure Online Account Number program. Anytime you use your Discover card

to purchase a product online, their program will generate a random account number to "stand-in"

for the one on your card. You then send this number to the merchant in place of the real number.

When the number is verified with Discover Card, it will link to your account and the purchase is

charged to you. The benefit of this system is that the merchant never sees your true account

number. Only you and Discover Card have access to it. Once the transaction is completed the

randomly generated account number is no longer valid, so any attempts to use it result in denial.  

A security method that online merchants are employing is the requirement of a shipping address

that matches the billing address on your credit card. This is to guard against thieves who may

steal your account number but will have no access to your billing address. This way, if your card

is stolen, it can only be used to make purchases that will ship to your address. Any prospective

thieves will have to pick up their orders from your mailbox, not something the average

anonymity-seeking thief will want to do. 

There are also third party systems in place for ensuring online credit card security. VeriSign's

SSL (Secure Sockets Layer) technology is the leader in the field. VeriSign will give each

merchant it conducts business with 2 "keys" (like coding alphabets), a public key and a private

key. The public key is used to encrypt information, and the private key is used to decipher it.

VeriSign's technology now offers this encryption in 128- to 256-bit encryption, which provides a

nearly un-guessable number of possible combinations of codes. 

Fraud

In relative numbers the values lost in bank card fraud are minor, calculated in 2006 at 7

cents per 100 dollars worth of transactions (7 basis points).[18] In 2004, in the UK, the cost

of fraud was over £500 million.[19] When a car is stolen, or an unauthorized duplicate

made, most card issuers will refund some or all of the charges that the customer has

received for things they did not buy. These refunds will, in some cases, be at the expense

of the merchant, especially in mail order cases where the merchant cannot claim sight of

the card. In several countries, merchants will lose the money if no ID card was asked for,

therefore merchants usually require ID card in these countries. Credit card companies

generally guarantee the merchant will be paid on legitimate transactions regardless of

whether the consumer pays their credit card bill. Most banking services have their own

credit card services that handle fraud cases and monitor for any possible attempt at fraud.

Employees that are specialized in doing fraud monitoring and investigation are often

placed in Risk Management, Fraud and Authorization, or Cards and Unsecured Business.

Fraud monitoring emphasizes minimizing fraud losses while making an attempt to track

down those responsible and contain the situation. Credit card fraud is a major white collar

crime that has been around for many decades, even with the advent of the chip based card

(EMV) that was put into practice in some countries to prevent cases such as these. Even

with the implementation of such measures, credit card fraud continues to be a problem.

Promotion

Promotional purchase is any purchase on which separate terms and conditions are set on

each individual transaction unlike a standard purchase where the terms are set on the

cardholder’s account record and their pricing strategy. All promotional purchases that

post to a particular account will be carrying its own balance called as Promotional

Balance.

Credit card numbering

The numbers found on credit cards have a certain amount of internal structure, and share a

common numbering scheme.

The card number's prefix, called the Bank Identification Number, is the sequence of digits at the

beginning of the number that determine the bank to which a credit card number belongs. This is

the first six digits for MasterCard and Visa cards. The next nine digits are the individual account

number, and the final digit is a validity check code.

In addition to the main credit card number, credit cards also carry issue and expiration dates

(given to the nearest month), as well as extra codes such as issue numbers and security codes.

Not all credit cards have the same sets of extra codes nor do they use the same number of digits.

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 car 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.

The magnetic stripe on the back of the card is a third security feature. The stripe is an area coated

with particles of iron oxide that can be encoded with binary information, which identifies the

card as authentic. It is difficult to determine exactly what information is coded on the strip

because for security reasons companies do not wish to discuss this. However, it is likely that the

card's expiration date is one fact recorded on the strip because automatic teller machines (ATMs)

will retain cards that have expired. It is unlikely that information like credit limit, address, phone

number, employer, is recorded on the stripe because banks do not reissue cards when this type of

information changes.

Finally, some cards feature special features that make them hard to duplicate, such as

complicated 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 pull the sheet along. These rollers keep the sheet flat and maintain

As the sheet exits the die, it goes through a series of three rollers stacked on top of each

other that pull 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.

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.

Printing

3 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

4 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

5 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.

Quality Control

Key quality issues are associated with the compounding of plastic and colour 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.

Transaction steps

Authorization:

The cardholder pays for the purchase and the merchant submits the transaction to the

acquirer (acquiring bank). The acquirer verifies the credit card number, the transaction

type and the amount with the issuer (Card-issuing bank) and reserves that amount of the

cardholder's credit limit for the merchant. An authorization will generate an approval

code, which the merchant stores with the transaction.

Batching:

Authorized transactions are stored in "batches", which are sent to the acquirer. Batches

are typically submitted once per day at the end of the business day. If a transaction is not

submitted in the batch, the authorization will stay valid for a period determined by the

issuer, after which the held amount will be returned to the cardholder's available credit

(see authorization hold). Some transactions may be submitted in the batch without prior

authorizations; these are either transactions falling under the merchant's floor limit or

ones where the authorization was unsuccessful but the merchant still attempts to force the

transaction through. (Such may be the case when the cardholder is not present but owes

the merchant additional money, such as extending a hotel stay or car rental.)

Clearing and Settlement:

The acquirer sends the batch transactions through the credit card association, which

debits the issuers for payment and credits the acquirer. Essentially, the issuer pays the

acquirer for the transaction.

Funding:

Once the acquirer has been paid, the acquirer pays the merchant. The merchant receives

the amount totalling the funds in the batch minus either the "discount rate," "mid-

qualified rate", or "non-qualified rate" which are tiers of fees the merchant pays the

acquirer for processing the transactions.

Chargeback’s:

A chargeback is an event in which money in a merchant account is held due to a dispute

relating to the transaction. Chargeback’s are typically initiated by the cardholder. In the

event of a chargeback, the issuer returns the transaction to the acquirer for resolution. The

acquirer then forwards the chargeback to the merchant, who must either accept the

chargeback or contest it. Credit card processing occurs every second of every minute of

every hour of every day. Can you recall a time when we did not have credit cards and

weren’t applying them all the time? They are so accessible that it is almost impossible to

live without one; or three. All you have to do is leap online, find something you want,

enter some details and press a button. It is that simplified and we do not even stop to

think about how it is done, or how hiring someone to do this process for us could improve

our business and take away some of the tension and worry about money. It is only too

common that while something is as easy as making a payment via credit card that we

genuinely do not stop to think about how it is done and what happens when something

goes incorrect, who is liable and what will happen to our money and product? That is

why we ought let the professionals worry about it while we sit back and unwind.

Basic Background About Credit Card Numbers and How They Work

Rather than ask you to take out a credit card out of your wallet to examine it, I've provided a

picture of a prototypical card - in this case, it's a Visa credit card. While different card types offer

different lengths of numerical digits, most major credit card issuers popular in the United States

have 16 primary numbers on the front face of the card. Visa, MasterCard, and Discover cards all

have 16 digits. American Express is the only major credit card issuer in the U.S. with one less

number - at 15 digits. Regardless of the length of numbers, their numerical sequencing is still

guided by the same Luhn validation formula, the mathematical check sum equation that makes

all valid credit card numbers error free.

As you can see from the picture of the Visa card above, the very first 6 credit card number

sequence is known as the issuer identification number (IIN) or bank identification number (BIN).

These first 6 numerical digits denote the credit card network and the banking institution the card

is a member of. The issuer identifier number also incorporates the card type's special identifying

numerical prefix.

All typical 16 digits Visa account credit card numbers start with a prefix of 4.

All 16 digits MasterCard account numbers start with a prefix of 5.

All 16 digits Discover account numbers start with a prefix of 6011.

All 15 digits American Express credit card numbers start with a prefix of 37.

There is less randomization during this initial set of 6 digits as the numbers are determined

purely by the card issuing source. Validation systems that want to go the extra mile in verifying

authenticity oftentimes scan this first numerical sequence to match the known bank and issuing

location of the card with the provided customer billing address for further validation accuracy.

The lone digit at the very right end of the complete 15 or 16 digit credit card number sequence is

known as the "check digit", which often is the final number that is computer generated to satisfy

the mathematical formulations of the Lehn check sum process. Meanwhile, in between the first 6

digits and the last single check digit is the actual personalized account number - the 8 or 9 digit

sequence given by the card issuer. For more basic background information about credit card

numbers, check out this credit card features brochure for more useful knowledge about the

embossed and printed information found on your typical plastic credit card.

The Future

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.

Credit Card Companies Love College Students

College students are a credit card company’s prime prospect. (If you haven’t seen the

documentary Maxed Out, rent it before you step foot on campus.) They like to get you while

you’re young for a couple of reasons. First, they have a strong hunch that your parents will bail

you out if you run up your credit card bill. Second, you have a long credit life ahead of you. That

means lots of years of interest payments for the credit card companies.

Credit card companies are so hungry for college students, they approve applications even then

students don't meet the criteria. For example, a college student can get a credit card with no job,

no verifiable income, no credit history, and even without a co-signer.

Banks are getting more aggressive — and creative — in their efforts to pitch credit cards to

college students by hawking cards near college campuses and striking exclusive partnerships

with college alumni associations, according to a growing body of research.

Banks have also increasingly forged credit card partnerships with colleges. No national numbers

are available on these deals. But by 2006, each of the largest 10 colleges and universities —

through their alumni or athletic associations — had partnered with a bank to issue co-branded

credit cards to alumni and students, earning the colleges up to millions in annual fees, the paper

found. Banks often receive student information and exclusive marketing access at campus

events.

Colleges defend these partnerships as a way to offset severe cuts in state funding. But consumer

groups worry that these alliances are encouraging students to sign up for products with high

interest rates or fees, making it easier to get mired in debt.

Most students who responded to US PIRG's latest survey — 1,584 students from 40 schools

were randomly surveyed on campus from October through February — favored some form of

card reform on campuses. Specifically, 38% of students supported a ban on schools or student

groups receiving money from banks in exchange for the right to market credit cards on campus,

while 67% opposed schools selling or sharing student information with credit card companies.

advertising. Here are five tips to assist you reach your possible consumers:

LOWE’S PROJECT OVERVIEW

The Lowe’s Project Card is offered by GEMB. This card offers an unprecedented 0% APR for

every new project window opened. During this time, interest does not accrue at all. You make

monthly payments and if the project isn’t paid off in 6 months then the interest starts to apply.

In order to open a project window, you have to spend $1,000 at Lowe’s. Once your project

window is open, you cannot open another one for 6 months. You can, after the six months are

up, start a new project window at 0% APR while making payments on an existing project.

The interest rates for the Lowe’s Project Card are interesting. Rates start at 7.99% for your first

project window. If you pay it off before opening another project window, then your new interest

rate will still be 7.99%.

If, however, you open a second project window while still paying on your first project window,

then your second project will have an interest rate of 9.99% after the 6 months are up. The

highest interest rate is 17.99% and that is if you have 4 or more project windows open at a

single time