The growth and popularity of plastic money in India has been phenomenal in the last few years.

The
Indian economy is booming with a refreshing youthfulness in its march to success.

Credit Cards in India:

India has came out of self-binding shackles to look "young" again and the enthusiasm shared by the
young work force of the country is driving the economy like never-before. In the present day world, no
one wants to be bothered by the presence of huge cash in his or her wallet and the Indians are no
exceptions. The unprecedented growth in the number of credit card users has stimulated the Indian
economy by a significant extent. The arrival of malls, multiplexes, online shopping stores and shopping
complexes have contributed to the growth of the use of plastic cards.

It will not be wrong to say that such a scenario in context of the Indian market is not driven by style
statement and is driven more by needs. The benefits of plastic money have offered unmatched ways to
create an equilibrium and offer an amicable solution when it comes to purchases and the inability to
possess or carry cash. The modern day Indian customers find it more easy to make physical payment

(credit card payments) rather than carrying too much cash. The introduction of credit card facilities to
pay for mobile, electricity, movie tickets and other related transactions have also contributed to the
growth of plastic money in the country.

Best credit cards (India):

In context of the Indian market, the leading credit card service providers are ICICI, HDFC, HSBC and
Standard Chartered to name a few. These financial institutions

have tried their hands on ensuring value-addition while offering customer-friendly credit card deals.
The Best credit cards in India are usually meant for specific user group such as women, students and
small business owners. These cards are offered to the prospective customers with appealing deals.
Statistics have clearly revealed that the number of credit card holders in India are close to 22 million
as on January, 2007. It has been also revealed that the increasing consumerism in the country has led
to a two-fold increase in the number of credit card transactions from FY 2003-04 to 2005-06. The
trends were as favourable as ever in the financial years, FY 2006-07 and 2007-08 and the same is likely
to continue in the coming financial years.Read more at
http://www.articlealley.com/article_573633_19.html?ktrack=kcplink

India , the developing economy, is witnessing a new revolution every fortnight. Yes, fortnight might sound like an
exaggeration, but you would have understood that we have used it to indicate the concurrent set of changes
entering this era.
The economy is booming and purchasing power is increasing by leaps and bounds. It is the age of malls, shopping
complexes, multiplexes, buying cars, expensive watches, owning a house and most importantly flashing a string of
`Credit Cards `. Some like to flaunt it, some misuse it, some underutilize it and some benefit from it. Ultimately,
we all love to own credit cards.
Need Driven

`Credit card is the trend of today.` We hear this statement from lot of people. But if you sit back and think, you
will understand that the increasing trend to use credit cards in India is more need driven rather than just being a
fashion statement. India is on a continuous move towards new advancements. People have become more mobile and
it is becoming riskier to carry cash every day. On the other hand, inflation has added to the expenses. So, to bridge
the gap between the purchases and inability to carry cash, the modern Indian generation is opting to use credit
cards.
Safe Sides

It is not just about the comfort of carrying a plastic rectangular card in pocket, but it is also about the simple mode
of payment. Using credit cards is also lot safer than carrying large amounts of cash. If you are one of the top
executives in a company and travel a lot by flights, stay in good hotels, the payment by credit card is a wiser step.
Paying by your credit card can help you present the bill as well as the copy of credit card statement for
reimbursements in the company. Credit cards have become a convenience to the travelers and business people.
Credit cards also help you in planning things. For example, you want to gift a washing machine to your wife but do
not carry enough balance, credit cards enable you to purchase it right now and plan your EMIs. This lessens the
pressure, gives you more scope of making plans and also helps you gain many of your favorite products the moment
you want them.

Figure out the figures

Statistics show that there were about 22 million credit cards in India in January 2007. The number of credit cards has
more than doubled in past three years. This increase can be attributed to the increasing consumerism in India, which
is further expected to boost owing to the intensifying competition between credit card companies and more lucrative
offers in the market each day. Moreover, apart from issuing of credit cards, the credit card transactions have also
doubled from the FY 2003-4 to 2005-6. The current growth in the credit card industry is estimated to be around 28
percent, which is further predicted to be on an increase. Moreover, the industry experts believe the increase in the
transactions should be around 20 percent each year.

As you see these figures, you can easily predict the growing popularity of credit card. The introduction of credit card
facilities to pay for mobile, electricity, movie tickets and other related transactions have also contributed to the
growth of plastic money in the country. Today, the payment structures are getting easier. 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. The competition in industry has further fuelled the usage of credit
cards in India . The banks are cutting down on interest rates and over head charges owing to the increasing
competition. All this will certainly add up to this growth of credit card industry, and if you move in the sensible
direction with sensible handling of cards, this growth is for good.

Benefits of credit cards:

1. Credit can be availed for a period of 30-50 days.

2. A cardholder need not have the required amount in his account to the extent of the transaction
made.

3. The card carries a predetermined limit up to which the holder can spend.
4. At the end of each billing cycle, the cardholder has to pay a minimum sum of the bill normally
5-10% and the rest can be paid in installments over the next few months/years.On outstanding
balance, a nominal rate of 1.5 to 3% per month is charged as interest.

5. Regular use of the credit card by the user earns him additional points that provide the
cardholder with discounts on purchases.

In addition to the above benefits, many problems associated with credit can be avoided through
the use of credit cards. In many businesses, particularly in the retail and consumer service fields,
credit arrangements for customers are available through the use of these cards. Under these
plans, there is little or no commitment of the business’s own capital, and the costs and risks of
administration and collection are almost entirely the responsibility of the Credit Card Company
or bank.

Credit card service is available from one’s regular commercial bank. Receipts from bank credit
card purchases can be deposited daily and are immediately credited. The bank assumes all credit
risks provided that one follows instructions for approval of credit card purchases. Typically,
these instructions require that one checks the validity of the card against a master list of canceled
cards and contact the credit service before accepting the customer’s card for purchase above a
certain limit.

Credit card services are particularly vital for businesses with a large number of relatively small
accounts. They eliminate the need for credit approval, invoice preparation, record maintenance,
and collections. They also minimize one’s commitment of capital and virtually eliminate the risk
of uncollectible accounts. From a marketing standpoint, the availability of instant credit could
often encourage a customer to buy immediately, rather than postpone the decision to a later date
or bypass it completely.

Credit cards are most often used for retail accounts. However, they have also been used
successfully in selling to small commercial accounts. Businesses such as repair shops, supply
firms, and stationery stores, which have a mixture of consumer and commercial accounts, often
find it convenient and economical to extend credit card service to small commercial accounts.
Benefits provided by credit cards are not limited to the credit facility alone.

Besides that following are the additional benefits available to the credit card holders, namely,

Personal Accident Insurance. Credit card issuers have introduced a free insurance cover to the
cardholder against loss of life due to accidents.

Cash Withdrawal Facility. A pre-determined credit and cash limit is provided to the cardholder
at Automated Teller Machine (ATM) facilities.

Increase in Credit. Cardholders with a good credit track record are provided with_t’1 increased
credit limit for a short period of time, whenever required.
Add-On cards: The spouse, parents and children, over eighteen, of the cardholder, are provided
with add-on cards on payment of a specified fee.

Leveraged Investment Facility: This facility enables the cardholders to subscribe to designated
equity or debenture issues in the primary market and schemes floated by mutual funds.

Factors that contributed to the increased uses of credit cards:

The perception to own credit cards has changed and cards are being viewed as a convenient
substitute to carrying cash and also availing credit for short periods.

India ranks at the bottom in terms of usage of credit cards when compared to China, Taiwan and
Malaysia.

Usage of credit card picked up only last ten years.

Indians viewed the cards as a luxury and so, Indian banks were not willing to venture it.

Over the last ten years, things have changed drastically since the idea of owning a credit card has
had its roots in the minds of millions of Indians.

Enlightened customer has started viewing the card as a convenient substitute to carrying cash.

The change in mindset is clear from the growth, both in terms of absolute numbers and growth
rates.

The importance of having a pie in the credit cards segment was not lost on any bank, and most
banks started their credit card operations. Currently, there are more than 20 banks offering credit
cards, but the market share of the top five exceeds 75%.

Credit card is a low-margin but high-volume business.

The initial investments required by a bank are very high.

The income per card is low, thereby requiring large volumes in terms of cards issued and the
transactions finance to make the operations profitable.

The bigger businesses and merchants are already acquired by the existing players, so for new
banks, braking into this business and convincing a merchant is increasing because the banks are
shifting towards lower end merchants.

Competition in acquiring business, new categories of merchants are coming up.

The foreign banks have a dominant share due to various reasons like having been in the field for
decades, sound operational and financial strength, strong brand recognition etc.
They were catering to the upper segments and charged high annual fees.

According to Visa International, an average Indian cardholder uses his card 9.3 times. A number
of card owners do not use their cards and almost 20-30% cards are inactive.

In India, two players dominate the credit cards industry,-Visa and MasterCard and 15 out of 17
banks provide credit card services through Visa or MasterCard.

Banks adopted a strategy of reaching lower down the income strata by lowering down their
eligibility norms, the credit limits are set at lower levels as compared to the foreign banks.

As a result of this strategy, the credit cards base is widening day by day with the increase of base
in B-grade cities.

ING Vysya Credit Cards

Description of Charges

Interest Charges

The initial interest rate is 3.15% per month (i.e. 37.8%

annualized). This can change periodically based on your

spend, payback and utilization patterns

Rate of interest can increase up to 3.5% per month (i.e.

42.0% annualized), in case of default.

For Cash withdrawals, rate of interest is 1.5% per month

(i.e. 18% annualized) from the date of withdrawal to the

date of billing and regular interest rate as applicable will

be charged beyond the bill date.

Annual Fee

There are no joining fees or annual fees for the ING Vysya

Bank Classic Card.

Late Payment Charges

Rs. 300 for bills up to Rs. 10000

Rs. 600 for bills from Rs. 10001 - 25000

Rs. 700 for bills above Rs. 25000

Over Limit Charge

2.5% of the amount over the Credit Limit (subject to a

minimum of Rs. 500)

Cheque/ECS Bounce

Charge

Rs. 250 per returned cheque/ECS

Railway Ticket Booking

or Cancellation Surcharge

(Counter booking)

2.5% of transaction value (subject to a minimum of Rs. 25)

Railway Ticket Booking

Surcharge (Internet

booking)
•

1.8% of transaction value for regular transactions;

2.8% of transaction value for 3 EMI transaction

Statement Request

(beyond 3 months)

Rs. 100

Card Replacement Fee

Rs. 100

Outstation Cheque Charge

(Charge based on the

value of the

cheque/instrument)

Up to Rs. 10000 - Rs. 50 per cheque

Rs. 10001 to Rs. 100000 - Rs. 100 per cheque

Above Rs. 100001 - Rs. 150 per cheque

Foreign

Currency

Mark up of 3.5% (service taxes as applicable)

Transactions
Petrol Transaction Charge

No transaction fees on petrol purchase

Cash Advances

Transaction Fees

2.0% on advanced amount (subject to a minimum of Rs.

300 and US$7.5 at International ATMs)

Service tax, as notified by the Government of India, is applicable on all fees, interest and

other charges and is subject to change, as per relevant regulations of the Government of

India.

NOTE:

The ING Vysya Credit Card programme is a programme jointly formulated by

ING Vysya Bank (hereinafter referred to as "ING Vysya") and Citibank for issue of

Credit Cards to the customers of ING Vysya. The Credit Cards are issued by Citibank

pursuant to an agreement entered into between Citibank and ING Vysya. By virtue of

the said agreement, Citibank shall issue Credit Cards, manage the operations, service

and recovery of dues of the Credit Cards while sourcing of applications and marketing

of the Credit Card may be carried out either by ING Vysya and Citibank jointly or

independently.

I haven't reported my missing credit card to the police because whoever stole it is spending
less than my wife.

Why don't we call on the credit card companies to be accountable? They need to be held
accountable for their predatory lending practices.
Paul Wellstone

“Money isn't everything - there's credit cards, money orders, and travelers' checks”
Why I need a credit card - Advantages vs. Disadvantages
Advantage and disadvantages of credit cards

Basha Shaikh

29 Feb 2008

A credit card from VISA, MasterCard, or any other network allows you to pay for purchases or
services by borrowing from the credit card company. You then repay by making monthly payments
towards the amount borrowed. That is, you do not have to repay the whole borrowed amount in full
at one go.

Then there are charge cards, such as the American Express card, that require full payment of the
borrowed amount each month.

Either way, the credit card is a very convenient alternative to paying by cash.

Essentially a credit card allows you to:

Purchase products or services whenever and wherever you 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 you 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.

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 you financial
flexibility when you travel abroad.

Advantages:

1. They allow you to make purchases on credit without carrying around a lot of cash. This
allows you a lot of flexibility.

1. They allow accurate record-keeping by consolidating purchases into a single statement.

1. They allow convenient remote purchasing - ordering/shopping online or by phone. They

allow you to pay for large purchases in small, monthly installments.

1. Under certain circumstances, they allow you to withhold payment for merchandise which
proves defective.

1. They are cheaper for short-term borrowing - interest is only paid on the remaining debt, not
the full loan amount.
 1. Many cards offer additional benefits such as additional insurance cover on purchases, cash
back, air miles and discounts on holidays.

Disadvantages:

1. You may become an impulsive buyer and tend to overspend because of the ease of using
credit cards. Cards can encourage the purchasing of goods and services you cannot really
afford.
2. Credit cards are a relatively expensive way of obtaining credit if you don't use them carefully,
especially because of the high interest rates and other costs.
3. Lost or stolen cards may result in some unwanted expense and inconvenience.
4. The use of a large number of credit cards can get you even further into debt.
5. 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.

ABOUT THE MERCHANT SURVEY 2009

Objective: The merchant survey on card payments is being conducted with an objective to
understand the payment system from the perspective of an India retail merchant and to try
rationalizing its costing structure.
Background: In India the MasterCard and Visa rules prohibit surcharging by merchants unlike
in Europe and Australia. This has been a very big issue for the merchants in various countries. In
India, the card usage is increasing at more than 22% per year with last year’s transaction volume
being Rs. 83,903 crore. An approach paper is under preparation and in this connection, opinions
on having an appropriate system in place is being sought from all players. As is correctly
suggested by RBI, for such matters, merchant participation/consultation is very crucial. It is
expected that the study will be able to highlight several issues that the regulator may find useful
in its endeavour towards bringing in an efficient payment system for the good of all players
including the merchants and the customers.
Conduct and Coverage: This web based survey is being conducted by reaching company
management and/or senior-level employees familiar with the payment methods accepted by their
businesses. The survey is so designed as to achieve a representative sample of different
categories of retail businesses based on company size (as measured by number of employees and
annual sales) and activity.
Retailers are being asked questions regarding their acceptance and perceptions of various
payment methods which primarily includes cash, debit cards and credit cards. The purpose of the
survey is

 to determine retailers’ acceptance of various payment methods

 to estimate the share of retail sales proceeds from cash, debit cards and credit cards
 to obtain data on the costs incurred by retailers for each payment method
 to understand possible indirect subsidization provided by cash consumers for card
consumers
The survey also addresses some of the existing rules of major credit card networks
(MasterCard/Visa) and its impact on retail business. The survey aims to analyze several aspects
of these rules and their behavioral and social impact on Indian merchants, including

 the no surcharge rule (i.e., merchants are prohibited to pass the bank imposed merchant
discount rate, that they incur on every card transaction, on to their customers),
 less popularity of debit cards vis-a-vis credit cards,
 Europe and Australia applying mechanisms to differentiate credit cards, debit cards and
cash in terms of the cost associated with the payment modes,
 inherent system in the credit cards payments which is convenient to use but forces one to
take loan (and thus increase the cost of the payment).

To merchants, a credit card transaction usually costs more than the corresponding cash
transaction because someone has to pay for the credit (or loan) taken while using a credit card.
By not passing the surcharge, merchants allow consumers to perceive that all payment
systems have the same transaction costs. This leads them to choose among the modes of
payment available on the basis of one’s convenience and without giving due consideration to the
costs that merchants have to bear. This usually leads to unwarranted cost pressures on the
merchants necessitating adjustment in pricing structure of their merchandise.

Some merchants correctly believe that not accepting credit cards would lead to downslide of
their business since consumers want to make use of their plastic money rather than carrying cash
in hand. But there are alternate (though less popular, as of now, in India) plastic money which is
relatively cheap for the merchants and a good substitute of credit cards, for example the (pin-
based) debit cards.
Needless to say, the survey results that are expected to bring in rationalization of costing
structure of the payment system cannot be completed without active support from the merchants.
Your opinion is therefore very valuable to us. Kindly respond to all the questions. This will help
in building opinions across the cross-sections of the retail sector. Your responses would not
associate your company name at the time of collating the data. For any enquires, you may
contact Prof. Ashish Das at ashish@math.iitb.ac.in.