Credit Card

CREDIT CARD
Credit Card originated in the USA during 1920s, when individual firms, such as oil companies and hotel chains began issuing them to customers for purchase made at their outlets. Their use increased immensely after World War II. A latter innovation came as the “Bank Credit Card System.” During last decade, use of credit cards gained acceptance in India. Some may still remember the Now it is becoming popular as a status symbol to convenience, security and worldwide acceptance by banks, merchants, transporters, hotels etc. Without the RBI's prior approval, a bank can enter into the credit card sector independently or in association with other card issuing agencies. On the world map, 1970s witnessed the evolution of electronic card authorization systems, electronic clearing and settlement systems and electronic data capture at the point of sale terminals, virtually eliminating paper work and significantly speeding up the process. Card industry today is going through a technological revolution and is moving towards the introduction of ‘Smart Cards’, which use computer chips, biometrics, etc. Types of Payment Cards PAYMENT CARDS Pay Now Pay Later Pay Before Debits Cards Cards Pre-payment ATM ATM + Charge/debit Credit Prepaid / Only POS the account cards Stored value cards Bank Credit Card is the most commonly used payment device issued by banks. It is a kind of revolving consumer credit account with a limit that can be availed in part or in full. Once the outstanding balance is paid, the limit is restored for use again. Credit card holders can use their cards to buy goods and services from various outlets or to obtain cash through ATMs / branch. ATM Cards allow customers to access their accounts at any time—24 hours a day, every day of the year, through automated teller machines. They can withdraw cash, transfer funds, find out their account balance and perform other financial transactions. Debit Cards, like ATM cards, directly accesses a customer's account. The debit card is a hybrid of ATM and credit card. The card directly accesses or debits a designated savings bank account. Whereas in the case of credit cards, a grace credit period of 25 to 30 days for making the payment is available. These can be used at merchant locations to buy goods and services or at ATMs. Smart Cards are credit card sized plastic cards with an embedded computer chip. Using special terminals designed to interact with the embedded chip, the card can perform special functions. This is essentially a prepaid card. There are two types of smart cards—Memory cards and Microprocessor cards. Memory cards are static. They store information and value that is not programmable i.e. not ‘reloadable’, e.g. Phone cards and other prepaid cards. Microprocessor cards have internal memory, have more storage capabilities and the data stored in the chip is dynamic and ‘reloadable’.

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What is a SMART CARD & from where did it start? A Smart Card looks like a credit card but contains a micro power and memory. It (size 2.5" x 1'2" x .5 mm) can be loaded with the desired value (just as `wallet') and when used to buy something, the amount is siphoned off to the seller's smart card through a 'reader'. Smart Cards are the next

stage of monetary evolution after commodity money. The card was invented in France and is quite popular in European countries. What are the uses of Smart Card? Because of no alternative one-fifths of India's money is held in cash. This movement has four effects and which smart card can help solve: 1. Avoidance of cash getting torn & soiled and then replacement. 2. Avoid loss of interest on cash idling at home. 3. Avoid enormous strain on RBI, which has to pump, store and distribute large sums of cash across the country. 4. Help banks deploy all this money effectively and put it to productive use e.g. if even 5% - 15% of the cash utilization were to decrease, some Rs.30000 - 35000 crore of funds would be freed for the banking system. Has the use of smart card started in India? An experiment sponsored by RBI and some banks has just been completed at IIT Mumbai and the report is yet to be approved by RBI considering the technical standards for the introduction of smart cards in India. Among banks Bank of Baroda has taken a lead and is involved with a small project in Ahmedabad where it is putting about 3000 customers' passbooks on Smart Card. Another bank is IDBI Bank which has started it in Renukoot (U.P.).



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