Credit Card Industry In India

The credit card business of India is booming with just over 24 million credit cards in circulation.

They are still not accepted with only about 28% of the Indian population possessing one.

But even so between 2008 and 2009 the incidence of nonpayment on those India credit cards rose via 20%.

Most likely just being aware of a few accepted mistakes would lower this incidence by a considerable amount.

This process involves the following parties:

   

Cardholder: the owner of the card used to make a purchaseMerchant: the business accepting credit card payments for products or services sold to the cardholderAcquirer: the financial institution or other organization that provides card processing services to the merchantCard association: a network such as VISA®, MasterCard®, Discover® (and others) that acts as a gateway between the acquirer and issuer for authorizing and funding transactionsIssuer: the financial institution or other organization that issued the credit card to the cardholder

The flow of information and money between these parties—always through the card associations—is known as the interchange, and it consists of a few steps:

 

1.AuthorizationThe cardholder pays for the purchase and the merchant submits the transaction to the acquirer. The acquirer verifies with the issuer—almost instantly—that the card number and transaction amount are both valid, and then processes the transaction for the cardholder. 2.BatchingAfter the transaction is authorized it is then stored in a batch, which the merchant sends to the acquirer later to receive payment (usually at the end of the day).

The entire process, from authorization to funding, usually takes about 3 days. However, Bank of America Merchant Services offers next-day deposits to customers with a Bank of America business checking account.1

2.Clearing and settlement

The acquirer sends the transactions in the batch through the card association, which debits the issuers for payment and credits the acquirer. In effect, the issuers pay the acquirer for the transactions. 3.FundingOnce the acquirer has been paid, the merchant receives payment. The amount the merchant receives is equal to the transaction amount minus the discount rate, which is the fee the merchant pays the acquirer for processing the transaction.

How card processing benefits your business

Regardless of your business's size or industry, there are many benefits in having the ability to process credit card transactions.

By accepting multiple forms of payment, you give your customers options and improve their experiences. You also introduce a new audience of customers to grow your business organically.

In addition, card processing is an efficient, convenient payment solution that helps you improve cash flow by ensuring timely, automatic deposits to your account.

Value-added services—like gift card and prepaid card programs—can provide a new channel for generating profits and increasing your revenue. Check protection services can help you limit your risk from bad checks.

1. Merchant calculates the amount of purchase and asks buyer for payment

2. Buyer presents merchant with a credit card.

3. Merchant runs credit card through the point of sale unit. The amount of the sale is either hand-entered or transmitted by the cash register.

4. Merchant transmits the credit card data and sales amount with a request for authorization of the sale to their acquiring bank.

5. Point of sale units are usually set to request authorization at the time of sale, and then actually capture the sales draft at a later time.

6. The acquiring bank that processes the transaction, routes the authorization request to the card-issuing bank. The credit card number identifies type of card, issuing bank, and the cardholder's account.7. If the cardholder has enough credit in their account to cover the sale, the issuing bank authorizes the transaction and generates an authorization code. This code is sent back to the acquiring bank.

8. The issuing bank puts a hold on the cardholder's account for the amount of the sale. Note that the cardholder's account has not been actually charged yet

9. At a later time, probably that night when the store is closing up, the merchant reviews all the authorizations stored in the point of sale unit against the signed sales drafts. When all the credit card authorizations have been verified to match the actual sales drafts, the merchant will capture, or transmit, the data on each authorized credit card transaction to the acquiring bank for deposit. This is in lieu of depositing the actual signed paper drafts the with the bank.

10. The acquiring bank performs what is called an interchange for each sales draft, with the appropriate card-issuing bank. The card-issuing bank transfers the amount of the sales draft, minus an interchange fee to the acquiring bank [Baughn, 88] .

11. The acquiring bank then deposits the amount of the all the sales drafts submitted by the merchant, less a discount fee, into the merchant's bank account.

* Premium Credit Cards

* Cash Back Credit Cards

* Gold Credit Cards

* Airline Credit Cards

* Silver Credit Cards

* Business Credit Cards

* Balance Transfer Credit Cards

* Co-branded Credit Cards

* Low Interest Credit Cards

* Lifetime Free Credit Cards

* Rewards

Types of Credit Cards

Cash back offers are a type of rewards program where the cardholder receives a cash rebate equal to a specified percentage of the amount charged to the card on an annual basis.

Cash back reward programs started appearing in 1990 when the Discover Card made their industry-shattering 1% cash back offer.

Cash back programs typically come with higher interest rates than cards that do not offer a cash back incentive. If the cardholder does not pay their balance in full every month, that higher interest rate can offset the value of the cash back incentive.

Cash Back Credit Cards

Premium Credit Cards

These cards offer incentives and benefits beyond that of a regular credit card. Examples of premium credit cards are Gold and Platinum cards that offer cash back, reward points, travel upgrades, and other rewards to cardholders. Premium cards can have higher fees and usually have minimum income and credit score requirements.

Both standard credit cards and premium credit cards have specific types of credit cards. Student credit cards, zero percent interest cards, and travel cards are just a few types available.

There are 25 major airline credit cards available in India. These cards provide a number of travel related benefits to cardholders.

Diners Club British Airways Credit Card

Following are some interesting facts about Diners Club British Airways Credit Card:

* First year is free.

* Renewal fee is INR 3000.

* Cardholders can earn 2.5 BA miles. This offer is applicable for every INR 100 spent by cardholders with the card.

* Regular interest rate is 2.75% per month.

* Cardholders get access to international standard business centers and lounges.

Airline Credit Card

* Cash advance fee is 3% per month. Minimum cash advance fee is INR 100. * Cardholders receive priority booking facilities in busy flights. They receive meal and seat preferences as well. * Issuer is Diners Club. * There are no joining fees. * Co-brand of this card is British Air

A charge card is a credit card without a credit limit. On a charge card, the balance must be paid in full at the end of each month. Charge cards typically do not have a finance charge or minimum payment since the balance is to be paid in full. Some charge cards don't have a preset spending limit, giving you the flexibility to charge as much as you want as long as you repay the balance by the due date.

Charge cards typically have more qualification requirements including a high credit score and income level.

Late payments may have stricter penalties on a charge card. You may receive a late fee, charge restrictions, or card cancellation depending on your card agreement.

Charge Credit Cards

Lifetime free Credit Cards

Lifetime free credit cards come to you absolutely free with no annual fee. Free for life credit cards may require a minimum spend per year in order provide the card free of cost. Please refer to the terms and conditions of these offers with the respective banks. Compare, Choose and Apply for your Lifetime Free Credit Card.

Business credit cards are designed specifically for business use. They provide business owners with an easy method of keeping business and personal transactions separate. There are standard business credit and charge cards available.

Business Credit Cards

Secured credit cards are an option for those without a credit history or those with blemished credit. Secured cards require a security deposit to be placed on the card. The credit limit on a secured credit card is equal to the amount of the deposit made. Secured credit cards have revolving balances depending on the purchases and payments made.

Secured Credit Cards

Limited purpose credit cards can only be used at specific locations. Limited purpose cards are used like credit cards with a minimum payment and finance charge. Store credit cards and gas credit cards are examples of limited purpose credit cards.

Limited Purpose Cards

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