7.credit card and debit card working and management
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7.credit card and debit card working and management
- 1. Credit card and Debit card Working and Management GROUP NO:7 Aditya Pande Anurag Goyal Mrugesh Chikhalikar Suchet Pajni Vishal Patel
- 2. Introduction to plastic money • Evolution of plastic cards • Plastic money – A new and easier way of paying for goods and services • Provides convenient usage alongwith incentives • An alternative to hire-purchase or loan on consumer goods • It,however,allows debt to pile-up that can lead to penalties • Major types of plastic money – Credit cards, Debit cards , Charge cards,co-branded cards
- 3. How Did It All Begin? • Debit cards Introduced around 1977- 1978 The launch highlighted the introduction of e-commerce and alternative means of payment • Credit cards Introduced in 1980 by Central BOI Banks acted as clearing houses for transactions and promoted their own brands Addition of magnetic strip introduced to enhance security measures Launch of ATM machines for ready access Present scenario - A household name
- 4. Credit cards • A part of a system of payments after the small plastic card issued to users of the system • A card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services • The issuer of the card grants a credit to the consumer from which the user can borrow money for payment to a merchant • Most credit cards are issued by local banks or credit unions, and are the shape and size-85.60 × 53.98 mm-ISO/IEC 7810 standard
- 5. Credit cards 1. Issuing bank logo 2. EMV chip on "smart cards" 3. Hologram 4. Credit card number 5. Card brand logo 6. Expiration Date 7. Card Holder Name 8. Contactless chip
- 6. Credit card numbering • Bank Identification Number • BIN- first six digits for MasterCard and Visa cards • Next nine digits-individual account number • Final digit-validity check code • Issue and expiration dates, extra codes such as issue numbers and security codes
- 7. Credit card numbering An example of the reverse side of a typical credit card: 1. Magnetic Stripe 2. Signature Strip 3. Card Security Code
- 8. How credit cards work
- 10. Parties involved • Cardholder • Card-issuing bank • Merchant • Acquiring bank • Credit Card association • Transaction network
- 11. Related terms • Interest charges • Benefits to customers • Grace period • Benefits to merchants • Rewards • Interchange fee • Discount fee
- 12. Debit Card • Provides an alternative payment method to cash when making purchases • Functionally, it can be called an electronic check, as the funds are withdrawn directly from either the bank account, or from the remaining balance on the card • It is also known as bank card or check card • Allow for instant withdrawal of cash, acting as the ATM card for withdrawing cash and as a cheque guarantee card • Merchants can also offer "cashback"/"cashout" facilities to customers, where a customer can withdraw cash along with their purchase
- 15. How Debit Cards work 1. Collecting payment data 2. Authentication 3. Authorisation 4. Settlement of funds
- 16. Some important tips… Do’s Prefer a debit card over a credit card Know all of your card’s hidden fees Always pay more than the minimum each month Pay on time, all the time Don’t’s Don’t use them for cash advances Don’t use them to pay for basics: rent, groceries, etc. Don’t charge more than you can pay off in a month Don’t let banks increase you credit limit
- 17. How are they different? Credit Card Debit Card • Borrowing money from a • Funds taken from the bank or financial institution. money that you have in (Spending "other's" money) your bank account. • Need not be connected to (Spending your "own" money) any bank account • Needs checking • Pay additional interest Account/Savings Account drawn on the amount • No interest to be paid borrowed • Limit: Equals your account • Limit: Credit line limit
- 18. Thank You!
Hinweis der Redaktion
- Focus on retail banking segment and global competition in late seventies and eighties led to the Co-branded card: Any credit card that is offered by a credit card company that is jointly sponsored by both a bank and a retail merchant. This type of card can generally be issued more cheaply than private label retail cards. This type of card is designed to give the issuing bank access to the retailer's customer base.Examples: ICICI Big Bazaar Gold Credit Card , Jet AirwaysCitibank Gold CardCharge card: A card that charges no interest but requires the user to pay his/her balance in full upon receipt of the statement, usually on a monthly basis. While it is similar to a credit card, the major benefit offered by a charge card is that it has much higher, often unlimited, spending limits.Incentives:reward points that can be redeemedCredit cards – Best form of consumer lending with respect to growth rate and profitablityHire-purchase:A method of buying goods through making installment payments over time. Under a hire purchase contract, the buyer is leasing the goods and does not obtain ownership until the full amount of the contract is paid.
- Credit cards: issuing cards like master card,visaMagnetic strip :application: point of salesThe use of debit card boomed to 28.8 million in 2006 and is expected to reach 34 million in 2017History of debit card indicates that the last 20 years have witnessed a radical change in the payment options and theplastic card has replaced cash.
- EMV-Europay,Mastercard ,Visa – 3 founder companies
- --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.
- Credit cards are issued after an account has been approved by the credit provider, after which cardholders can use it to make purchases at merchants accepting that card.When a purchase is made, the credit card user agrees to pay the card issuer. The cardholder indicates consent to pay by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a personal identification number (PIN). Also, many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet, known as a 'Card/Cardholder Not Present' (CNP) transaction.Electronic verification systems allow merchants to verify that the card is valid and the credit card customer has sufficient credit to cover the purchase in a few seconds, allowing the verification to happen at time of purchase. The verification is performed using a credit card payment terminal or Point of Sale (POS) system with a communications link to the merchant's acquiring bank. Data from the card is obtained from a magnetic stripe or chip on the card.Other variations of verification systems are used by eCommerce merchants to determine if the user's account is valid and able to accept the charge. These will typically involve the cardholder providing additional information, such as the security code printed on the back of the card, or the address of the cardholder.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.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).
- AUTHORIZATION – Approval code which the merchant stores with the transaction.BATCHING – Transactions stored in “batches” which are send to the acquirer.CLEARING AND SETTLEMENT – debits the issuers for payment and credits the acquirer.FUNDING - Merchant receives the amount totaling the funds in the batch minus the "discount rate.” CHARGEBACKS - Chargeback is an event in which money in a merchant account is held due to a dispute relating to the transaction.
- 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. 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.
- Interest charges-Credit card issuers usually waive(not-claim) interest charges if the balance is paid in full each month, but typically will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid.For example, if a user had a $1,000 transaction and repaid it in full within this grace period, there would be no interest charged. If, however, even $1.00 of the total amount remained unpaid, interest would be charged on the $1,000 from the date of purchase until the payment is received. The general calculation formula most financial institutions use to determine the amount of interest to be charged is APR/100 x ADB/365 x number of days revolved. Take the Annual percentage rate (APR) and divide by 100 then multiply to the amount of the average daily balance (ADB) divided by 365 and then take this total and multiply by the total number of days the amount revolved before payment was made on the account.Interest rates can vary considerably from card to card, and the interest rate on a particular card may jump dramatically if the card user is late with a payment on that card or any other credit instrument, or even if the issuing bank decides to raise its revenue.Benefits to customers-The main benefit to each customer is convenience. Compared to debit cards and cheques, 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. Additionally, carrying a credit card may be a convenience to some customers as it eliminates the need to carry any cash for most purposes.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 vary, but usually range from 20 to 50 days depending on the type of credit card and the issuing bank. 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.Benefits to merchants-For merchants, a credit card transaction is often more secure than other forms of payment, cash, because they discourage theft by the merchant's employees and reduce the amount of cash on the premises.For each purchase, the bank charges the merchant a commission (discount fee) for this service and there may be a certain delay before the agreed payment is received by the merchant. The commission is often a percentage of the transaction amount, plus a fixed fee (interchange rate). Some small merchants require credit purchases to have a minimum amount to compensate for the transaction costs.Rewards-Many credit card customers receive rewards, such as frequent flyer points, gift certificates, or cash back as an incentive to use the card.Rewards are generally tied to purchasing an item or service on the card, which may or may not include balance transfers, cash advances, or other special uses. Depending on the type of card, rewards will generally cost the issuer between 0.25% and 2.0% of the spread. Networks such as Visa or MasterCard have increased their fees to allow issuers to fund their rewards system. Some issuers discourage redemption by forcing the cardholder to call customer service for rewards. Fees charged to customersLate payments or overdue payments Charges that result in exceeding the credit limit on the card (whether done deliberately or by mistake), called over limit fees Returned cheque, fees or payment processing fees (eg phone payment fee) Cash advances and convenience cheques (often 3% of the amount)Transactions in a foreign currency (as much as 3% of the amount). A few financial institutions do not charge a fee for this. Membership fees (annual or monthly), sometimes a percentage of the credit limit. Exchange rate loading fees (these may sometimes not be reported on the customer's statement, even when they are applied)
- 1. Collecting payment dataPayment details are entered into the payment device or system. They could be entered by a call centre operator, read by a card-reader or entered directly into an internet page.2. AuthenticationDetails of the purchase, details from the card and the PIN are sent through to WorldPay. We identify the relevant card scheme (Visa, MasterCard etc.) and send the details through them to the bank or other institution that issued the card.If the details can't be verified, the payment is normally declined and the shopper or payee is asked to use another type of payment.3. AuthorisationThe issuing bank checks the cardholder's identity, that the account has sufficient funds and that the card hasn't been reported lost or stolen. If everything is OK, the issuing bank authorise the amount requested and reserve those funds. Once the payment transaction is complete, we send a follow-up instruction to the bank to debit the funds.4. Settlement of fundsYour WorldPay merchant account is credited with the value of the card transaction within four working days (depending on the card issuing bank and your agreement with us).Every month, we'll send you a merchant statement which details the transactions processed, and how much you've paid for each transaction.Read more here - http://ps.velocitysc.com/learnabout/howdebitcardprocessingworks.aspx