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Business credit card

Credit Cards

I. Introduction

Industries in the manufacturing sector grew because they produced tangible goods which satisfied physiological needs of human beings like food, shelter and clothing. As these basic needs were fulfilled there was a demand for improved satisfaction and this led to a proliferation of variations in the same product and number of companies involved in their manufacture.

The economic development of society and the socio-cultural changes accompanying these changes has lead to the growth of service industry. Increasing affluence combined with increasing complexity of life and increasing insecurity has led to the phenomenon of credit cards. The business credit card provide convenience and safety in the purchasing process.

The business credit card is generally known as plastic money, as these cards are made of plastic, is widely used by the consumers all around the world. The convenience and safety factors add value to these cards. The changes in the consumer behavior led to the growth of credit cards.

Credit card is a document that can be used for purchase of all kinds of goods and services in the world. It is a card that identifies its owner as one who is entitled to purchase things without cash, purchase services without money and be eligible to get credit from a number of establishments. The cards issuer issues credit cards depending on the credibility of the customers and also enters into a tie-up with merchant establishments which are engaged in various fields of business activities. The issuer, for its convenience and for proper scrutiny sets up a credit limit on its card holders and a floor limit for its merchant establishments. The credit card offers the individual an opportunity to buy rail or air tickets, make purchases from shops and stay at hotels when they need.

A business credit card also enables an individual to purchase certain products or services without paying for them immediately. He needs only to present the credit card at the cash counter and has to sign some forms. In short, he can make purchase against credit card without making immediate cash payment. Therefore, credit cards can be considered as a good substitute for the cash and cheques. However, these cards will be accepted only by those establishments which have consented to entertain, them. These establishments are known as Merchant Establishments.

II. Types of credit cards

The business credit card system can give a wide range of products and services. The varied uses of credit cards can be obtained from a spectrum of acceptance venues. Todays payment business is growing dramatically while consumer demand is driving the industrys growth, technology is making it possible to address that demand with a broader range of products and with the ability to support these products, at an expanded spectrum of points of interaction. The growth of service industry mainly depends on knowing the needs of the customer. These needs are taken care off by different card issuers who target different segments of customers. Thus there are generally four basic types of cards based on the issuers:





There are many types of business credit card which are being used in India and in the world. These cards can be classified as follows depending on the geographical reach, usage pattern and the class of membership, etc.

Category I: Based on Mode of Credit Recovery

a) Revolving credit type of credit card: This credit card is generally built around the revolving credit principle. Generally a limit is set to the amount of money one can spend in a month using the card. At the end of every month, the card holder has to pay a percentage of the outstanding credit. Interest is charged on the outstanding amount. The interest rate charged by the issuer may vary from bank to bank.

b) Charge Card: A charge card is a convenient instrument not a credit. Instrument. Instead of paying cash or cheque every time you make a purchase, this facility gives a consolidated bill for a specific period. Bills are payable in full on presentation, so there are no interest charges and no pre-set spending limits either.

Category II: Based on Status of Credit Card

a) Standard Cards: It is a normal credit generally issued by all card issuing banks, by which a card holder is able to purchase without having to pay cash immediately. It offers limited privileges to card holders when compared to the holders of others cards in this category. Some banks issue standard cards in the brand name as CLASSIC cards, etc.

b) Business Card: Business cards are generally issued to small partnership firms, solicitors, firms of CAs, tax consultants, etc. These cards are given to the executives of a firm to make their business trips more and more convenient. Ii enjoys more credit limits and privileges than the STANDARD cards. These cards are issued in the name of EXECUTIVE card by some banks. These cards mainly serve the credit needs of business persons particularly when they are traveling.

c) Gold Card: The Gold card is one which has got a high value for the elite. It offers the card holder some additional benefits and facilities which he cannot enjoy with standard or executive cards. These cards will have more credit limits, more cash advance limits than the other cards.

Category III: Based on Geographical Validity

a) Domestic card: These are generally available credit cards from most of the banks and will be valid in India and Nepal only. They cannot be used in rest of the countries. All the transactions will be in rupees only.

b) International card: This type of credit cards will be issued to persons who travel abroad frequently. These cards will be honoured in every part of the world except in India and Nepal. The card holder can make purchases in currencies such as Dollars etc., subject to RESERVE BANK OF INDIA AND FEMA rules and regulations.

Category IV: Based on Franchise or tie-up

a) Proprietary card: Generally credit card issuers will have their own brand of credit card reflecting the name of the bank. These cards will be issued by the banks in addition to their other tie-up cards.

b) VISA: This is a type of credit card which can be issued by any bank, which is having tie-up with VISA International Corporation, USA. The banks which are issuing Visa cards on franchise basis can avail the facilities of Visa network for their transactions.

c) Master card: This is also a type of business credit card having brand name as Master card. The issuing bank has to obtain permission or franchise from the master card corporation of USA. The franchised cards will be honoured by the establishments which are in the master card network.

d) Domestic tie-up cards: These are the cards issued by a bank having a tie-up with domestic credit card brands such a Can card and In card etc. These banks issue cards to users through the original banks.

However, they can have the bank name on the card. They give credit to customers on similar lines as the original card issuers.

Category V: Based on the category of the user

a) Individual cards: This category of cards is issued to individual persons.

Generally all the brands of cards will be given to individuals except Corporate cards.

b) Corporate cards: This type of credit cards is issued to corporate companies and business firms only. These credit cards will be used by the executives and top officials of the firms. The cards bear the name of the firm. Bills will be paid by the firm to the banks.

III. Additional facilities and services

Some of the facilities and services are as follows:

a) Free Insurance protection

b) Emergency cash withdrawal

c) Twenty-four hour customer service

d) Photo card option

e) Travel privileges

f) Temporary credit line increase

g) Draft on phone

h) Choose when and how to pay

i) Buy anything on your card

j) Purchase protection

k) Fuel facility at petrol pumps

l) Emergency medical advance facility

m) Supplementary cards

n) Hotels discount facility

o) Joint credit card and ATM facility

p) Validity and renewal of the card

IV. Credit card business cycles

The credit card operating cycle comprises of the following six steps:

1. Card holder purchases goods and services and gives credit card.

2. Merchant Establishment delivers goods after taking credit card and noting the number and taking signatures on some forms.

3. Merchant Establishment raises the bill for the purchase and sends it to the credit card issuing bank for payment.

4. Issuing bank pays the amount to the Merchant Establishment.

5. Issuing bank raises the bill on the credit cardholder and sends it for payment.

6. Credit cardholder makes the payment to the Issuing bank.

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