Credit Cards

Presented By:
Abhishek
Vijayvargiya
What are Credit Cards?
Pre-approved credit which can be used for the
purchase of items now and payment of them
later.
Are Debit Cards a type of
Credit Card?

NO! Debit Cards are:

$ Not the same as credit
cards
$ Not a form of credit at
Debit=Credit all
$ Directly linked to your
bank account.

Debit cards allow payment and purchase

to happen simultaneously
 Types of Credit Cards
 Bank Credit Cards
 Flexible account
 Accepted anywhere
 Available from a financial institution (commercial bank,
credit union) with a service provider (Visa,
MasterCard)
 Retail Credit Cards
 Purchases allowed at a particular retailer
 Can work with bank to offer a bank credit card with
the retailer’s logo
Types of Credit Cards
Cont..
 Travel and Entertainment Cards
 Similar to bank credit cards
• Can make purchases at a number of businesses
 Entire balance must be repaid in 30 days
 Prestige Cards
 High status accounts
 Higher credit qualifications
 Special benefits
• i.e. Free travelers checks, higher credit limits
Types of Credit Cards
Cont..
 Affinity Cards
 Accounts through financial institutions
 Logo of sponsoring organization
 Financial institution donates percentage of
charges to organization
How Do Credit Card Companies
Make Money?

 Approve Borrowers With Terms Based on

Their Credit Score - Credit card companies
approve applicants for rates and terms that
change based on their credit scores. For
example, If I have excellent credit (e.g., above a
720 score), I will typically receive the lowest
interest rate and, possibly, a higher credit limit
on my card. Lower credit scores receive higher
interest rates and lower credit limits.
Income From Interest and
Finance Charges

 The number one money-maker for credit card

companies is interest charged on outstanding
balances.

 Late payment fees. If you pay your credit card bill

late, you can get hit with a penalty fee for late
payment. 85% of the banks raise interest rates
after customers pay credit card bills late. The
average credit card late payment fee is about $30.
Contd…
 Fees for exceeding your credit limit - If you charge
more to your card than the credit card company has
allowed, you may find that the charges go through
but you get hit with a penalty fee for exceeding your
credit limit. Some credit card companies charge a
$20 fee for exceeding your credit limit.

 Balance transfer fees. If you move an outstanding

balance from another credit card to their card, they
will charge you a interest rate.
Contd…

 Cash withdrawal fees. Credit card companies

encourage you to use your credit card as an ATM
card. But if you withdraw cash from an ATM machine
using a credit card, you'll probably be billed a one-
time fee in addition to paying interest from the
moment you receive the cash.

 Annual fees. Some credit cards charge an annual

fee.
By Selling Products and Additional Services

 If you have at least one credit card, You typically

receive "special offers" to purchase any number
of third-party products and services, including
loan payment "protection," life or auto
insurance, AD&D (accidental death or
dismemberment) insurance or membership in
buying clubs that promise the ability to buy
products at a large discount
By Selling Cardholder Information to Third
Parties:
Many credit card companies sell their cardholders
information to third parties to permit them to market
products and services to you. So additional income
comes to credit card companies through this activity.

Transaction Fees: Visa and MasterCard charge

merchants about 2% of the value of every transaction
billed to their credit cards.
 Credit card Terms

Annual   Balance    
Percentage Grace Minimum Calculation Annual Transaction Late
Rate for Period Finance Method for Fees Fees for Payme
Purchases for Charges Purchases Cash nt Fees
Purcha Advances
ses
    $.50 when Average      
Not less a finance daily   2% with a
19.9% than charge at balance $20 per minimum fee $29
  25 days a periodic method year of $3
  rate is (including
charged new
purchases)
Thank You!
Any
Questions?