A credit card is a payment card issued to users as a system of payment. It allows the cardholder to pay for goods and services based on the holder's promise to pay for them. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

A credit card typically involves a third-party entity that pays the seller and is reimbursed by the buyer, whereas a charge card simply defers payment by the buyer until a later date.

The size of most credit cards is 3 3 ⁄8 × 2 1 ⁄8 in (85.60 × 53.98 mm), conforming to the ISO/IEC 7810 ID-1 standard. Credit cards have a printed or embossed bank card number complying with the ISO/IEC 7812 numbering standard. Both of these standards are maintained and further developed by ISO/IEC JTC 1/SC 17/WG 1.

• Cardholders - persons who are authorized to use credit cards for the payment of

goods and services;

• Card issuers - institutions which issue credit cards;

• Merchants - entities which agree to accept credit cards for payment of goods and

services;

• Merchant acquirers – Banks/NBFCs which enter into agreements with merchants to process their credit card transactions; and

Credit card associations - organisationsthat license card issuers to issue credit cards under their trademark, e.g. Visa and MasterCard, and provide settlement services for their members (i.e. card issuers and merchant acquirers).

Credit cards can be broadly categorised into two types: General purpose cards and private label cards: The former are issued under the trademark of credit card associations (VISA and Mastercard) and accepted by many merchants while the latter are only accepted by specific retailers (e.g. a departmental store).

Banks in India can undertake credit card business either departmentally or through a subsidiary company set up for the purpose. They can also undertake domestic credit card business by entering into tie-up arrangement with one of the banks already having arrangements for issue of credit cards.

Prior approval of the Reserve Bank is not necessary for banks desirous of undertaking credit card business either independently or in tie-up arrangement with other card issuing banks. Banks can do so with the approval of their Boards. However, only banks with networth of Rs.100 croreand above should undertake credit card business. Banks desirous of setting up separate subsidiaries for undertaking credit card business would, however, require prior approval of the Reserve Bank. Banks should adopt adequate safeguards and implement the guidelines enunciated in this circular in order to ensure that their credit card operations are run in sound, prudent and customer friendly manner.

Most of the card issuing banks in India offer general purpose credit cards.These cards are normally categorisedby banks as platinum, gold or classic to differentiate the services offered on each card and the income eligibility criteria. Banks may, at the request of a cardholder, issue a supplementary card (also referred to as ‘add-on cards’) to another individual who is usually an immediate family member of the cardholder.

It is quite common for banks to partner with business corporations or non-profit making organizations (e.g. charitable or professional bodies) to issue co-branded cards. However they need to undertake due diligence on the non-bank entity to protect themselves against the reputation risk to which they are exposed to in such an arrangement. NBFCs, which desire to enter into a co-branding arrangement for issue of credit cards with banks, may be guided by the instructions contained in circular No. DNBS (PD) CC No.83/03.10.27/2006-07 dated December 04, 2006

Banks may also issue corporate credit cards to the employees of their corporate customers.

Each bank must have a well documented policy and a Fair Practices Code for credit card operations. The Banking Codes and Standards of India(BCSBI) has released a

“Code of Bank’s Commitment to Customers”(Code) in July 2006 as also a Guidance

Note in December 2006, which have been adopted by most of the banks with the

approval of their Boards. Such of the banks which have subscribed to the BCSBI Code

may incorporate the principles contained in BCSBI Code for evolving their Fair

Practices Code for credit card operations, in lieu of IBA Fair Pratices Code for credit

card operations. The banks’ Fair Practices Code, should at a minimum, incorporate the

relevant guidelines contained in this Master Circular. Banks/NBFCs should also widely

disseminate the contents of this Master Circular, including through their websites.

Issue of cards Banks/NBFCs should ensure prudence while issuing credit cards and independently assess the credit risk while issuing cards to

persons, especially to students and others with no independent financial means. Add-on cards i.e. those that are subsidiary to the principal card, may be issued with the clear understanding that the liability will be that of the principal cardholder.

Interest rates and other charges Credit card dues are in the nature of non-

priority sector personal loans and as such, upto June 30, 2010, banks were free to determine the rate of interest on credit card dues without reference to their BPLR and regardless of the size in terms of the Master Circular on Interest rates on advances.

Banks are advised to be guided by the instructions contained in the circular while determining the interest rate on Credit Card dues.Banks have also

been advised vide our circular no. DBOD No.Dir.BC.93/13.03.00/2006-07 dated May

7, 2007 that they should prescribe a ceiling rate of interest, including processing and

other charges, in respect of small value personal loans and loans similar in nature.

The above instructions are applicable to credit card dues also. In case, banks/ NBFCs

Wrongful billing The card issuing bank/NBFC should ensure that wrong

bills are not raised and issued to customers. In case, a customer protests any bill, the bank/ NBFC should provide explanation and, if necessary, documentary evidence may also be provided to the customer within a maximum period of sixty days with a spirit to amicably redress the grievances.

Use of Direct Sales Agent (DSAs) / Direct Marketing Agents (DMAs) and other agents

When banks /NBFCs outsource the various credit card operations, they have to be extremely careful that the appointment of such service providers does not compromise with the quality of the customer service and the banks'/NBFCs' ability to manage credit, liquidity and operational risks. In the choice of the service provider, the banks/NBFCs have to be guided by the need to ensure confidentiality of the customer’s records, respect customer privacy, and adhere to fair practices in debt collection.

Protection of Customer Rights Customer’s rights in relation to credit card operations primarily relate to personal privacy, clarity relating to rights and obligations, preservation of customer records, maintaining confidentiality of customer information and fair practices in debt collection. The card issuing bank/NBFC would be responsible as the principal for all acts of omission or commission of their agents

1. Right to privacy

2. Customer confidentiality

3. Fair Practices in debt collection

4. Insurance cover to cardholders

Redressal of Grievances Generally, a time limit of 60 (sixty) days may be given to the customers for preferring their complaints / grievances. The card issuing bank /NBFC should constitute Grievance Redressalmachinery within the bank/NBFC and give wide publicity about it through electronic and print media. The name and contact number of designated grievance redressal officer of the bank /NBFC should be mentioned on the credit card bills. The designated officer should ensure that genuine grievances of credit card subscribers are redressed promptly without involving delay.

Internal control and monitoring systems With a view to ensuring that the quality of

customer service is ensured on an on-going basis in banks/NBFCs, the Standing Committee on Customer Service in each bank/NBFC should review the credit card operations including reports of defaulters to a Credit Information Company which has obtained Certificate of Registration from RBI and of which the bank / NBFC is a member and credit card related complaints on a monthly basis and take measures to improve the services and ensure the orderly growth in the credit card operations. Banks should put up detailed quarterly analysis of credit card related complaints to their Top Management. Card issuing banks should have in place a suitable monitoring mechanism to randomly check the genuineness of merchant transactions.

Fraud Control

Banks/NBFCs should set up internal control systems to combat frauds and actively participate in fraud prevention committees/ task forces which formulate laws to prevent frauds and take proactive fraud control and enforcement measures.

With a view to reducing the instances of misuse of lost/stolen cards, it is recommended to banks/NBFCs that they may consider issuing (i) cards with photographs of the cardholder (ii) cards with PIN and (iii) signature laminated cards or any other advanced methods that may evolve from time to time.

Convenience--Credit cards can save you time and trouble--no searching for an ATM or keeping cash on-hand.

Record keeping--Credit card statements can help you track your expenses. Some cards even provide year-end summaries that really help out at tax time.

Low-cost loans--You can use revolving credit to save today (e.g., at a one-day sale), when available cash is a week away.

Instant cash--Cash advances are quick and convenient, putting cash in your hand when you need it.

Establishes a credit history. Buying something on credit with some creditors (even when you can afford to pay cash for it) means you have a credit record.

Build positive credit--Controlled use of a credit card can help you establish credit for the first time or rebuild credit if you've had problems in the past--as long as you stay within your means and pay your bills on time.

Purchase protection--Most credit card companies will handle disputes for you. If a merchant won't take back a defective product, check with your credit card company.

Balance surfing--Many credit card companies offer low introductory interest rates. These offers allow you to move balances to lower-rate cards.

Overuse--Revolving credit makes it easy to spend beyond your means.

Paperwork--You'll need to save your receipts and check them against your statement each month. This is a good way to ensure that you haven't been overcharged

High-cost fees--Your purchase will suddenly become much more expensive if you carry a balance or miss a payment.

Unexpected fees--Typically, you'll pay between 2 and 4 percent just to get the cash advance; also cash advances usually carry high interest rates.

No free lunch--The high interest rates and annual fees associated with credit cards often outweigh the benefits received. Savings offered by credit cards can often be obtained elsewhere.

Deepening your debt--Consumers are using credit more than ever before. If you charge freely, you may quickly find yourself in over your head--as your balance increases, so do your monthly minimum payments.

Homework--It's up to you to make sure you receive proper credit for incorrect or fraudulent charges.

Teaser rates--Low introductory rates may be an attractive option, but they last only for a limited time. When the teaser rate expires, the interest rate charged on your balance can jump dramatically.

A debit card (also known as a bank card or check card) is a plastic payment card that provides the cardholder electronic access to his or her bank account(s) at a financial institution. Some cards may bear a stored value with which a payment is made, while most relay a message to the cardholder's bank to withdraw funds from a payer's designated bank account. The card, where accepted, can be used instead of cash when making purchases. In some cases, the primary account number is assigned exclusively for use on the Internet and there is no physical card.

A debit card is linked to a specific bank account from which withdrawals are taken whenever payments or cashpointtransactions are made. No line of credit is given (unless the user has an overdraft) and spending will be debited virtually immediately. The benefits of these cards include:

Multiple functions: Most debit cards can be used to withdraw cash and to make purchases, both in stores and online/by phone. They can also double up as chequeguarantee cards and as a way of getting cash back in certain stores. This makes them versatile as they give easy access to the money stored in your bank account.

Security: Using a card instead of carrying cash makes some consumers feel safer. If you lost a card or had it stolen, then you won't necessarily lose any money. Cards are PIN protected and, provided the user keeps their security number a secret, are harder to use for spending than cash.

Budgeting and debt: Transactions are generally paid for with money you already have in your bank account. This can make it a lot easier to budget and to avoid getting into debt by overspending or using credit.

Processing costs: Some e-tailers will charge a processing fee when you buy certain goods and services online. They may not, however, add this charge if you pay by debit card.

Debit card use may be convenient, but this may not always be the best way to pay. Some of the downsides include:

Restricted spending: Withdrawals and payments made with a debit card are generally checked against available funds in the connected bank account. If you try to buy something that costs more than you have to spend, your transaction may not be approved.

Unchecked approvals: On the other hand, not all debit card systems will check a balance before authorising a payment. Some may process a transaction automatically, which could see you go overdrawn without realising it.

Online payment protection: Consumers are given automatic payment protection when they shop online with a credit card but this may not apply to debit cards. You may not be given help to get your money back unless your card issuer has a chargeback scheme and this may not be valid for larger value purchases.

It may also be worth considering how debit card usage compares to other payment solutions, such as credit cards.

A smart card, chip card, or integrated circuit card (ICC) is any pocket-sized card with embedded integrated circuits. Smart cards are made of plastic, generallypolyvinyl chloride, but sometimes polyethylene terephthalate based polyesters,acrylonitrile butadiene styrene or polycarbonate. Since April 2009, a Japanese company has manufactured reusable financial smart cards made from paper.

Smart cards can provide identification, authentication, data storage and application processing. Smart cards may provide strong security authentication for single sign-on (SSO) within large organizations.