Credit Cards Introduction Advantages and Disadvantages

 Credit Cards Introduction - Advantages and Disadvantages

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Commercial Banks have introduced Credit Card facilities in the early 1980's. From then, the facility has become popular among the public as well as banks.

Features of Credit Cards :

• Acts as a document of credit worthiness of card-holder and minimizes the use of hard cash in setting the day to day transactions.
• It acts as a medium of exchange.
• Helps to buy whenever the cardholder likes to buy and can pay whenever he likes.
• In India, credit card interests are typically charged at a rate of 3.35 – 3.49% per month.
• The cardholder has to pay an initial annual deposit.
• Credit cards are mostly used by elite corporate executives, businessmen, middle income gropu to buy consumer durables and certain services from railways hospitals etc.
• Now a days almost all banks are providing credit card facilities.
• No matter where the cardholder is, he does not have to worry about to carry enough money for his / her purchases.
• Bankers bears the cost of issuing credit cards.
  
• Banks also bears the risk of non payment by the card holders.
• The income for the bank is the excess commission received from the seller over interest factors and administrative and advertisement costs.
• Credit limit is specified on every card basing on the income level and type of the card.

Benefits to Credit Card Holders :

Credit cards offers the following benefits to card holders

• Useful in Emergencies : They can purchase goods and services at large number of merchant outlets upto inbuilt ceiling credit limit amount without cash or cheque. This is generally useful in emergencies.
• Interest free period : Card holder has the period of interest free credit depending upon the issuing bank and card scheme. i.e., the normal card and gold cards as offered by various banks. The period of interest free credit range from 15 days to 51 days and there after interest @ 3.35 – 3.49% per month charged.
• Cash withdrawal from ATMs : Cash upto a ceiling within the credit limit can be obtained from banks' branches or ATMs.
• Need to carry liquid cash : Credit card holder need not carry any liquid cash. He can purchase without any cash and pay later.
• Benefit of free accident Insurance Cover : The card holder also get a free accident insurance cover and add on card for spouse and children.
• Useful for other purposes : Credit cards can also be used for rail reservation, air ticket booking, hotel booking, sending gifts etc.

 Advantages of Credit Card to the Issuing Bank :

• Reduces operational cost : Credit card reduces operational cost of the bank and increases their reach and profitability.
• Enhancing the customer base : Credit card also enhances the brand image of the card issuer and increases its customer base. 

Disadvantages to Credit Card Holders :

• Over Spending :Credit Card facility oftenly results in over purchasing and over spending unintentionally.
• Possibility of Frauds : There is possibility of frauds due to loss of cards in the intervening periods.
• Possibility of forged signatures : Since signatures are already on the cards, forged signatures could cause a loss to the cardholders. Such kind of forged signature loss could be avoided with use of Photo Credit Cards (credit Cards with the photographs of the user.).

10:52 - By Unknown 0

Automated Teller Machine (ATM) Introduction - Advantages and Disadvantages

 Automated Teller Machine (ATM) Introduction - Advantages and Disadvantages

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In my childhood I used to think that ATM is nothing but Any Time Money. It took me 22 years to know that its Automated Teller Machine. Now a days everybody knows what an ATM is and how useful it is. But for the sake of formality we shall start with the technical definition of ATM. The Automated Teller Machine (ATM) is a machine which facilitates basic banking activities viz, withdrawal of money, depositing money and checking of ones own balances etc. ATM does most of the functions of cashier in the bank. ATM is operated by plastic card issued by the bank which is called as ATM Card, with it special features. This plastic ATM Card is replacing cheque, personal attendance of the customer, banking hours and bank holidays restriction and paper based verification.

Electronic banking i.e., computerization of banking operations in India has picked up during  the second half of 1990's. This has helped to introduce ATMs.

ATMs are established in important places by the authorized bank in cities and important towns. The Indian Railway gave a mandate to 10 leading banks to host ATMs at Railway Stations.

Banks in India realized the need for ATM-interchange deals to keep their overheads under check . Under ATM inter-change, customers of one bank are offered free access to the other bank's ATM network

What is the difference between Credit Card and ATM Card ?

The essential difference between the Credit Card and ATM Card is that the former offers credit facility as the name suggests, whereas the latter in a networked environment allows the occupant of the cardholder to be directly debited.

Advantages of ATM :

• Round the Clock Services : ATM provides banking services to its customers round the clock, 24 hours a day, 7 days a week and 365 days a year.
• Access to bank from any part of the world : Essential banking services like deposits, withdrawals transfer of funds, etc can be accessed by customers from any part of the world.
• Expansion of Services to any corner of the world : Of the Banks can expand their services to any corner of the world by providing electronic access to its customers.
• Reduction in cost of operation : This reduces human intervention and thereby reduces the cost of operations and increases profitability of banks.
• For shopping Purpose : Now a days almost every shopping mall, restaurant and other organizations are accepting credit card payments.

Disadvantages :

• Cannot be provided in rural areas : In a country like India, where banks are having large number of rural and non-computerized branches, ATM services cannot be provided.
• Presence various constraints : Even if banks make some efforts to introduce ATM services country side, various constraints like illiteracy, security concern, etc., may not permit that.
• Limitation of cash withdrawals : Again there is a limitation of cash withdrawals from ATM. For example, many banks do not permit withdrawal of more than 25,000 at a time. 
• Cash deposit facility is not safe : Similarly cash deposit facility is restricted and not safe as dropping of envelope with can in ATM is not advisable. 
• Possibility of misusing ATM card : ATM card, if misplaced, lost or stolen, may be misused. There are number of such reported incidences now a days.
• Loss of personnel touch with the Banks : Last but not the least, customers lose personal touch with their bankers.

The ATM usage in India is growing very fast, i.e., at 300 percent, as per the survey conducted in 2002 the density in relation to population stands at a mere 4 ATMs per million population, now its triplicated.   Indian Banking Industry has developed during this 11 years of span and it also has introduced so many new technologies like Talking ATMs and White Labeled ATMs.

10:50 - By Unknown 0