Major Research Project

On

“A STUDY OF CONSUMER AWARENESS AND

PERCEPTION ABOUT CREDIT CARD”

Submitted for the Partial Fulfillment of the Requirements of the Degree of

Master of Business Administration (Full Time)

Session (2009-11)

GUIDED TO: SUBMITTED BY:

AIMS, Indore

DECLARATION

I, hereby declare that the following documented Project work titled “A

STUDY OF CONSUMER AWARENESS AND PERCEPTION ABOUT

CREDIT CARDS IN INDORE” has been prepared under the guidance of Prof.

Vivek Sharma. The project work is the result of my own authentic work and is

original in all respect. Due references have been made to the researches & texts

adopted from various sources.

The Study was undertaken as a part of the course curriculum of MBA Full Time

Program of

CERTIFICATE

This is to certify that, student of MBA IV Semester, of has completed his major

research project entitled “A STUDY OF CONSUMER AWARENESS AND

PERCEPTION ABOUT CREDIT CARDS IN INDORE” prepared this report

under my guidance and to the best of my knowledge, this is his original work and

has not been submitted anywhere before.

Date :

Place:

ACKNOWLEDGEMENT

I would like to convey my sincere gratefulness to all those who gave me the opportunity to

complete this project. I acknowledge the huge importance of this research and especially of this

project undertaken.

I am grateful to, M.B.A department for opportunities explore my talents and potential to conduct

such interesting topic for my project. I express my thanks to the Director for associating me with

the college and giving me a chance to work on the project.

My deep sense of gratitude to, the H.O.D. for extending his support in imparting me knowledge

and giving me permission to conduct the project, also for the untimed support and guidance over

the academic years.

Also, I am highly obliged to for his untiring help, valuable guidance and kind supervision which

were the main stream to bring this work in present shape. I wish to thank him for his constant

guidance and support in the successful completion of this research work.

I shall be failing in my duty if I do not express my sincere gratitude to my family and friends for

their moral support and encouragement throughout the study. I would like to thank all the

respondents who offered their opinions and suggestions through the survey that was conducted

by me in Indore.

TABLE OF CONTENTS

1. INTRODUCTION 7-15

2. REVIEW OF LITERATURE 17-21

3. RATIONALE OF THE STUDY 23

4. RESEARCH OF METHODOLOGY 25-26

(a) TOOLS FOR DATA COLLECTION

(b) STATISTICAL ANALYSIS

5. DATA INTERPRETATION 28-43

6. 45

7. SUMMARY & CONCLUSION 47

8. 49

CREDIT CARD

DEFINITION

A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. [1]

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 is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. Most credit cards are issued by banks or credit unions, and are the shape and size specified by the ISO/IEC 7810 standard as ID-1. This is defined as 85.60 × 53.98 mm (3.370 × 2.125 in) (33/8 × 21/8 in) in size.

History

The concept of using a card for purchases was described in 1887 by Edward Bellamy in his utopian novel Looking Backward. Bellamy used the term credit card eleven times in this novel.[2]

The modern credit card was the successor of a variety of merchant credit schemes. It was first used in the 1920s, in the United States, specifically to sell fuel to a growing number of automobile owners. In 1938 several companies started to accept each other's cards. Western Union had begun issuing charge cards to its frequent customers in 1921. Some charge cards were printed on paper card stock, but were easily counterfeited.

The Charga-Plate, developed in 1928, was an early predecessor to the credit card and used in the U.S. from the 1930s to the late 1950s. It was a 2½" × 1¼" rectangle of sheet metal related to Addressograph and military dog tag systems. It was embossed with the customer's name, city and state. It held a small paper card for a signature. In recording a purchase, the plate was laid into a recess in the imprinter, with a paper "charge slip" positioned on top of it. The record of the transaction included an impression of the embossed information, made by the imprinter pressing an inked ribbon against the charge slip.[3] Charga-Plate was a trademark of Farrington Manufacturing Co. Charga-Plates were issued by large-scale merchants to their regular customers, much like department store credit cards of today. In some cases, the plates were kept in the issuing store rather than held by customers. When an authorized user made a purchase, a clerk retrieved the plate from the store's files and then processed the purchase. Charga-Plates speeded back-office bookkeeping that was done manually in paper ledgers in each store, before computers.

The concept of customers paying different merchants using the same card was implemented in 1950 by Ralph Schneider and Frank McNamara, founders of Diners Club, to consolidate multiple cards. The Diners Club, which was created partially through a merger with Dine and Sign, produced the first "general purpose" charge card, and required the entire bill to be paid with each statement. That was followed by Carte Blanche and in 1958 by American Express which created a worldwide credit card network (although these were initially charge cards that acquired credit card features after BankAmericard demonstrated the feasibility of the concept).

However, until 1958, no one had been able to create a working revolving credit financial instrument issued by a third-party bank that was generally accepted by a large number of merchants (as opposed to merchant-issued revolving cards accepted by only a few merchants). A dozen experiments by small American banks had been attempted (and had failed). In September 1958, Bank of America launched the BankAmericard in Fresno, California. BankAmericard

became the first successful recognizably modern credit card (although it underwent a troubled gestation during which its creator resigned), and with its overseas affiliates, eventually evolved into the Visa system. In 1966, the ancestor of MasterCard was born when a group of California banks established Master Charge to compete with BankAmericard; it received a significant boost when Citibank merged its proprietary Everything Card (launched in 1967) into Master Charge in 1969.

Early credit cards in the U.S., of which BankAmericard was the most prominent example, were mass produced and mass mailed unsolicited to bank customers who were thought to be good credit risks. But, “They have been mailed off to unemployables, drunks, narcotics addicts and to compulsive debtors, a process President Johnson’s Special Assistant Betty Furness found very like ‘giving sugar to diabetics’.”[4] These mass mailings were known as "drops" in banking terminology, and were outlawed in 1970 due to the financial chaos that they caused, but not before 100 million credit cards had been dropped into the U.S. population. After 1970, only credit card applications could be sent unsolicited in mass mailings.

The fractured nature of the U.S. banking system under the Glass–Steagall Act meant that credit cards became an effective way for those who were traveling around the country to move their credit to places where they could not directly use their banking facilities. In 1966 Barclaycard in the UK launched the first credit card outside of the U.S.

There are now countless variations on the basic concept of revolving credit for individuals (as issued by banks and honored by a network of financial institutions), including organization-branded credit cards, corporate-user credit cards, store cards and so on.

Although credit cards reached very high adoption levels in the US, Canada and the UK in the mid twentieth century, many cultures were more cash-oriented, or developed alternative forms of cash-less payments, such as Carte bleue or the Eurocard (Germany, France, Switzerland, and others). In these places, adoption of credit cards was initially much slower. It took until the 1990s to reach anything like the percentage market-penetration levels achieved in the US, Canada, or UK. In some countries, acceptance still remains poor as the use of a credit card system depends on the banking system being perceived as reliable. Japan remains a very cash oriented society, with credit card adoption being limited to only the largest of merchants, although an alternative system based on RFIDs inside cellphones has seen some acceptance. Because of strict regulations regarding banking system overdrafts, some countries, France in particular, were much faster to develop and adopt chip-based credit cards which are now seen as major anti-fraud credit devices. Debit cards and online banking are used more widely than credit cards in some countries.

The design of the credit card itself has become a major selling point in recent years. The value of the card to the issuer is often related to the customer's usage of the card, or to the customer's financial worth. This has led to the rise of Co-Brand and Affinity cards - where the card design is related to the "affinity" (a university or professional society, for example) leading to higher card usage. In most cases a percentage of the value of the card is returned to the affinity group.

How credit cards work

Credit cards are issued by a credit card issuer, such as a bank or credit union, after an account has been approved by the credit provider, after which cardholders can use it to make purchases at merchants accepting that card. Merchants often advertise which cards they accept by displaying acceptance marks – generally derived from logos – or may communicate this orally, as in "Credit cards are fine" (implicitly meaning "major brands"), "We take (brands X, Y, and Z)", or "We don't take credit cards".

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 not present transaction (CNP).

Electronic verification systems allow merchants to verify in a few seconds that the card is valid and the credit card customer has sufficient credit to cover the purchase, 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; the latter system is called Chip and PIN in the United Kingdom and Ireland, and is implemented as an EMV card.

For card not present transactions where the card is not shown (e.g., e-commerce, mail order, and telephone sales), merchants additionally verify that the customer is in physical possession of the card and is the authorized user by asking for additional information such as the security code printed on the back of the card, date of expiry, and billing address.

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 (see 15 U.S.C. §   1643 , which limits cardholder liability for unauthorized use of a credit card to $50, and the Fair Credit Billing Act for details of the US regulations). 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). In addition, if the credit card user fails to make at least the minimum payment by the due date, the issuer may impose a "late fee" and/or other penalties on the user. To help mitigate this, some financial institutions can arrange for automatic payments to be deducted from the user's bank accounts, thus avoiding such penalties altogether as long as the cardholder has sufficient funds.

Advertising, solicitation, application and approval

Credit card advertising regulations include the Schumer box disclosure requirements. A large fraction of junk mail consists of credit card offers created from lists provided by the major credit reporting agencies. In the United States, the three major US credit bureaus (Equifax, TransUnion and Experian) allow consumers to opt out from related credit card solicitation offers via its Opt Out Pre Screen program.

CREDIT CARDS IN INDIA

India has came out of self-binding shackles to look "young" again and the enthusiasm shared by the young work force of the country is driving the economy like never-before. In the present day world, no one wants to be bothered by the presence of huge cash in his or her wallet and the Indians are no exceptions. The unprecedented growth in the number of credit card users has stimulated the Indian economy by a significant extent. The arrival of malls, multiplexes, online shopping stores and shopping complexes have contributed to the growth of the use of plastic cards.

It will not be wrong to say that such a scenario in context of the Indian market is not driven by style statement and is driven more by needs. The benefits of plastic money have offered unmatched ways to create an equilibrium and offer an amicable solution when it comes to purchases and the inability to possess or carry cash. The modern day Indian customers find it more easy to make physical payment (credit card payments) rather than carrying too much cash. The introduction of credit card facilities to pay for mobile, electricity, movie tickets and other related transactions have also contributed to the growth of plastic money in the country.

Standard Chartered Bank in India is the largest international banking Group in India. The Combined Balance Sheet (as at March 31, 2001) of SCB India is Rs. 24515.9 cr. and is having a combined customer base of 2.4 million in retail banking and over 1200 corporate customers.

Standard Chartered India was the first to issue first global credit card in India, the first to issue Photocard, the first Picture Card and was the first credit card issuer to be awarded the ISO 9002 certification. Some other product innovations of Standard Chartered Bank in India include the 'Sapnay' credit card, the international debit card that provides free access to over 1500 Visa

Future of credit cards in India

With high and industry-favourable figures as above, there is no doubt that the rise in number of credit card providers and users have come of age. With these positively-influencing trends expected to continue in the near and far-future, the writing is on the wall. The credit card industry is likely to soar more than any industry segment. To add to that, easy and continuous payments' structures with each passing day and with every Bank poised to expand its network, the Indian credit card user community is the biggest beneficiary. The intensifying competition prevalent in the present

day Indian credit card market has further fuelled the usage of credit cards in the country like never-before. In an aim to overpower the peers and to sustain and prosper themselves, the Banks and financial institutions have started cutting down the interest rates and offering lucrative deals.

A number of companies are working hard to develop credit cards that are safer and easier to use.

In the very near future, a person will not have to carry his plastic money for the payment purposes. Since the mobile number of the user will act as his or her credit card number, there might not be any requirement of carrying the credit cards all the time. In the recent times, Reserve Bank of India informed that it was in the process of formulating the guidelines for a payment system using mobile devices. Reserve Bank of India is discussing with both public and private sector Banks, service providers and industry bodies to develop the payment system for the mobile devices. The RBI had also stated that draft guidelines would be placed on its official website by the 15th of June, 2008.

In the countries like India, the usage of mobile is growing rapidly. There are about 250 million mobile phone connections in the country, whereas the credit card holders are far lower in comparison to number of mobile phone connections. Therefore, using the mobile phones for making payments may take some more time in getting implemented.

The RBI said in its policy statement said that the quick elaboration of this mode of payment and transactions have thrown up a new delivery channel for banks. This channel will certainly assist small value payments to merchants, utility service providers. In addition, the speed with which the money will get transferred at a low cost will make this process really useful.

Credit card market is going to witness some more innovative changes in the present year. The outcome product of the joint venture between Life Insurance Corporation of India and GE Money is likely to touch the market by the end of this year.

In the first year of its launch, the company will provide this card to the LIC customers and policy holders only. This venture is an outcome of very solid research works. It includes a 30 per cent stake for GE Money, while LIC Housing Finance Company, LIC Mutual Fund and Corporation Bank each have a 5 per cent stake each in the venture. The Life Insurance Corporation will have 40 percent of stake in the company. LIC has invested around Rupees 150 crore in this plan. LIC has yet not taken any decision about the remaining 15 per cent stake of the total investments. In another development, ABN AMRO and MakeMyTrip.com have launched a distinctive co-branded credit card. The card is named as the 'Go Card'. This card offers special reward benefits and good range of travel-related promotional packages to its users.

Credit cards and debit cards, or automated teller machine (ATM) cards, commonly referred to as plastic money, are undergoing tremendous changes across the globe. In order to improve security and reduce frauds in plastic cards and card payment transactions, authorities, researchers and

innovators are searching for newer ways. This has resulted in many countries shifting to the more secure Europay, MasterCard and Visa (EMV) chip cards with personal identification numbers (PIN).

However, countries like the US, China and India are still using the older magnetic strip cards (MSDs) and signature, or PIN verification, for plastic cards transactions. In the US, the resistance to change is primarily due to the cost of migration to EMV, as profitable revenue channels associated with current interchange fees do not offset the cost of re-carding. In China there is a strong legal framework to handle financial frauds, which acts as a deterrent to fraudsters.

On the other hand, over 99% of the total cards issued in India are based on magnetic strips. Interestingly, about 90% of the existing point of sales (POS) terminals in the country, managed by 21 acquirers (among them Axis Bank, HDFC Bank and ICICI Bank), can accept EMV chip cards and PIN. However, not all ATMs are equipped to do the same. Only 50% of the existing ATMs with minimal software and hardware upgrades can accept EMV chip cards. The rest of the ATMs would need major hardware upgrades, or even replacement, to enable EMV chip card acceptance.

A majority of the lenders, who have installed around 70,000 ATMs across the country, are also not keen to spend on upgradation. There is a reason for this. According to Reserve Bank of India (RBI) rules, any cardholder can use another lender's ATM free of cost, for up to five transactions each month. This means, that many lenders are serving many who are not their customers, through ATMs, without earning much revenue from these transactions. On the other hand, lenders earn commission on each transaction through the POS terminals.

In the period between March 2010 and February 2011, the total spends value in India on credit and debit cards, including e-commerce, interactive voice response (IVR) and mail order/telephone-order (MOTO) transactions, was Rs1.13 lakh crore. In the same period, India had 22.2 crore debit cards and 1.8 crore credit cards, while there were 5.6 lakh POS and around 70,000 ATMs installed.

The industry reported a loss of Rs13 crore due to stolen and counterfeit card frauds. While the fraud-to-sales ratio came at 1.4 basis points (bps), early cases of domestic counterfeit and skimming are on the rise.

Certain issuers such as Citibank and State Bank of India issue Maestro debit cards. Maestro debit cards are magnetic stripe cards that require a PIN to be entered at the POS terminal. Citibank's experience has been that card usage levels are significantly lower when a PIN is required to be

entered at the POS terminal. No wonder that a majority of cards require the user to use the PIN only for ATM transaction and not at POS.

A few large card-issuing lenders like Citibank, ICICI Bank, HDFC Bank and SBI issue EMV chip cards, while for most other banks the host systems are not ready and have not been certified for issuance of chip card. However, these banks are issuing chip-based cards to customers who frequently travel abroad and have high credit limits. In addition, all these cards use signatures as a second authentication instead of the global practice of using PINs.

However, MSDs and PIN are susceptible to skimming or counterfeit frauds. This has forced many countries to adopt the EMV chip card and PIN, which protects against skimming and lost and stolen card frauds. Based on international experience, EMV chip card and PIN migration typically takes more than five years, depending on the market size.

According to a report by a "Working Group on Securing Card Present Transactions" of the Reserve Bank of India (RBI), there is a need to put in place a series of measures to strengthen the payments infrastructure and ecosystem in the country. Inferences drawn from case studies clearly indicate the need to have a much stronger authentication mechanism and reiterate the need for a second factor (2FA) for card present transactions.

"In the absence of 2FA for POS transactions there is a possibility of the fraud losses increasing by more than 200% in a single year, in the event of a sharp increase in fraud incidents in the country. There is also a possibility of POS FTS (fraud-to-sales ratio) increasing by around 200 basis points in one year under adverse conditions," the report said.

The report discusses new systems like EMV chip cards with PIN that has been adopted by many countries and enhancing the current MSD card system with help from biometric identification. "Aadhaar (issued by the Unique Identification Authority of India - UIDAI) authentication using biometrics, provides a strong 'Who you are' factor of authentication. This can be combined with a second 'What you have' or 'What you know' factor to achieve strong customer identification at the point of sale.”

While the option to use biometrics from the UIDAI database looks good, in practice, due to insufficient feasibility tests, it may not be a viable option. "The working committee considered biometric, or UID, as the second factor in one of the solution sets; however, the decision to adopt this would depend on various factors like the number of UIDs issued to the population which transacts through cards, the error rates, authentication network capability to handle transaction volumes, network capability to handle enhanced transaction size and acquiring infrastructure," the report said.

Therefore, while on paper the use of biometrics as 2FA may sound feasible, its uses would be

limited at specific locations. In this situation, EMV chip cards and PIN look like the future proof system, despite the higher costs, for card-based transactions. Nevertheless, this may not be the last in payment transaction systems.

According to Bhavin Mody, senior product manager, ElectraCard Services, EMV chip and PIN cards require the industry to make a huge investment in the card issuing and acquiring infrastructure. In addition, it involves replacing all the MSD cards that have been issued, which in itself could be a huge exercise.

"EMV chip and PIN is surely a long-term solution, but it would require a very long time (3-5 years) to implement. One more advantage, which EMV chip cards have, is that this solution is extendible to offline modes of payments. This would enable mass transit payments and payments requiring fast-moving queues.” he said.

One of the options available for payment ecosystem players to consider is contactless smart cards. Transit payments, like metro rail, buses, toll and loyalty applications and micro-transactions might accelerate the move to contactless cards in India. Contactless transactions are known to be significantly faster and more efficient than magnetic stripe or contact cards.

Last month, internet search giant Google launched 'Google Wallet', which allows people with compatible mobile phones to pay for goods and services in shops by just waving their phones. Google Wallet is based on near field communication (NFC) protocol. According to Juniper Research, by 2013, one in five smart phones in the world would have NFC capability. NFC is also available as a Micro SD card or sticker.

Such technologies will be a huge advantage in India, which has 24 crore debit and credit cards and 58.1 crore GSM mobile subscribers, as of April 2011.

In November last year, the National Payments Corporation of India (NPCI) launched its much-awaited interbank mobile payment service (IMPS), which has the potential to change the payments scenario in the country. According to bankers, this system could revolutionise the retail payments process and even overtake the number of payment transactions carried out through cards and the internet.

However, while there are nearly 60 crore mobile phone subscribers, there are less than 20 crore 'active' bank accounts. Although on record there are about 31 crore savings bank accounts, many of them are either multiple accounts or they are not operational. IMPS could help revive these accounts.

Unfortunately, the initial response for IMPS from lenders and customers has been lukewarm. In the absence of information and awareness campaigns from the lenders to the end user, the IMPS

may not take off, as per expectation. Moneylife has been trying to get access and use IMPS for subscription services since December last year, without any luck so far. The reason is no one from our bank or branch seems to have complete knowledge about IMPS.

In the end, there is not a single payment transaction system that we can label as future proof. While the EMV chip card and PIN provide good options for safe and secure card payments, other systems which use mobile phone may turn out to be the dark horse.

Consumer Perception Towards the Purchase of Credit Card

Intangibility is the inherent nature of services. Service is a "performance" rather than a "thing". There are more of experience and credence qualities with services than search qualities. Therefore, consumers perceive high degree of uncertainty in making a service purchase decision due to lack of tangible cues with service product. As a result, consumers normally do not consider service product features to evaluate service offer. Present study has its focus on understanding how consumers' perceive and consider service product features for making purchase of credit cards. Objectives are to analyze the role of service product features (core benefit, facilitating services and supplementary services) in pre-purchase evaluation and to understand the position of supplementary services at product levels. The data analysis indicates that consumers consider service product features

during pre-purchase evaluation of credit cards and respondents find it easy to make a purchase decision on the basis of supplementary services. Responses reveal that existing supplementary service elements are perceived more of expected features than augmented features of credit cards.

Services marketing differ from goods marketing due to well established service characteristics; viz., intangibility, perishability, inseparability of production and consumption, heterogeneity and lack of ownership. Further, this difference is due to resulting extended marketing-mix of 7Ps (Booms and Bitner, 1981). The present study is focused on the fundamental 'P'; i.e., service product which is critical to manage for keeping one's business in market.

The service product is essentially a bundle of activities, consisting of a core service plus a cluster of supplementary services. The core elements respond to the customer's need for a basic benefit; for example, airlines offer transportation. Supplementary services are those that add value to the core service.

Within the purview of given parameters, the study is carried out in the area of financial services marketing, a branch of services marketing, with special reference to credit card services. Thus, the objective is to study the consumer perception towards service product features in pre-purc...

. With the new reforms in the banking sector, the marketing of financial products has become very competitive, creating a need for strategizing the marketing efforts. This study investigates the shift of consumers towards the use of plastic money, with emphasis on credit cards. A survey of consumers holding (at least) one or no credit card were used for data collection. Variables related to demographics such as age, income level and gender have also been taken into consideration. This study makes (the) use of descriptive variables in terms of analyzing the general attitude about the use of credit cards and the factors contributing towards the selection of (a) one particular credit card over the other. A positive relationship has been found between the income level of a person and his/her possession of the credit card. While making the choice of a credit card the trust in a particular brand name seems to hold a very significant importance in the selection of a credit card, instead of the logo of Visa or Master card. The profession of the person seems to play a very interesting role with their behavior towards credit cards. Our study shows that the bankers hold negative attitude towards the use of a credit card. The moderating variables include the marketing campaign of a particular bank, sales teams support, openness from retailers for accepting credit card instead of cash, knowledge about the true interest rate imposed by the banks and the concept of financing, etc. Based on an observations, suggestions have also been made for managers to refine the

target market. The popularity of credit cards as a payment medium has been attributed to the convenience of not carrying cash and checks, the limited liability of lost/ stolen cards, and additional enhancements, such as dispute resolution services and perks (i.e., frequent-use awards programs) They are frequently used for convenience, telephone and Internet transactions.

The behavior and the attitude of the consumer towards the use and acceptability of credit cards differ for psychographic reasons devised a 38-item scale to measure affectiveness, cognitive and behavioral attitudes towards credit cards. Affective attitudes involve emotional feelings (e.g. My credit card makes me feel happy); cognitive attitudes involve thoughts (e.g. Heavy use of credit cards results in heavy debt); while behavioral attitudes involve actions (e.g. I use my credit card frequently).

Many consumers value uncollateralized credit lines for making purchases when they are illiquid (i.e. before their incomes arrive), even at relatively high interest rates. Because of limited alternatives to short-term uncollateralized credit, the demand for such credit may be fairly in-elastic with respect to price consumers may not even consider the interest rate when making purchases because they do not intend to borrow for an extended period when they make purchases. However, they may change their minds when the bill arrives.

the consumers are somewhat sensitive not only to changes in the interest rate but also to the value of other credit-card enhancements such as frequent-use awards, expedited dispute resolution, extended warranties, and automobile rental insurance. However, she agrees that lowering interest rates may attract less creditworthy consumers, therefore dissuading some credit-card issuers from lowering their interest rates.

longitudinal study, low income users of credit cards tend to use the cards for the installment feature rather than for service features such as convenience, safety, or identification. It has been suggested that the installment feature of credit is needed by the low income consumer to permit purchases such as automobiles, furnishings, and other consumer durables.

Demographics also seem to play a vital role in making a choice and the use of credit cards as a convenience user or revolver. Age, income level has been studied previously and suggest some indication for correlation between demographic and use of credit card. According to the study conducted the probability of having credit cards and the number held was correlated highly with age and occupation. However these two characteristics were less important than the place of residence, use of checking and savings accounts, and attitude towards credit.

consumers, those who have credit card, prefer to use cash mostly in book stores, grocery stores, and night clubscredit card is mostly preferred for the payments of clothing, gasoline, and supermarket. On the other hand, consumers prefer to use other forms of payment such as installment, bank credit while they are making shopping in electronics and furniture stores.

The results indicated that customer characteristics affecting credit card choice criteria included age, marital status, education, and income level

CONSUMER AWARENESS 

Anyone who consumes goods is a consumer. Consumers get exploited in the market. They respond to

advertisements and buy goods. Generally advertisements do not give all the information that a

consumer needs t know or wants to know about a product.

Some of the common methods of exploitation are

1. Under weight and under measurements –not measured or weighed correctly

2. Substandard Quality –defective home appliances and medicines beyond expiry date

3. High prices—charging above the retail price

4. Duplicate Articles—selling fake items in the name of the original

5. Adulteration and Impurity—is done to get higher profits

6. Lack of safety Devices—absence of inbuilt safeguardsin appliances

7. Artifical Scarcity—hoarding and black marketing

8. False and Incomplete Information—misleading information on quality, durability, and safety.

9. Unsatisfactory after sales Service—high cost items like eletronics and cars require constant and

regular service.

10. Rough behaviour and Undue conditions—harassment in getting LPG connection or a telephone

connection..

There are 22.5 crore debit cards in the country and while nine of ten transactions are done at the ATMs, only one transaction is done directly at the merchant establishment. Now, priority is to make consumers aware of the electronic payment scheme. Uttam Nayak, group country manager (India & South Asia) at Visa, tells FE's Kumud Das  that channels like internet and mobile will help accelerate cashless payments in the country.

How do you see the electronic payments industry in India?

The opportunity in India for electronic payments is huge. First, if you look at India's personal consumer expenditure (PCE), or the amount spent on a card on an average, it is only 3% compared to the global average of 16%.

New channels like internet and mobile will help accelerate cashless payments and electronic mode of disbursement will be key to ensure the right person receives the right amount.

Do you think the overall picture is changing on how payments are made?

In the mid-90's, only foreign banks like Citibank and Standard Chartered were issuing cards and had set up ATMs for cash withdrawals and point of sales (PoS) terminals at merchant establishments. Today, we have almost 50 banks that issue credit or debit cards and have set up large ATMs and PoS networks.

Additionally, we are seeing the acceptance network also grow because merchants are realising that the cost of processing cash is very high and that consumers benefit from the convenience of cashless payments.

Globally, transactions worth more than $100 billion take place through cards every year. In India, there has been an increase in online transactions which is a result of RBI's security mandate of second factor authentication. In future, we will definitely see cardholders move to newer e-payment modes such as mobile payments.

Although there have been a number of changes in the industry, we believe the Indian market will see continued innovation and growth in electronic payments.

How do you differentiate between PoS and ATM usage?

Point of sale (PoS) is when a cardholder uses his card to purchase his groceries, pay bills at the restaurant or buy movie tickets. ATM usage is when a cardholder withdraws money in cash.

Even though there are over 70,000 ATMs against 5 lakh PoS terminals in the country, we see cardholders going to ATMs more often. There are 22.5 crore debit cards in the country and nine of ten transactions are conducted at the ATMs while only one of the ten transactions is done directly at the merchant establishment. All key stakeholders recognise that consumer awareness on electronic payments is a priority.

National Payments Corporation of India has also joined the space and it is trying to come up with its own card, to be known as RuPay? How will it change the dynamics?

As mentioned earlier, PCE penetration in India is only around 3%. The Indian market requires significant investments for developing world class inter-operable payments infrastructure. There is an opportunity of increasing PCE penetration drastically and we believe this will happen once more participants come into the industry to achieve faster growth.

What are the most popular uses of cards in India?

I think electronic payments bind key industries together and enables them to provide value for money to their customers. To start with, we have large retail stores which accept and promote payments through credit/debit cards.

As far as the aviation industry is concerned, it benefits by gaining popularity by offering their customers low fares through e-ticketing. There are 22.5 crore customers availing electronic payment, out of which 5.5 crore customers are availing the facility to buy online air tickets only. We also have almost all important insurance companies in India accepting premium payments online.

Debit card market is growing faster compared to that of credit cards as per the data provided in the RBI website. How do you see it?

For every credit card, there are 10 debit cards in the country. However, the key challenge is that the usage of credit/debit cards at PoS is very low and PoS transactions are yet to pick up.

Visa is working with banks to educate cardholders on the advantages of electronic payments. Visa, together with its partner banks, regularly run a number of campaigns to create awareness among the cardholders. The most recent campaign was the cashback programme for cardholders.

Can you throw some light on Visa Bill Pay ....

In order to provide convenience to cardholders, one of Visa's key initiatives is Visa Bill Pay, - a portal which provides a simple, convenient, secure and reliable way to pay bills with a Visa card.

Consumer awareness is necessary for ensuring that you get your money's worth. To ensure the quality of products. To prevent adulteration. To ensure hygiene in products. To prevent exploitation by under weighing the products, by artificial scarcity etc.

Consumer Awareness helps the trade to be vigilant of spurious products in the market, stops the tall claims some products are supposed to do in the adverts, gives clear choice to the consumer in terms of price, quality, quantity and the total value of a product. Be aware and be consumer aware.

Consumer Awareness helps the trade to be vigilant of spurious products in the market, stops the tall claims some products are supposed to do in the adverts, gives clear choice to the consumer in terms of price, quality, quantity and the total value of a product. Be aware and be consumer aware.

By JESSICA SILVER-GREENBERG

Protection could find it difficult to keep ahead of the credit-card industry.

The Credit Card Accountability Responsibility and Disclosure Act of 2009, known as the Card Act, was intended to reshape the contours of consumer finance. Among other things, it forces card issuers to give customers more notice about interest-rate increases and restricts certain controversial billing practices such as inactivity fees.

Yet some of the biggest card issuers in the U.S., including Citigroup Inc., J.P. Morgan Chase & Co. and Discover Financial Services, are already rolling out a slew of fees designed to recapture some of their lost income, in part by skirting the new rules. Some banks may even be violating the law outright, say consumer advocates.

"Card companies are figuring out how to replace old fees with new ones," says Victor Stango, an associate economist with the Federal Reserve Bank of Chicago and a professor at the University of California, Davis, who has been analyzing how the Card Act will affect consumer banking. "It's a race between regulators writing ever-more-complex laws and credit-card companies setting up ever-more-complex fees."

The banks have a big gap to fill. The Card Act is expected to wipe out about $390 million a year in fee revenue, according to David Robertson, the publisher of industry newsletter Nilson Report. On July 16, during its second-quarter earnings call with analysts, Bank of America Corp. Chief Financial Officer Charles Noski warned that the Card Act and other regulatory changes would prompt the bank, the nation's largest in assets, to write off up to $10 billion in the third quarter.

"If you have every major issuer saying that we are losing our shirt, then that speaks volumes," Mr. Robertson says. "Proportionately, these fees should be understood as almost inconsequential compared to the losses."

So the banks are getting aggressive. According to a July 22 report from Pew Charitable Trusts, a nonpartisan research group, the industry's median annual fee on bank credit cards jumped 18% to $59 between July 2009 and March 2010. At credit unions, annual fees soared 67% to $25. During the same period, the median cash-advance and balance-transfer fees jumped by 33%.

All of these increases are perfectly legal, of course. Banks and other issuers would have a difficult time extending credit to consumers, even at high interest rates, if they couldn't augment those revenues with fee income. "We're coming out of a deep recession that issuers are still working through," says Peter Garuccio, a spokesman for the American Bankers Association.

But some banks may be going too far. In a July 7 letter to the Office of the Comptroller of the Currency, which regulates many of the biggest U.S. banks, a coalition of consumer groups including the National Consumer Law Center, the Consumer Federation of America and Consumer Action flagged several "potential violations of the Credit Card Act."

Other banks are ramping up their marketing of so-called professional cards. These are like corporate cards but can carry the same terms as consumer cards—and aren't covered under the new law. In the first quarter of this year, issuers sent out 47 million professional-card offers to U.S. households, up from 13.2 million in the corresponding period last year, according to research firm Synovate.

"This can be a very easy way around the Card Act," says Josh Frank, a senior researcher at the Center for Responsible Lending, a consumer group.

The upshot: Borrowers must be more vigilant than ever—even before they make their first charge on a new credit card.

Alan Condon of Woodstock, Ga., says he carefully reviews his card statements each month, and even read the Card Act—all 33 pages—after it was passed in May 2009.

Alan Condon, a self-employed computer programmer in Woodstock, Ga., is one of many who was hit with a late fee after missing a single payment.

Among other things, the Card Act stipulates that late-payment fees shouldn't be triggered on a Sunday or holiday, when there is no mail delivery.

The rule "is clearly meant to offer cardholders some semblance of relief so that they don't get saddled with late fees for making a reasonable payment on the next business day," says Chi Chi Wu, a consumer credit lawyer at the National Consumer Law Center.

Mr. Condon says he was shocked when he opened his credit-card statement dated June 18 and saw that Discover had charged him $39 for a late payment—and had upped his interest rate on future purchases from 17% to 24.99%. He says the company considered him late because he paid on June 14, instead of June 13, a Sunday.

"I just got mad," says the 56-year-old computer-software developer, who says he had never before been late on a Discover payment.

"We were in compliance with the Card Act," says Discover spokesman Matthew Towson. "The law states that if a creditor does not receive or accept payments on weekends or holidays, then the date is extended. But we accept payments seven days a week."

Nevertheless, Discover reviewed Mr. Condon's account at The Wall Street Journal's request and decided to waive the late fee and reduce Mr. Condon's interest rate to its earlier level.

The Card Act also stipulates that issuers can't jack up rates on existing balances unless a cardholder is at least 60 days late. But there is a creative maneuver around that: the so-called rebate card.

Citibank rolled out rebate-card offers to some of its customers last fall, offering to refund up to 70% of finance charges when customers pay on time. The problem: Rebate offers aren't governed by the Card Act, and an issuer can revoke them suddenly and hit cardholders with high charges.

The net result is the same as raising rates—and because it is perfectly legal, customers have little recourse. "Rebates on finance payments may seem like a good deal, but you could end up with a very high interest rate suddenly," says Mr. Frank, of the Center for Responsible Lending.

"The rebate offer is clear, transparent, and we believe fully within the spirit of the Card Act," says Citigroup spokesman Samuel Wang.

Shortening the billing cycle is another new tactic some banks may be using. The Card Act requires companies to provide a window of at least 21 days from when a statement is mailed and when payment is due.

Yet the National Consumer Law Center and Consumer Action say they have received complaints from borrowers who allege that their billing cycles have been shortened to fewer than 21 days.

By Daniel Kadlec

After getting socked with a late fee and finance charge on my Kohl's account in May, I called to plead my case. How could a $45.08 pair of sneakers result in a $70.58 charge? O.K., I was two days late. Still, the $25 late fee and 50¢ finance charge came to a whopping annualized penalty rate of more than 21,000%. A local loan shark would have cut me a better deal. The Kohl's rep's response: "It's perfectly legal, and everybody does it."

Turns out she was right, and so began my education in just how much my credit cards were costing me. Without getting too personal, let's just say my inattention has had a price. Yours might too--especially if, like me, you have been carrying around the same cards for years and have not bothered to check the fine print lately.

Credit-card companies are constantly adjusting their rates, penalties and fees, and understanding all the ways they ding you requires ever more diligence. Disclosures now run 20 pages on average, up from one page a decade ago. And though late fees are hardly new, since the mid-'90s they have tripled, to about $30 on average--commonly going as high as $39. "Sure, they send

you notification," says Adam Levin, founder of Credit.com a consumer-education website. "But your eyes just glaze over."

Meanwhile, new fees are sneaking in. Making a comeback is the balance-transfer fee (about 3%). If you transfer $10,000, you could get socked with a $300 charge.

Another addition is a fee for foreign-currency conversions. It has long been thought that the smartest way to purchase goods overseas is with a credit card because you'll get a fair deal switching from, say, dollars to euros. That may still be true. But many cards now tack a 3% conversion fee on top of the profit built into the conversion rate.

What's next? Card companies are weighing a fee for people who pay their balance every month, says Levin. Watch out for that one. Some companies already close accounts that are inactive, which can lower your credit rating. And if your credit rating falls, some card issuers will raise your interest rate to punitive levels--even if you are paying in a timely manner.

A yearly review of your credit cards is a good idea. First, check the annual percentage rate, or APR, which is your total cost of carrying a balance. If you're paying more than 14%, ask why. Look for recurring fees. You may have signed up for a card with no annual fee, but that doesn't mean one wasn't tacked on. There is also a fee (up to $39) for spending beyond your credit limit and one for paying by phone ($15). Penalty fees account for a third of the industry's revenue, twice the share it was 10 years ago.

How can you avoid penalties? Call the card issuer and ask to have them removed. If you are a good customer, the issuer may let you off the hook once or even twice. And when you get a bill, make the minimum payment immediately and another payment as soon as you are able. Managing your credit cards takes some effort; avoiding 21,000% interest is worth it. •

Henry, Weber, and Yarbrough (2001), writing in this Journal, reported that many college students are living on the verge of a financial crisis. The purpose of this study was to further consider this assertion by examining college students' credit card use behavior and attitudes. A concurrent purpose was to test the factors associated with students' attitude toward credit cards. It was determined that, using a sample of 242 undergraduate and graduate students from a southwestern state university, Ethnic/racial background, academic level, credit card ownership, parents' credit card use, money ethic, and locus of control were associated with college students' credit card attitudes. Henry et al.'s assertion that students are vulnerable to a financial crisis was confirmed.

College students' use of credit cards has recently received increased visibility throughout the media (Hayhoe, 2002). Henry, Weber, and Yarbrough (2001), writing in this Journal, concluded that in addition to credit problems many students do not have a written budget, and of those who do have a budget few young people actually use it. They determined that university students "are vulnerable to financial crisis" (p. 246).

The staggering number of credit cards in circulation exemplifies this crisis, as does the number of cards carried by the average student. Currently, there are 1.3 billion credit cards in circulation, which, when averaged, equals about 12 cards per household (Sullivan, Warren, & Westbrook, 2000). The growth of credit cards on college campuses has tended to minor the credit saturation found in the general public (Xiao, Noring, & Anderson, 1995). More than a decade ago Churaman (1988) reported on college students' use of consumer credit. It was during this period that the banking industry began permeating the student credit card market in the late 1980's (Manning, 2000). Churaman reported that in 1985-86 over half of all college students had bank credit cards. This figure has been on the rise as some 70% of all undergraduates at four-year colleges have at least one credit card today.

Rationale Of The Study

The purpose of this study is to understand the use of credit card in the changing environment of the world and banking system . It provides many benefits to the credit card holder and has various dimensions providing insurance ,security and thus has multipurpose benefits of it. This study is just about going through its benefits ,that how much consumers are aware and their perception about credit.

A).OBJECTIVES:-

1. To study about the consumer awareness of credit card.

2. To study about the consumer perception of credit card.

B). METHOD/TOOLS OF DATA COLLECTION

The data used for the project is primary as well as secondary data, as follows;

Sources of primary data-

Interview Questionnaire

Sources of secondary data-

Journals Books Magazines Reports

C). SAMPLE SIZE: The sample size for the study would be around 100 person of different level in the city.

D) RESEARCH METHODOLOGY

Research Methodology describes the methods to be used, the research design, the population to be studied, and the research instrument, or tools, to be used are discussed in the methodology. Research methodology is a way to systematically solve research problems. The method of data collection used for this project is both primary data and secondary data.

Primary Data

Primary data is the freshly collected data for specific purpose for specific research project.

Method of collection of Primary Data

Questionnaire Method

Mailed Questionnaire Method

Observation

Secondary Data

Secondary data is the data that already exists somewhere. This is not collected specifically for the research work being now undertaken. This may have been collected by someone or some organization under different context for different purpose.

Method Of Collection Of Secondary Data

Bank website-people and private sector, bank website thought internet study of various articles about credit card.

Tools For Data Collection

Questionnaires

Personal Interviews

Observations

Account in a bank

Frequency Percent Valid Percent Cumulative Percent

Valid 1 90 90.0 90.0 90.0

2 10 10.0 10.0 100.0

Total 100 100.0 100.0

Frequencies variable :

Account to our study above graph shows that 90% people have account in bank and 10%

people do not have account in bank.

Types of account

Frequency Percent Valid Percent

Cumulative

Percent

Valid 1 2 2.0 2.0 2.0

2 92 92.0 92.0 94.0

3 6 6.0 6.0 100.0

Total 100 100.0 100.0

Frequencies variable:

Account to our study above graph shows that 92% people have saving a/c, 16 % have current a/c

and 2% have recurring a/c in bank.

SUMMARY

A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services.[1] 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 is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner. The concept of using a card for purchases was described in 1887 by Edward Bellamy in his utopian novel Looking Backward. It was first used in the 1920s, in the United States, specifically to sell fuel to a growing number of automobile owners. Credit cards are issued by a credit card issuer, such as a bank or credit union, after an account has been approved by the credit provider, after which cardholders can use it to make purchases at merchants accepting that card India has came out of self-binding shackles to look "young" again and the enthusiasm shared by the young work force of the country is driving the economy like never-before Standard Chartered Bank in India is the largest international banking Group in India Standard Chartered India was the first to issue first global credit card in India, the first to issue Photo card, the first Picture Card and was the first credit card issuer to be awarded the ISO 9002 certification.

Protection could find it difficult to keep ahead of the credit-card industry. The Credit Card Accountability Responsibility and Disclosure Act of 2009, known as the Card Act, was intended to reshape the contours of consumer finance. Among other things, it forces card issuers to give customers more notice about interest-rate increases and restricts certain controversial billing practices such as inactivity fees.

Making existing and potential customers knowledgeable about products/services, consumer awareness programs create more informed buying decisions. Consumers cannot purchase products and services if they do not know they exist. Developing consumer awareness can help people save money and prevent fraud. In a complicated marketplace, people need to develop consumer awareness to protect themselves from fraud and poor purchasing decisions. It is essential that consumers understand how to make knowledgeable purchases and avoid obvious scams

Before positioning of a particular brand it is very important for the brand to know what does a consumer think about the product or service which is going to be launched by the brand.  With the help of this the customers need or expectations from the product , its ideal pricing etc. can be found out. At the same time brands also try to find out about the other brands and their image in the minds of the consumer. 

This involves an intensively planned research methodology that helps a manager to plot a graph with respect to the results received and get an idea about the perpetual spacing of the mind of the consumer. This ultimately helps a brand to identify the ideal positioning strategy that will occupy the desired imagine in. the mind of the customer.

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