IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 22, Issue 11. Ser. II (November 2020), PP 08-13 www.iosrjournals.org DOI: 10.9790/487X-2211020813 www.iosrjournals.org 8 | Page A Study on Benefits of Credit Cards for Customers Cyriac Philip Alexander -------------------------------------------------------------------------------------------------------------------------------------- Date of Submission: 2810-2020 Date of Acceptance: 09-11-2020 --------------------------------------------------------------------------------------------------------------------------------------- I. Introduction Innovation in fact has become a continuous process in banking. With dramatic changes in policies, the banks apart from meeting the demands of the economy are optimizing their efforts to fulfil their requirements, ambitions, aspirations and expectations of the community. Quite clearly, the aim is to make it an exclusive piece of possession and a symbol of status. The imperatives of the new business and industry culture also demands that it dispenses with the need of hard currency into many areas of its transactions making it cashless society. Nothing has revolutionized monetary transactions in the present day more than credit cards. The launching of credit card is indeed one step further in meeting the social objectives expected of today's banking. It is treated as a status symbol and as a vehicle of consumerism A world where dreams are turned into reality with the flash of a credit card. CREDIT CARDS IN INDIA India is one of the fastest growing countries in the plastic money segment. Already there are 300 million cards in circulation, which is likely to increase at a very fast pace due to rampant consumerism. India‟s card market has been recording a growth rate of around 20 per cent in the last 5 years, especially in the debit card segment. Card payments form an integral part of electronic payments in India, because customers make many payments on their card - paying their bills, transferring funds and shopping. Credit cards have shown a relatively slower growth compared to that of debit cards, even though they entered the market one decade before debit cards. Only in the last 5 years has there been an impressive growth in the number of credit cards- by 30 per cent between 2004 and 2008. It is expected to grow at a rate of about 60 per cent considering levels of employment and disposable income. Majority of credit card purchases come from expenses on jewellery, dining and shopping. Another recent innovation in the field of plastic money is co-branded credit cards, which combine many services into one card-where banks and other retail stores, airlines, telecom companies enter into business partnerships. This increases the utility of these cards and hence they are used not only in automated teller machines, but also at POS terminals and while making payments on the net (Reserve Bank of India, 2012). MECHANISM OF CREDIT CARD 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. 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. 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. 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. The cardholder must pay a defined minimum portion of the amount owed by a due date, or may choose to pay the entire amount billed. The credit issuer charges interest on the unpaid balance, if the billed amount 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.