Finance Business

Credit Card: What are the different types of Credit Cards

In India only banks are authorized to issue the credit card, they can only become a member of VISA/MASTERCARD & issue to their respective clients.

It means undertaking a risk or you can say a credit risk for giving a loan on that card or instrument. Many banks are also present in the issuance of ‘affinity’ or ‘co-branded’ credit cards. Also, prepaid cards are the fastest growing segment in today’s scenario for initiation & subsistence of digital transactions and digital payments.

At the ‘mass’ people strategic level, the credit card as well as the loyalty card boom started early in this decade. Hard to believe, but today in this digitized web-based network it is not tough to find a person with four credit cards and another 20 plastics, including club membership, airline and hotel membership and dining discount cards. Barely a decade ago, was it a common threat amongst the masses in India to lose money through misuse of credit card. There was also a mental block against owing money to someone in any capacity.

What are the different types of Credit Cards?

• Co-branded Credit Cards
• Loyalty Cards i.e. ensuring fidelity to brands
• Fund based Cards
• Business Credit Cards
• Cashback points cards
• Prepaid credit cards
• Corporate Credit Cards
• Add-on Credit Cards

What are the different types of Debit Cards?

• Pre-loaded Debit Cards
• ATM Cards

Who has the authority to issue Cards?

Banks can issue credit cards either through its own wing or a subsidiary company set for this purpose. Herein RBI approval is not mandatory to issue such; it can even happen by a board approval amongst the members.

• However, Banks having a Net worth of 100 Crore are only allowed to issue credit cards into Indian Banking system.
• Banks desirous of setting up separate subsidiaries for undertaking credit card business would, however, require prior approval of the Reserve Bank of India.
• Banks must have a well-documented credit policy along with a Fair Practice Code for smooth processing of cash credit & loans via credit cards.

Things to Be Kept in Mind:

• Assessment of Credit Limit of the customer
• Scrutiny & detailing regarding credit risk of the customer.
• Analyzing the reasons which can lead to credit card application rejection.
• Ensuring prudence in the evaluation of a client profile
• KYC/AML/CFT regulations applicable to Banks to comply with.

How Does It Work?