Credit card transactions spike in January

Transactions worth Rs. 6,934.65 crore were carried out in India through credit card in January, 2011, growth of 27.82 % from that in the same period last year.
Credit card transactions during January, 2010 were at Rs. 5,425.51 crore, according to the RBI data.
The number of credit cards in circulation have, however, declined by over 10 % to 1.81 crore as on January 31, 2011, from 2.02 crore in the same period last year.
During the April-January period of the fiscal, the total transactions carried out via credit cards increased 21.78 % to Rs. 62,335.44 crore as against Rs. 51,188.94 crore in the April-January period of 2010-11.
Meanwhile, debit card transactions in January were up by 49.04 % to Rs. 3,712.67 crore, as against Rs. 2,491 crore in the corresponding month last year.
There were 21.82 crore debit cards in use in the country as on January 31, 2011, up over 25 % over the figure of 17.41 crore in the year-ago period.
In April-January period, the total transactions carried out by debit cards jumped by 47.06 %, to Rs. 32,029.24 crore, from Rs. 21,779.83 crore in the first 10 months of the last fiscal.

Why it is important to effectively manage your credit score

In the rapidly-evolving credit landscape, it has become almost impossible for defaulters to get a loan from banks who actively use credit bureaus. The increasing significance of credit reports to the loan seeker prompts questions like what a ?credit report/ score? is and how it affects them.
A credit report is a compilation of information about the individual and his or her credit history that has been reported to the credit bureau by those who granted credit to the individual. This report reflects details of all the individual?s loans, credit cards and other borrowings. It contains information like the date opened, credit limit, outstandings , overdues and written-off amounts among others. An individual?s credit score is generated by information on their credit report, but is not part of the credit report itself.
Credit scores can project the amount of risk posed by the individual to a lender. When lenders request an individual?s credit report, they often choose to receive a credit score at the same time, and will select which scoring model they want to use. Large lenders may use a customised scoring model. For example, for Car loan, a lender may use a scoring model that focuses on car payment history.
Lenders will typically evaluate an individual?s credit report and credit score along with other key information, such as income, against their own internal decision criteria to determine the individual?s ability to qualify for a particular loan type. In future, lenders are also likely to use the credit scores to decide on interest rates. The rates will factor in the perceived credit risk depending on one?s score.
Credit scores can change gradually over time as one?s overall credit picture gets better. This happens by consistently engaging in credit-worthy behaviour going forward, such as paying one?s bills/EMIs on time and using credit conservatively.
There are a few good habits to keep in mind to maintain creditworthy behaviour. The first one is paying bills on time. Delinquent payments can have a significant negative impact on your score. If one has missed payments, they should do their best to get current and stay current. Debt should be paid off rather than shifting it to other accounts. One should look to re-establish their credit history if they have had problems. Opening new accounts responsibly and paying them off on time may help in the long term. One should also be prudent in applying for and opening new credit accounts.
Credit cards can be kept, but they need to be managed responsibly . In general, having credit cards and instalment loans (and paying timely payments) may favourably impact your credit score in the long term. If one is having trouble making ends meet, one should contact his or her creditors. Lastly, one should keep balances as low as possible on credit cards and other revolving credit.
There are also some areas one should tread with utmost caution . One should not close unused credit cards as a short-term strategy to try to raise their score. Also, one should avoid opening a number of new credit cards, just to increase the credit available. This approach could actually have a negative impact on one?s score. If a person has been managing credit for a short time, avoid opening a lot of new accounts too rapidly. Adding new accounts will lower the average account age, which could have a negative impact on the individual?s credit score, particularly if s/he is a new credit user.
It takes time and there is no quick fix for eliminating past aspects of one?s credit history that may negatively affect their credit score. Credit scores are based on one?s credit history and can generally only be changed over time. Remember - accurate and timely negative information cannot be removed from your credit file. Your best approach for establishing credit worthiness is to handle your credit responsibly over time.

A credit card that talks to you!

Imagine your credit card talking to you and displaying your balance, while doubling as a reward card. Well, your imagination will soon turn into a reality.

Dynamics Inc is developing such cards -- due to be introduced in the US later this year -- which will have wafer- thin microprocessors and would run on batteries that can last up to three years.

However, the credit cards will only display personal information after a security code is entered.

Citibank has released the new 2G card, which has a programmable magnetic strip and buttons on the front for users to choose to use it as a credit card or just to spend reward points, the 'Daily Mail' reported.

A trial is currently ongoing and, if successful, it could roll out across the country.

Even Mastercard has just released a card that has a small LCD screen which displays a one-time code which the customer can use to make an online purchase. It means even if someone's credit card details are stolen, they will be useless to buy anything with without the one-off code.

Jeff Mullen, the CEO of Dynamics Inc which is working on several other high-tech cards, explained that the end of the magnetic strip has been mooted for years, but is still the dominant payment system in the world.

He said: "Magnetic stripe readers are being placed in more places than ever before -- like vending machines, movie theater kiosks and taxicabs. Download Songs

"Even in Japan, where the infrastructure is in place and phones (which can make payments) have been distributed for seven years, the volume of phone payments is significantly less than one per cent share of transactions.

"European chip cards comprise only about 10 % of cards in world."

Banks, phone providers, Google and Apple, are also working on mobile payment systems which rely on short-range wireless technology that allows electronic devices to transmit encrypted data.

"Although mobile payments is the future, you're not going to move all that overnight to magical phones. So these are step innovations, rather than leap innovations.

"Some are very much needed, and some are probably not going to make it," Todd Ablowitz, President of Double Diamond Group, a consulting firm on payments strategy technologies and products was quoted by the British newspaper as telling the 'creditcards.com'

Citibank reports maximum cases of debit/credit card frauds

Citibank has witnessed maximum 92 frauds of cloning of debit/credit cards or use of fake cards involving over Rs 1.89 crore from 2007-08 to December 2010.
"Largest number of such frauds belong to Citibank from 2007-08 to December 2010...RBI's committee has suggested a number of steps including replacing the magnetic strip on cards by a chip. All these aspects are being looked into," Finance Minister Pranab Mukherjee said in Lok Sabha during Question Hour.
Compensation to the victims, who lost money in these frauds, is another aspect which is being looked into by the banks.
Besides Citibank, other banks which reported such frauds are one each by Syndicate Bank, Standard Chartered, Punjab National Bank and Canara Bank in 2010 involving a total amount of less than Rs 23 lakh.
Bank of India reported one case of fraud in 2007-08 but the amount involved is huge at over Rs 1.92 crore.
Mukherjee said the Committee, headed by Executive Director, RBI has given various suggestions and a decision would be taken soon in this regard.
Besides, the RBI has also issued a series of instructions relating to Know Your Customer (KYC) to the banks so that identification could be authenticated before issuing a debit or credit card, the Minister said.
He said criminal investigations have also started against people involved in such frauds.
The RBI has issued a Master Circular on " credit card Operations of banks" recently advising the banks to set up internal control systems to combat frauds and to take pro-active fraud control and enforcement measures, Mukherjee said in his reply.
The Central bank has also advised banks to ensure that credit card operations were run on "sound, prudent and profitable" lines and fulfil "Know Your Customer" requirements, assess credit risk of customers, specify terms and conditions in clear and simple language and ensure prompt dispatch of bills.

Credit Card: Boon or Curse

Credit cards are whether a boon or a curse entirely depends on usage. On one hand it can help one out of any money problems, providing a financial lifeline and helping in case of severe cash flow problems but on the other hand they are pure temptation which can easily lead into debt trap (financial ruin).
Experts keep advising on the Dos and Don’ts, tricks and tips to use cards etc. They help you learn various ways in which you can benefit from credit cards like avoiding carrying hard cash, being able to pay for larger (expensive) items and then repay the balance gradually, and being able to cruise through temporary cash crunches.
There are few people who keep credit cards just to spend extravagantly, not for the benefits like convenience, ease, and flexibility offered by these cards. Some believe it a status symbol while few spend on cards just because they can afford to!
This kind of spending can easily lead one into a debt trap. In fact according to research this is the main reason for most to end up in personal debt. Then people are forced to take loans to tide over credit card dues and get caught in vicious circle of debt. Credit card should not be used to buy all sorts of luxuries, pay for holidays which you cannot afford. Neither should one buy the latest gadgets and high tech devices at high prices just to show off your purchases. Credit card is a responsibility. You need to look at how much you have to spend, how will you repay the money and how much interest will you have to pay.
Reports have revealed that people choose their credit card based on the credit limit offered by the bank rather than the rate of interest they would be charged. One reason for this could be the fact that they want to stretch the card limit to the maximum. One should always choose a card that gives best terms with lowest rate of interest. One should be careful in spending on a card and most importantly spend as much as one can afford. One should avoid falling into a debt trap from which it could get difficult to emerge by making diligent payments. If one is careful, credit cards will always be a Boon and never a Curse.