The credit card market today is expanding to include undergraduate and post-graduate students under its umbrella. There aren’t many options for this type of card at present; many of the banks have been adapting their low-interest and lower-end cards for students’ use. The student credit card market is a fledgling one at present, with banks using models from the USA for their own adapted cards.
Features:
The most important feature of a student credit card is that there is no lower income eligibility limit, which allows even a person who doesn’t earn money to obtain a credit card.
Such credit cards are simpler to obtain than normal credit cards, with no income tax returns required. The only documents required are proof of residence and proof of enrollment at any institute.
A second major feature of most student credit cards is that they offer a lower cash limit and revolving credit limit, along with a lower service charge on the revolving credit limit.
Finally, there is no joining or annual fee, and the car is generally valid for a period of 5 years, and eligible to students who are 18 and above.
Warning:
A problem with student credit cards that has arisen in the USA, and which we would do well not to emulate is when credit card companies encourage students to use the student card to pay off their student loans. This plunges them deeper into debt, and often students are unable to pay back the loans on the credit card. The credit card companies compensate for a low monthly interest fees with an unusually high annual percentage rate, so the bills on a student card should be paid on time and in full.
NextGen Gold Visa Card:
A good example of a student credit is the Bank of Baroda’s NextGen Gold Visa Card, which is a card exclusively for students offering low interest rates as well as the primary features of their standard Gold card. The card is a prime example of a characteristic student credit card; 1.5% revolving credit service charge as opposed to 2.5%, and a higher APR.
Reminder:
Three things that a student must remember before obtaining a student card:
The card should be used for small purchases, not for any extravagant items.
The bill should be paid in full before the end of the year, otherwise the high APR kicks in.
The details and offers of the card should be studied in full before a card is purchased, with special emphasis on the APR and the late payment charge.
Thursday, May 28, 2009
Debit Cards vs Credit Cards
This article highlights the differences and comparative advantages and disadvantages of the two types of popular plastic money on offer in India.
The basic difference between the two is the fact that a credit card takes the form of a personal loan from the issuing bank to the consumer, while a debit card is more like a cheque: money is directly deducted from a person’s bank account to pay for transaction.
Some advantages of a credit card over a debit card are:
With a flexile spending limit, a cardholder can take advantage of the easy loan facility of a credit card, and can use it to purchase items or spend money that he expects in the near future, not just money that he presently has in his account.
Most of the major features of a debit card such as withdrawal of cash from ATMs are available on credit cards as well.
A credit card has a wider acceptance and recognition, especially in online transactions.
A credit card has greater security measures ad checks than a debit card.
Credit cards allow for cash back and bonus points schemes that a debit card is not eligible for.
A credit card can be used as a convenient way to check and record your spending.
Since there is a fixed credit limit, a cardholder cannot overstretch his purchases.
The disadvantages of using a credit card: Following are the disadvantages of Credit card
The major one is the hidden costs of a credit card in the form of late payments, transaction fees, fuel surcharge. The consumer must take all of this into account before getting a card issued.
It is not compulsory for the entire balance to be paid, but the interest is charged on the entire amount, regardless of the part paid. This causes a debt trap for the cardholder.
The security of a card is not total and cases of fraud are extremely common even today.
Credit cards can be used at ATM cards, but there is a considerable processing fee required.
All in all, a credit card should be used responsibly and the amount due should be paid in full.
Debit cards provide access to ready money in a more convenient and less invasive form than cheques, and allow for a faster withdrawal of cash.
They can be used by people who do not qualify for a credit card, and the major advantage is that a person spends money that he actually possesses from his bank account.
A debit card can be used to withdraw money from an ATM with no processing charge. A debit card is a more convenient way of carrying cash around.
The disadvantages of the debit card:
There are almost no security measures and a person can use a debit card to clean out the cardholder’s account, if he knows the PIN.
A debit card does not prevent the account from being overdrawn, and has less affordability than a credit card.
A debit card also has a narrower acceptable area in India, with many merchants not accepting it since they are charged a fee every time they do.
The major problems of a debit card are negated by instant notifications of transactions via sms and emails. A credit card or a debit card are both useful tools that must be used carefully and sparingly to maximize your advantage.
The basic difference between the two is the fact that a credit card takes the form of a personal loan from the issuing bank to the consumer, while a debit card is more like a cheque: money is directly deducted from a person’s bank account to pay for transaction.
Some advantages of a credit card over a debit card are:
With a flexile spending limit, a cardholder can take advantage of the easy loan facility of a credit card, and can use it to purchase items or spend money that he expects in the near future, not just money that he presently has in his account.
Most of the major features of a debit card such as withdrawal of cash from ATMs are available on credit cards as well.
A credit card has a wider acceptance and recognition, especially in online transactions.
A credit card has greater security measures ad checks than a debit card.
Credit cards allow for cash back and bonus points schemes that a debit card is not eligible for.
A credit card can be used as a convenient way to check and record your spending.
Since there is a fixed credit limit, a cardholder cannot overstretch his purchases.
The disadvantages of using a credit card: Following are the disadvantages of Credit card
The major one is the hidden costs of a credit card in the form of late payments, transaction fees, fuel surcharge. The consumer must take all of this into account before getting a card issued.
It is not compulsory for the entire balance to be paid, but the interest is charged on the entire amount, regardless of the part paid. This causes a debt trap for the cardholder.
The security of a card is not total and cases of fraud are extremely common even today.
Credit cards can be used at ATM cards, but there is a considerable processing fee required.
All in all, a credit card should be used responsibly and the amount due should be paid in full.
Debit cards provide access to ready money in a more convenient and less invasive form than cheques, and allow for a faster withdrawal of cash.
They can be used by people who do not qualify for a credit card, and the major advantage is that a person spends money that he actually possesses from his bank account.
A debit card can be used to withdraw money from an ATM with no processing charge. A debit card is a more convenient way of carrying cash around.
The disadvantages of the debit card:
There are almost no security measures and a person can use a debit card to clean out the cardholder’s account, if he knows the PIN.
A debit card does not prevent the account from being overdrawn, and has less affordability than a credit card.
A debit card also has a narrower acceptable area in India, with many merchants not accepting it since they are charged a fee every time they do.
The major problems of a debit card are negated by instant notifications of transactions via sms and emails. A credit card or a debit card are both useful tools that must be used carefully and sparingly to maximize your advantage.
Credit Card Hijacking by Identity Theft
Identity theft is the stealing of another person’s identity and using it as your own. Personal information is stolen by identity thieves through various sources, and used to make credit cards and other identity documents. Fraudulent credit cards are the most common result of identity theft. There are various ways in which thieves gather details of someone’s identity. The most common methods are listed below:
Retrieving information from redundant equipment which has been disposed of carelessly, e.g. at public dump sites, information given away without proper sanitizing etc.
Stealing payment or identification cards, either by pick-pocketing or surreptitiously by skimming through a compromised card reader
Eavesdropping on public transactions to obtain personal data
Stealing personal information in computer databases
Advertising bogus job offers (either full-time or work from home based) to which the victims will reply with their full name, address, CVs, telephone numbers, and banking details
Browsing social network sites, online for personal details that have been posted by users.
These methods allow thieves to gather a surprising amount of information and get a credit card issued in your name. The net results of such a measure are disastrous. Vigilance and discretion must be exercised in keeping personal details from being stolen.
Credit Card Hijacking by Cancellation Barrier
Another common form of credit card hijacking is used by subscription companies, the payments for whom are routed through a credit card. The organization creates certain barriers that make it difficult for a credit card user to cancel his subscription easily, and as such continue to charge him for services he no longer desires or needs. This is in direct contrast to the traditional method of subscriptions, where the subscriptions have to be proactively renewed, and are cancelled or suspended if payments are not on time. The credit card makes the user’s money more easily accessible to the subscription company, and the liability resulting from inactivity falls on the user’s shoulders, rather than the company that is providing the service.
Also, since the general monthly cost is low, such practices can go unnoticed for months at a time. Hence, the user must maintain a close eye on his monthly bills.
Credit Card Hijacking by Negative Option Billing
Negative option billing is a business practice in which goods or services are provided automatically, and the customer must either pay for the service or specifically decline it in advance of billing. Thus, if the user makes no response to the bill sent by the company, he is assumed to have agreed with the transaction and the amount is debited from his credit card. This is a practice which is not illegal yet, and many credit card users have been exploited because of such tactics.
Sources:
http://en.wikipedia.org/wiki/Credit_card_hijacking
http://en.wikipedia.org/wiki/Identity_theft
Retrieving information from redundant equipment which has been disposed of carelessly, e.g. at public dump sites, information given away without proper sanitizing etc.
Stealing payment or identification cards, either by pick-pocketing or surreptitiously by skimming through a compromised card reader
Eavesdropping on public transactions to obtain personal data
Stealing personal information in computer databases
Advertising bogus job offers (either full-time or work from home based) to which the victims will reply with their full name, address, CVs, telephone numbers, and banking details
Browsing social network sites, online for personal details that have been posted by users.
These methods allow thieves to gather a surprising amount of information and get a credit card issued in your name. The net results of such a measure are disastrous. Vigilance and discretion must be exercised in keeping personal details from being stolen.
Credit Card Hijacking by Cancellation Barrier
Another common form of credit card hijacking is used by subscription companies, the payments for whom are routed through a credit card. The organization creates certain barriers that make it difficult for a credit card user to cancel his subscription easily, and as such continue to charge him for services he no longer desires or needs. This is in direct contrast to the traditional method of subscriptions, where the subscriptions have to be proactively renewed, and are cancelled or suspended if payments are not on time. The credit card makes the user’s money more easily accessible to the subscription company, and the liability resulting from inactivity falls on the user’s shoulders, rather than the company that is providing the service.
Also, since the general monthly cost is low, such practices can go unnoticed for months at a time. Hence, the user must maintain a close eye on his monthly bills.
Credit Card Hijacking by Negative Option Billing
Negative option billing is a business practice in which goods or services are provided automatically, and the customer must either pay for the service or specifically decline it in advance of billing. Thus, if the user makes no response to the bill sent by the company, he is assumed to have agreed with the transaction and the amount is debited from his credit card. This is a practice which is not illegal yet, and many credit card users have been exploited because of such tactics.
Sources:
http://en.wikipedia.org/wiki/Credit_card_hijacking
http://en.wikipedia.org/wiki/Identity_theft
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