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Credit cards basics and Bank's Profit and Loss Statement

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Fundamental of credit cards and understand banks' profit and loss statement

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Credit cards basics and Bank's Profit and Loss Statement

  1. 1. Basic of Credit Cards
  2. 2. Wikipedia- A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services, based on the cardholder's promise to the card issuer to pay them for the amounts so paid plus other agreed charges.[1] The card issuer (usually a bank) creates a revolving account and grants a line of credit to the cardholder, from which the cardholder can borrow money for payment to a merchant or as a cash advance. A credit card is different from a charge card, where it requires the balance to be repaid in full each month.[2] 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. A credit card differs from a charge card also in that a credit card typically involves a third-party entity that pays the seller and is reimbursed by the buyer, whereas a charge card simply defers payment by the buyer until a later date. - Wikipedia What is a credit card
  3. 3. How unique credit card numbers are created Network Starting Digit Total Digits ( up to) Master 2 or 5 16 Maestro 2 or 5 19 Visa 4 19 Diners 3 14 Discover 6 16 Amex 3 15
  4. 4. How does the network work Source : http://treasurytoday.com/2007/05/interchange-fees
  5. 5. How does the network work Source : https://rortybomb.wordpress.com/2009/ 12/01/should-the-us-reform-interchange- fees-on-credit-cards/
  6. 6. Credit Card Key Terms 1. Annual fee 2. Minimum payment Due 3. Annual percentage rate (APR) 4. Over-the-limit fee 5. Average daily balance 6. Payment due date 7. Balance transfer 8. Cash-advance fee 9. Previous balance 10. Credit limit 11. Purchases/new charges 12. Finance charge 13. Grace period 14. Variable interest 15. Late fee 16. ANR 17. Revolvers 18. Transactors 19. Utilization 20. Payment Rate 21. GCL 22. NCL 23. Day Past Due
  7. 7. Credit Cards PnL Drivers Source : Mareketelligent
  8. 8. ADB Based Interest Computation Microsoft Excel Worksheet
  9. 9. Sample Benefits ( max benefits for Transactors)
  10. 10. Sample Benefits ( max benefits for Transactors)