A plastic money card is a thin card that contains identification information such as a signature or picture, and authorizes the card holder to charge purchases or services to the card holder’s account. Today, the information on the card is read by automated teller machines (ATMs), banks, and the internet. It all started in the 1920s, when individual companies (such as oil companies and hotels) issued these “plastic money cards” for purchases made at their businesses. However, these cards could not be used outside of the company. In the 1950s a “universal card” was introduced by Diners Club, INC. This was when credit cards were made. These cards allowed the card holders to use the cards in various locations and businesses. The way the cards worked was that there were annual fees, and depending on the plan, the card holders were billed either monthly or yearly. Later on the “bank Continue reading
Credit Management
Types of Credit Cards
There are many types of credit cards which are used by different types of customers and account holders. Mostly business personnel use credit cards which are convenient in their use and which suit businessmen. Similarly students would use student credit cards and a layman will use general purpose cards. There are some most used types of credit cards. For example Interest Credit Cards are mostly used by businessmen and company CEOs because there is a charge of interest if credit card payment has not been annulled in time. Another important and commonly used type of credit cards is those in which 0 APR (Annual Percentage Rate) is charged as its introductory price similarly cash cards are also used which are just like cash but in the form of plastic card. It is because the cash card holder has paid the cash price of that card and he can use it Continue reading
Case Study of J.P. Morgan Chase : The Credit Card Segment of the Financial Services Industry
As result of mergers and acquisitions activities Chase Credit Card Services (CCS) became fifth largest credit card issuer in the industry. Being a child of a highly reputable J.P. Morgan Chase bank the CCS has many competencies and competitive advantages in order to compete in already saturated credit card market. Evolvement of internet and technology, globalization, legislation and modernization of financial industry is giving new opportunities for expansion of the credit card business. Despite of intense competition among the banks to acquire and retain profitable customers this market still has a great potential for the right players. CCS reached a critical point when it is equipped with the right instruments and now needs to demonstrate that it is able to leverage them the most optimal way to maximize its profit and prove to its parent investment banking company that it still deserves to be a part of Chase core business. Continue reading
Credit Management Concepts: Know Your Client
A cardinal rule in banking is the concept of “Know your client”. This means exactly what is says. The banker will do all he can to find out as much as he can about the company and the client. In this no information is too small or too immaterial since they will fit into a larger picture and the fate of the facilities extended may depend upon it. It has to be always remembered that the project may appear sound, the documentation perfect and the financials impeccable. However, if the intent is to cheat, it could cause severe losses to the Bank. Banks are always aware that a dishonest man is also a very clever person. Additionally the dishonest person has the advantage in that the innocent banker believes him to be a good, honest soul. He knows he is not; he knows he intends to cheat the banker and Continue reading
Credit Management – Managing Trade Credit and Accounts Receivable in Business
“The purpose of any commercial enterprise is the earning of profit, credit in itself is utilized to increase sale, but sales must return a profit.” – Joseph L. Wood The primary objective of management of receivables should not be limited to expansion of sales but should involve maximization of overall returns on investment. So, receivables management should not be confined to mere collection or receivables within the shortest possible period but is required to focus due attention to the benefit-cost trade-off relating to numerous receivables management. Principles of Credit Management In order to add profitability, soundness and effectiveness to receivables management, an enterprise must make it a point to follow certain well-established and duly recognized principles of credit management. The first of these principles relate to the allocation of authority pertaining to credit and collections of some specific management. The second principle puts stress on the selection of proper credit Continue reading
Commercial Credit Analysis: Debt Covenants
Conditions imposed on facilities extended by banks, also known as covenants (here Debt Covenants) are imposed by bankers upon a borrower to: Preserve the financial strength of the borrower. Maintain the borrower’s ability to refinance itself – the borrower (being a limited company or a business) continuing as a going concern. Control the assets – prevent the borrower from selling assets thereby ensuring that assets are not dissipated, Ensure that the borrower does not do something that would be detrimental to the interests of the Bank. Debt covenants, therefore, are from a banker’s perspective extremely important in the structuring of a loan.While a risky, unsound loan will not become good by covenants, they will afford some comfort and a degree of control including providing warning signs should the financial position of the company deteriorate. The amount of covenants that can be imposed on a borrower would depend on: The antecedents Continue reading