How a credit card works when you shop….??

A small situation to make us understand the funda…

Priya: I want to buy a Sony digital camera costing Rs.20,000, but I don?t have any cash right now.

Raj: Why don?t you use your ICICI Bank credit card? Never heard them say ? Hum Hain Na ??

Priya: I am quite skeptic about using these cards. I pay using the card, get a bill after 30 days and pay after another 20 days. This is a maximum of 50 days interest free loan. Why does any bank do it?

If I borrow Rs.20,000 on personal loan at 11%.
Interest to be paid for 50 days = Rs. 20,000 * 11% * (50/365) = Rs. 301.40.

Here the bank is giving me a loan without interest when I use the credit card. Something is wrong somewhere!

Raj: Well? let me tell you how it works when you use your card to pay for the camera.
• You present your ICICI Bank credit card ? a VISA card.
• Sony World swipes your card on a machine provided by Citibank. Lets call Citibank ? the acquirer bank and the process of Sony World swiping the card on that machine ? requesting authorization .
• Citibank communicates with the card issuer ? ICICI Bank through VISA Network to check if the card is valid and has the required credit limit.
• ICICI Bank reviews and approves / declines which is communicated back to Sony World.
• You sign a receipt called Sales Draft given by Citibank. This is the obligation on your part to pay the money to ICICI Bank. Data on this receipt can be captured electronically and transmitted.

At the end of day or at the end of some period Sony World chooses:
o Sony World submits the receipt you signed to Citibank who pays Sony World the money. Sony World pays Citibank a fee called Merchant Discount . Let us say this is 6% of the sale value = 6% * 20,000 = Rs. 1200
o Citibank sends the receipt electronically to a Visa data center which in turn sends it to ICICI Bank.
o ICICI Bank transfers the money to a settlement bank which in turn transfers the funds to Citibank.
o Citibank pays ICICI Bank an Interchange Fee of 4% of the sale value = 4% * 20,000 = Rs. 800
o 20 to 50 days later ICICI Bank gets the money from you ? and you don?t pay the interest!!

Priya: Interesting! So Sony World pays more than the interest that I should have paid for the loan that I take. I, as a cardholder have the following benefits

1. Convenience of not having to carry cash.
2. Credit availability ? free of interest.

However what benefits does Sony World get for paying so much money? Isn?t it more profitable for them to take cash? They can save as much as Rs.1200.

Raj: Certainly. Some retail outlets offer you discounts if you pay by cash, don?t they?

However when you don?t count the money that you are spending, you tend to buy more! Cards encourage this ? called impulse purchase .

If you did not have access to credit, you would not have bought the camera this month ? or may be not any time soon either. By accepting cards, the merchant is actually extending you credit at the risk of the card issuer. He pays money to the banks to carry that risk.

Priya: So ICICI Bank uses this money to pay back to us when they announce 5% cash back. They insist that the Sales draft that I sign at the retailer should also be from ICICI Bank. This means they are saving on the Interchange Fee and also pay me a part of the Merchant Discount that they get.

Raj: Exactly! If you have noticed, ICICI Bank gives you the cash back in the next credit card statement. They keep the ?cash back? money for a maximum of 60 days before passing on a part to you. This accrues them interest too.

Say if ICICI Bank earns an interest of 6% per annum for the cash they carry ? they get Rs.1000 * 6% * (60/365) = Rs. 10

That is not huge, but money nevertheless. And when you consider that almost everyone in this city shops with a credit card these days, it is a big sum.

Priya: And that also explains why banks tie up with petrol pumps ? like ICICI Bank has tied up with HPCL and I could re-fuel there without having to pay the fuel surcharge of 2.5%. The card issuer and the acquiring bank is the same and that saves interchange fees.

Raj: Good! You seem to have figured out how it all works! Let me summarize:

Priya: Sooper! Toh ab shopping chalein?? Lets not miss this Christmas and New year Shopping Festival!

i [miss] or mess my college days

Don’t feel bad and not surprised even …plz….yaar mery life hai if i am feeling it then kya hua. Nothing na. But yes this is true. Though i don’t know how much you agree with me and how many of you disagree (concentrate on much and many ;-) . Seriously whenever i recall then i got few lines running behind me like “micca running behind rakhi sawant” and out of those few were like:

1. Xl ki kudiyaan wah wah bhi wah

2. Those were the best days of my life

3. Din bhar kaam nahi aaram…

3. Sabka kata hai … [Sorry i can not give you the link :-) ]

So does it means all were sweet enough to recall or there were something which i am hiding. Those cold and heated comments of Profs who used to say that i am one of the most useless channel of his class, or the opinion of my friends who used to say that i am a so prominent bugger that i can give classes to “Raju Srivastava”.

The green park of our college which must be abusing us for digging and eating all the greenery like Buffalo,

The broken windows of every class where we stay for more than 1 day,

Every bench of the library which are still the manuscript of all the love and lovers and various uncensored dialogues which Nagesh kukunurr must love for his next movie,

and moreover anything…

The staircases of the college which are red colored not due to the sincerity of college management but due to the voluntarily mouth wash of my guttka loving fnds,

and how can i forget my hostel which was the best example of change:

you come at 9 o clock morning it is like an uncensored movie, ppl with and without cloths are trying to bath, to dress, to impress, to hide…..and many more.

you come at 12 o clock in the noon…… we are the morons, can eat anything……..and hygiene: ……….from where this world came to dictionary?….. ….i hope my hostel is not the right ans.

you come at 6 in the evening ……i can bet that Olympics can get many new champions and many new games to play and to include in list of games they formally have.

you come at 12 in the night …uffffffff this is not the right place to describe , we are hiding the things in the closed rooms and hearing everything with the earphone which we usually and casually use for secret reasons ;-) .

and hell ! you come at 3 o clock in the night …..and then you will realize that we have a call center office at each of the building floor near the staircase, the flower pot, the balcony and our sincerity employees are busy in different type of ascent and facial expressions in solving the customers problems [i hope you can understand that who are the customers]……but don’t ask.. :-) what and who are the customers ?

Finally the morons are on the bed.
And while sleeping i am realizing that i had lost those days when reality means dreams and dreams were beautiful. I can’t say that do i really miss or do i really messed my college days. But one thing about which i am pretty sure is I really loved my college days.

Mission fails .....Vision can not.....

This is something which looks like a more theoretical and philosophical thought. Though it is not. It is more practical than a theoretical saying but in first eye it looks like. I personally believe that some times we are so obsessed with the feeling that there is a north and south type of difference in between theory and practical. Because science says that hypothesis is not a practical thing.

Today we were busy enough to define the thin line difference between the hypothesis and practical approach. Why? Sorry it is a bit personal question. Though the reason is simple enough ...i am having the age of 25 and i am certainly transforming myself into the "Grahstra Aasram". So it is natural enough that i want a vision which i could have i was 18 but no sorry !!!!!!!!!! as it is always good to come back to the right path ....late than never.

Though we had defined the things earlier also ...but we were not professional then. We were having our personal problems along our way. But now we are free ....at least we thinks so . And it is right also....now there is an open sky in front of us ..we can fly if we want to fly....we can count the height and width of the world if decide. ..............................All depends.


But one thing about which i am sure is ...."Mission fails but vision can not". So what if we lost...in one game ...we are indians and we can make any game interesting even at the last moment....you can ask for the examples....take any thing...any thing like Indian cricket team .....you can lose even when all the batsman are waiting for there chance...you can lose even if you have to make one run and you have one over and 8 wickets.......you take Indian daily shops....hundreds of the time actor in them dies and reborn. .......you take Indian movies....you never distinguish between the hero and "super commando dhruv".

And this thought would make me charge again so that i can start the venture i dreamt once. I don't know the shape ...i don't know the size but one thing which i have is a dream, a vision and a promise. Which i have to kept alive.

Chak de Vivek.