Credit Cards Case Study

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2.1 CREDIT CARDS The Bank Negara Malaysia (BNM, n.d) explained that credit card as a card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. Credit cards charge interest and are primarily used for short-term financing. Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual's credit rating. For many purpose, credit cards were chosen by a lot of people to make the purchases in their daily life. Besides that, credit cards issuers, especially banks, have involved into fierce competition in the credit card market that is growing rapidly. From the history, credit cards were first issued at the beginning of the 20th century, by hotels…show more content…
Fowler (1995: 51) states, “credit card means any card, plate, coupon book, or other single credit device existing for the purpose of being used from time to time upon presentation to obtain money, property, labor or services on credit”. A more updated definition by the IDB (2000: 249) in Resolution No. 63/1/7 of the Resolutions and Recommendations of the Council of the Islamic Fiqh Academy 1985-2000, define a credit card as “a document that its issuer (issuing bank) gives to a natural or legal person (card bearer) according to a contract between them. The card bearer becomes able, by virtue of this arrangement, to purchase goods or services from those who recognize the card without immediate payment of the price, as commitment will thus fall on the issuer. Payment is made from the account of the issuer who will afterwards charge the card bearer at regular time intervals. Some issuers used to impose usurious interest on the total outstanding balance that the bearers owe to them, after due date of payment, while other do not” (IDB,…show more content…
Credit cards are different to charge cards, as the credit given through charge cards has to be paid relatively quickly within one period. Credit cards are also unlike debit cards in which customers use money that is deducted from their own accounts upon transaction (Kante, 2006; Worthington, 1995). It is worth noting that there is literature, which uses the term credit card to include charge cards. For instance, Diamond (1982) defines charge cards as ‘short-term credit cards’, while credit cards are ‘extended credit cards’. However, for the focus of this study, it is important to distinguish between the two card

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