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Money  and Banking(MGT411)

Announcement of Discussion Board


This is to inform that a
 Discussion Board will be opened under the link of GDB according to the following schedule:

Opening Date and Time: Oct 23, 2012 At 12:00 AM (Mid-Night)

Closing Date and Time:    Oct 25, 2012 At 11:59 PM (Mid-Night)

Topic/Area for Discussion:
                                                         "Other Forms of Payments.    

 

Learning objectives: To understand the hidden costs associated with the use of credit card and its relationship with the core principles of money and banking.

 

Learning outcomes: It will enhance the ability of the students to understand the logic behind the operations of credit cards and the hidden cost associated with the use of these credit cards. It will also enable the student to understand that how the various costs associated with the use of these credit cards are related to the core principles of money and banking.

 

The Case:

Suppose you go to the market and purchase some goods using your credit card issued by your bank. Definitely the bank is providing you this facility in return for some profit. Keeping in view the core principles of money and banking, please explain, who is paying the extra money to the bank for providing this facility: you, merchant or both, and why? Support your answer with logical reasons.

 

Important Instructions:

 

1. Your discussion must be based on logical facts and should not exceed 80 words.

2. The GDB will remain open for 3 working days.

3. Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.

4. Obnoxious or ignoble answer should be strictly avoided.

5. Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over.




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Replies to This Discussion

When you use a credit card, you borrow money from the issuer, who then pays the merchant. At the end of the month, the issuer sends you a statement listing your charges, and you repay the money you borrowed plus any interest. If you pay off the entire amount each month by the due date, you pay no interest.

maryam arg tmhn pta h k relevant material kon sa h to tum bta do

yehe k card holder aur dukandar men se kon bank ko zayada pay ker raha hai.. ya dono zayada pay ker rhy hain bank ko... is ka simple and yeh hai k CARDholder zayada pay ker raha hai... dukan wala nahi...bus

Solution:

 

In my opinion, because the customer is using the money of credit card which is actually the bank money. It's on the shoulders of customers to pay the extra price or money the base of shopping conducted by the use of credit card. The merchant is not liable for paying extra money to bank because it's just provide the facility of purchasing of something. It on the customers to pay the extra money due to the use of credit card interest is imposed on the outstanding amount of credit card limit which is 3% on daily basis and 36% to 40% per monthly on the outstanding balance or balance used by the customer. Merchants have no issue with the extra amount

gud ans rabi shah

thanxx dear 

koi question explain karai ga plzzzzzzzz

Q yeh hai saji k agar aik banda aik dukan se kuch cheezien purchase kerta hai aur credit card se payment kerta hai... to Q main yeh pocha gaya k credit card k through kon zayada bank ko pay ker rha hai? jis ne bill pay kia wo? ya dukan dar.. ya dono?

kyu k credit card bank ne issue kia hai.. aur iss fisility k liye bank kuch charges leta hai in the sense of interest/.. to Q ma pocha gaya k kon zayada pay ker rha

is ka ans hai k zayada pay wo kar rha hai jo card holder hai.. dukandar nahi

thank u

MGT411 Money & Banking-1ST GDB Idea Solution

Note: Dont copy paste the solution

 

The Case:

Suppose you go to the market and purchase some goods using your credit card issued by your bank. Definitely the bank is providing you this facility in return for some profit. Keeping in view the core principles of money and banking, please explain, who is paying the extra money to the bank for providing this facility: you, merchant or both, and why? Support your answer with logical reasons.

 

Note: Dont copy paste the solution

Solution:

When you do an offline transaction and simply sign a charge slip, the retailer has to pay a small percentage of your total purchase – perhaps 2%. This fee goes to the bank that issued your debit (or credit) card as an interchange fee.

What about online transactions? Retailers can get those done for a lot less. They might only pay 10 cents or so per transaction.

As you might imagine, 2% of every purchase adds up to a lot of money. The banks andcredit card companies would love for you to choose credit because they get 2% of every dollar you spend. Retailers, on the other hand, beg to differ. They’d prefer that you choose debit so that they don’t have to pay a hefty interchange fee.

In order to maximize revenue, banks give you an incentive to choose credit (or a penalty for choosing debit, depending on how you look at it). They may charge you a fee for online transactions – usually in the ballpark of one to two dollars. Once you discover these fees, you’re more likely to choose credit next time. In addition, they may offer rewards (such as airline miles or entry into a sweepstakes) each time you choose credit.

Of course, somebody has to pay the 2% interchange fee. Retailers don’t pass it on to you as a transaction cost. However, it has to come from somewhere – they have to build it into the price of the products and services you buy.

 

EXTRA CHARGE FOR USING A CREDIT CARD

When a merchant gives a credit card slip to the credit card company or bank for processing, a percentage of each purchase—usually 1.5% to 5% of the purchase amount—is deducted. This "merchant discount fee" helps pay for the bank's services and for the credit card system. By charging extra for credit card use, the merchant passes the discount fee on to customers.

Tariq Bhai you are genius. According to my knowledge the bank is providing a fascility to its customers in the form of credit cards.  Credit cards are very safe mode of payment. The cardholder will give the extra payment in the form of interest of every transaction because the most benefit is going to the cardholder. The shopkeeper or retailer is not responsible for the transaction through credit cards because they needs only the payment of his goods. It is on the will of customers that either they pay in the form of cash or through credit cards. Also when a customer pays the payment of credit card late then the due date then he pays extra amount with the real payment. 

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