Black Cards And Banking Harvard Case Solution & Analysis

Black Cards And Banking Case Solution

The main challenge for the card issuer is an unsecured loan. Other loans, auto loans, and mortgages are secured.  Auto loans have reduced risk because the bank can repossess the car when the borrower cannot keep up with the payment. Similarly, the bank can foreclose the house if the borrower fails to pay the mortgage payment. But the bank cannot repossess items purchased on the credit card which means the card debt unsecured and therefore riskier. The bank can easily lose 100% of the card balance.

The unsecured loan carries a higher interest rate than secured loans because when the credit card is issued, the cardholder signs a legal document promising to pay the money within time. The contract also explains the responsibilities of the card holder if he or she does not pay the full balance on time. In order to compensate the cost of being a late payment, credit card issuers charge interest for the use of funds. This charge is referred to as the Annual percentage rate.

Ans no. 3

Debit or ATM card deducts the purchase amount directly from one’s checking account. They can be used to purchase goods or services or to get cash from ATMs. It often has a daily purchase limit and its purchase can be made with or without a personal identification number (PIN).

Credit cards give the person access to debt issued by the bank. It offers better consumer protection in terms of fraud as compared to the debit card. Many credit cards do not longer charge annual fees. However, new debit cards offer credit-like protection.

Ans no. 4

Luke and Cecilia should get separate cards instead of the joint card. Because the joint card will increase responsibility to both Luke and Cecilia.They both have to use it economically and pay the full balance each month. In order to get a credit score, they both have to make sure to keep the credit limit below 40%. Luke was not disciplined and he knew it was difficult for him to keep the credit limit within 40%. Therefore it is better for them to open a separate account. Because it helps in diving the limit in two people. Both Luke and Cecilia have separate 40% credit card limits. And in order to get credit scores, they both will try to keep their credit limit below 40% which will help them in gaining rewards. The separate card also prevents future clashes about who is using the credit card more. Both will responsible for their own balance payment.

Ans no 5

The bank offers different types of options like checking and saving accounts, CDs, debit cards, and credit cards. There are different sorts of fees that a person has to pay in the bank but he or she can earn interest at different rates. There are many options in choosing a bank and how a person wants to manage his or her finances. Most banks are federally insured, which means that money would be insured up to 250,000$. Even if the bank went bankrupt, the account holder would still get his or her money back. This helps a person to feel better about trusting an organization with their money.

Credit unions are nonprofit institutions that work solely for the benefit of customers. Therefore, their fees are lower. They were formed to serve small groups from different workplaces and communities. At the credit union, the customer who banks with them becomes a voting member which means a person can be paid a small dividend if the credit union has a good year and there are extra profits. The services of credit unions are really expanded but still smaller than larger banks. Because most credit unions are regional, branches and ATM access are limited. Therefore, credit unions have to allow other ATMs to be used for an additional fee............................

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