| Updated On June 5th, 2020 at 07:24 pm
Payment Cards are essential part of payment system set up by banking institution that offers hassle free and cash free option to make payments and also withdraw money as per the need of the card holder. Some of the most common types of Cards used in Banking System used by customers in banking system are debit cards, credit cards, prepaid cards, and Forex cards. Types of payment cards and the difference among cards used in banking system is a basic topic of banking awareness and general knowledge that you should know about and here we are going to discuss the same in details.
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Types of Cards used in Banking System
The following are most common types of cards used in banking system and the difference between them-
|Debit Card||make payments from linked account|
|Credit Card||used to borrow money and make payments|
|Forex Card||to hold foreign currency during international travels|
|Prepaid Cards||load the money in advance and then make transaction|
They allow the card holder to transfer money electronically from their bank accounts and can also be used as ATM cards to withdraw cash using the Automated Teller Machine. Keep in mind that you’re not borrowing money using debit card, you are using the money deposited in the bank account linked to the card, whereas in credit cards, you borrow money to make payment. The following are some different debit cards used-
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1. Visa, Master and Maestro Debit Cards
2. Visa Electron Debit Cards
3. MasterCard Debit Cards
4. Contactless Debit Cards
5. RuPay Debit Cards
6. Deferred Debit Card
Image Credit- visa.co.in
Both Visa and MasterCard debit cards have similar functionality and both of them are foreign payment gateway that provides payment facility to most of the banks in the world. They can also be used to make payments in other countries as well. An important thing to note is that they do not provide any actual credit to any party, they are just payment methods and rely on various banks to issue cards using these payment methods. Maestro is the name given to a brand of MasterCard.
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Visa Electron debit cards do not offer the overdraft feature that Visa debit cards do. One of the main advantage of this card is that the card holder will never be allowed to overspend or will not fall into debt and no interest charges are there for cash withdrawal as well.
Contactless debit cards have built-in radio frequency module can facilitate the card holder to make payments by simply waving the card over supported machine.
Have you heard about EMV Chip Card?
Well most of the cards now come with this technology of an integrated chip that adds a layer of security. EMV stands for Europay, MasterCard and Visa and EMV Cards are essential smart payment cards also known as IC cards. They prevent cloning of the card.
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RuPay is Indian Domestic Payment system created by the National Payments Corporation of India. As per the official website rupay.in “It was conceived to fulfill RBI’s vision to offer a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions in India to participate in electronic payments.It is made in India, for every Indian to take them towards a “less cash” society.” Also note that banks are required to pay a quarterly fee for visa, master or foreign payment facilities whereas RuPay network is free of charge and is used only in India.
Deferred Debit Card allows the facility of payment being done a few days later from the date of purchase.
Credit cards allow the user to borrow money from the bank and make purchases. Bank or companies issuing the credit card creates a revolving account and grants a line of credit to the cardholder,and then the user borrows money for payments or can also withdraw cash at times.Companies issuing credit cards also set a minimum repayment amount for the amount borrowed and also charge interest on delayed payments.
Following are some terms associated with credit cards-
Credit Limit – represents the maximum balance on a credit card
Balance – is the total amount you owe, including purchases, finance charges, and fees
APR or Annual Percentage Rate– is the interest rate applied to the balance carried forward past the grace period of time.
Grace Period – time alloted to pay your balance
Credit Card Fees– annual or maintenance charges, late fee, and over-the-limit fee.
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Forex Cards stands for Foreign Exchange Cards and are used for international travels to hold foreign currency. There are two main variants- single currency cards and mlti-currency forex cards. Forex cards can also be used to withdraw the currency abroad.
Image Credit- rupay.co.in
Just as the name sugest in prepaid cards you can load the amount in advance and then use the money to make transactions, they are not linked to any bank accounts. Most common example is prepaid gift cards.
RuPay in India also brought the prepaid cards in 2014 considering the huge opportunity in the untapped, unorganised, corporate gifting and other business space.