Different types of payment cards you must know about

Today, card payments have become a huge part of every business. It offers simplicity, transparency, and comfort for carrying out every type of financial transaction. The shifting payment ecosystem is evident that card payments have really evolved in the last four decades.

However, shifting from a major cash-driven economy towards a contactless/card payment system was not a spontaneous process.

Back in the 2000s, debit cards became more popular. From ATMs to swipes, and Wi-Fi cards, the fintech sector’s card vertical has come a long way. Today, whether consumers have to withdraw cash or pay for purchased products, it can get done with just a swipe.

Plus, point-of-sale terminal swipe machines and ATMs, which are open 24/7, have made the payment process even more convenient. Now, consumers can withdraw cash or make payments at any hour of the day.

Card payments also offer elevated security, and technology has a big role to play in it. The simplest example can be how quickly and conveniently the users can block their card through a mobile application in case it gets stolen or misplaced. All the financial institutions provide zero fraud liability, which ensures to protect of consumer details and money away from probable frauds.

Technology and online security features such as encryption or fraud monitoring are used to offer fraud liabilities.

There are many different types of cards that can be used as per the consumer’s convenience and need.

Broadly, there are four major types of cards that are used in India — prepaids, credit, debit, and electronic cards. All these can be further categorised based on the kind of payment by user, amount of usage, and their issuance.

Debit cards

Whenever a user opens a savings account in the bank, a debit card is issued with it. The card is directly linked to your bank account and is associated with card networks viz. MasterCard and VISA.

Its validity depends on whether or not the credits of these networks are printed on the card. Debit cards are mostly used to swipe up at different shops to pay for products and services as well as for withdrawing cash at the ATMs.

Post demonetisation, India witnessed a surge of cash payments and the RBI announced that no processing fees will be levied on users. With the increased usage, the National Payments Corporation of India (NPCI) launched a new card network — RuPay.

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Credit cards

Users can issue a card at any bank, NBFCs or any other authorised financial institution. Unlike debit cards, the amount is not immediately withdrawn from your bank account, instead, it is reflected in the statements, which the users receive at the end of the payment cycle.

Credit cards are mostly used by users to build up a good credit score, which later makes them eligible for much bigger loans. They are valid nationally as well as internationally.

Unlike debit cards, credit card payments can push you into debts so it’s a popular belief of avoiding using them.

Contrary to this belief, credit cards come with certain benefits like users with a good credit score get a card that offers bonuses, cash backs, reward points, elevated safety from frauds.

Prepaid cards

Prepaid cards are technically like debit cards; it is issued against an amount paid priorly by the user to the financial institution. The amount is stored in such cards and when needed, users can issue it in two-ways — either a card or a wallet.

Unlike the conventional debit card, consumers do not need to open a savings account to use the prepaid card. Subjected to a value limit, prepaid cards can also be used for domestic fund transfers. The financial institutions issue both open as well as semi-closed prepaid cards depending upon the user’s needs/wishes.

The biggest benefits of prepaid cards are that the user does not need a bank account or a good credit score; using them does not incur any debt.

Prepaid cards are also very easy to issue and can be used to pay any outstanding bills as well. It can also be used as travel cards to carry or transfer foreign currency or gift cards.

Electronic cards

Electronic cards are nothing but debit cards that can only be issued in specific overdraft accounts like personal loans having no fixed limit. The financial institutions are only allowed to issue electronic cards to users already having overdraft accounts which are enabled for national digital transactions.

All the instructions related to debit cards including Merchant Discount Rate (MDR), safety and security, Additional Factor of Authentication (AFA) apply to electronic cards, as well.

Moving with the times the consumers as well as every business accepts the contactless and cashless means of payment. This has made the payment process quicker, transparent, convenient, and monitoring the expenditure.

Electronic card payments provide extended flexibility of payment and have transformed the whole business sector. It has been a prime technology enabler for all the financial insulations and helped revolutionalise the consumer-bank relationship to the core.

Plus, the concept of card verification number (CVN), has increased the security level against any frauds.