Payment Cards are part of a payment system issued by financial institutions, such as a bank, to a customer that enables its owner to access the funds in the customer’s designated bank accounts, or through a credit account and make payments by electronic funds transfer and access automated teller machines (ATMs). Through this article, let’s discuss something important which are types of payment cards.
Types of Payment Cards
- Credit cards
A credit card allows you to make purchases with borrowed money, known as credit. As you spend and make purchases with your credit card, you will begin to accumulate a balance that must be refunded at the end of each month.
Over time, using your card and paying your bill on time will help build a positive credit history. Having a positive credit history will save you money for future loans and purchases. The most immediate benefits of having a credit card are the additional purchasing power and flexibility. Most companies accept credit cards and some services, such as Uber and car rental agencies, only accept credit card payments.
- Debit cards
When you open a checking account for the first time with a bank, you will most probably be asked to deposit money in this account. A debit card and your bank account are directly connected. The use of a debit card will automatically deplete the funds in your bank account.
Most debit cards will have a credit network such as VISA or the MasterCard logo. Having these credit networks printed on them means that the debit card is accepted as a form of payment in many places. Despite this, the use of a debit card will not generate your credit history.
In a side note, a debit card can also be used to withdraw or deposit cash from an ATM. There are also cards designed specifically for this purpose, called ATM card.
- Charge card
It is a card that provides a direct debit payment method enabling the cardholder to make purchases which are paid for by the card issuer, to whom the cardholder becomes indebted.
Charge cards like the American Express Premier Rewards Gold Card provide a smart alternative to debit cards and traditional credit cards. A charge card is like a credit card without the option to pay your balance off over time. With a charge card, you must pay the entire balance in full every month.
- ATM card
It is a payment card or dedicated payment card issued by a financial institution which enables a customer to access automated teller machines (ATMs). The card reader captures the account information stored on the magnetic stripe on the back of an ATM/debit or credit card. The host processor uses this information to route the transaction to the cardholder’s bank.
The difference is that a debit card has a Visa® or Mastercard® logo on its face. When you use a debit card, the money is deducted from your checking account. With a credit card, you’re borrowing money to be repaid later. ATM and debit cards allow you to use ATMs, a safe and convenient way to manage your money.
- Stored-value card
It is a payment card with a monetary value stored on the card itself, not in an external account maintained by a financial institution. This means no network access is required by the payment collection terminals as funds can be withdrawn and deposited straight from the card.
These are examples of stored value cards. Stored value cards are sometimes called prepaid cards. They are loaded with a certain amount of money. The value of the card goes down every time you use it to buy something or to take out money at an ATM.