Credit card and Debit card Working and Management

Introduction to plastic money Evolution of plastic cards Plastic money – A new and easier way of paying for goods and services Provides convenient usage alongwith incentives An alternative to hire-purchase or loan on consumer goods It,however,allows debt to pile-up that can lead to penalties Major types of plastic money – Credit cards, Debit cards, Charge cards,co-branded cards

How Did It All Begin? Debit cards  Introduced around  The launch highlighted the introduction of e-commerce and alternative means of payment Credit cards  Introduced in 1980 by Central BOI  Banks acted as clearing houses for transactions and promoted their own brands  Addition of magnetic strip introduced to enhance security measures  Launch of ATM machines for ready access

Credit cards A part of a system of payments after the small plastic card issued to users of the system A card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services The issuer of the card grants a credit to the consumer from which the user can borrow money for payment to a merchant Most credit cards are issued by local banks or credit unions, and are the shape and size × mm-ISO/IEC 7810 standard

Credit cards 1.Issuing bank logo 2.EMV chip on "smart cards" 3.Hologram 4.Credit card number 5.Card brand logo 6.Expiration Date 7.Card Holder Name 8.Contactless chip

Credit card numbering Bank Identification Number BIN- first six digits for MasterCard and Visa cards Next nine digits-individual account number Final digit-validity check code Issue and expiration dates, extra codes such as issue numbers and security codes

Credit card numbering An example of the reverse side of a typical credit card: 1.Magnetic Stripe 2.Signature Strip 3.Card Security Code

How credit cards work

Transaction steps

Parties involved Cardholder Card-issuing bank Merchant Acquiring bank Credit Card association Transaction network

Related terms Interest charges Benefits to customers Grace period Benefits to merchants Rewards Interchange fee Discount fee

Debit Card Provides an alternative payment method to cash when making purchases Functionally, it can be called an electronic check, as the funds are withdrawn directly from either the bank account, or from the remaining balance on the card It is also known as bank card or check card Allow for instant withdrawal of cash, acting as the ATM card for withdrawing cash and as a cheque guarantee card Merchants can also offer "cashback"/"cashout" facilities to customers, where a customer can withdraw cash along with their purchase

Debit Card Numbering

How Debit Cards work 1. Collecting payment data 2. Authentication 3. Authorisation 4. Settlement of funds

Some important tips… Do’s  Prefer a debit card over a credit card  Know all of your card’s hidden fees  Always pay more than the minimum each month  Pay on time, all the time Don’t’s  Don’t use them for cash advances  Don’t use them to pay for basics: rent, groceries, etc.  Don’t charge more than you can pay off in a month  Don’t let banks increase you credit limit

How are they different? Credit Card Borrowing money from a bank or financial institution. (Spending "other's" money) Need not be connected to any bank account Pay additional interest drawn on the amount borrowed Limit: Credit line Debit Card Funds taken from the money that you have in your bank account. (Spending your "own" money) Needs checking Account/Savings Account No interest to be paid Limit: Equals your account limit

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