Card Based Payments
Card-based payments are made by using a credit card or a debit card or an ATM Card. Major advantages of card payments are that it will only be accepted if the cardholder has sufficient funds in his/her account and safer than cash and faster than the paper-based payments. A payment card is a plastic card which you use as a credit card, but which takes the money directly from your bank account. Can also be used for mail order or online purchases and carries lesser risk than holding cash. The risk of theft is mitigated by having pin codes. Some major disadvantages are that for the merchant it might take up to three days for the money to be received and acknowledged and cards are operated at a fee payable to the bank generally both by the cardholder and the merchant.
Credit Card:
The credit card system is a credit facility extended to a user who is issued a plastic card which can be used in place of cash for making any type of payment/purchase. Credit Card enables its holder to buy goods and services with a credit line given by credit card issuer. The institution which issues the card has a tie-up with the concerned merchant establishment and the card issuing organization, if different, to facilitate this arrangement. The amounts charged to the customer are paid by a card issuer to the merchant and subsequently billed to the customer. Funds are settled at a later date. Cardholders are billed on a monthly basis and bear financial charges (interest) on outstanding amounts if payments are not made by the due date. Credit cards are issued through commercial banks and/or other issuers. A credit card holder may not be an account holder in the bank which issues the credit card.
Debit Card is a payment card where the transaction amount is deducted directly from the card holder’s bank account upon authorization. Debit cards can be of two types; one which is linked to an account and is issued by banks to account holders only. Second could be pre-loaded cards where a certain amount is stored in the card. Generally, debit cards are also ATM cards. The mode of using debit cards and credit cards is generally the same.
