Types of Cards used in Banking System

Cards can be classified on the basis of their issuance, usage and payment by the card holder. There are three types of cards: Debit cards, Credit cards and Prepaid cards.
These cards can be issued by banks or other entities too. We will discuss each type of card and the issuance authority for particular type of card.

Debit Card

• Debit Card means the card which can be used to withdraw cash up to the limit present in customer’s bank account. These cards are also known as bank card, plastic card or check card.
• So to get issue a debit card, one should have a bank account.
• This means that debit cards are only issued by banks which are linked to the customer’s bank account number.
• So, in the case to use a debit card, one should have enough balance in his bank account.
• They are used to withdraw cash from ATM, purchase of goods and services at Point of Sale (POS)/E-commerce (online purchase) both domestically and internationally (provided it is enabled for international use).
• It can also be used only for domestic fund transfer from one person to another.

Parts of a debit/credit card: 

The following subheadings contain information of details on the front side of the card. 

Bank branding: This section identifies your card issuer.

Card number: It’s a number that identifies your account with the card issuer, and those are the digits you need to provide when making purchases online or by phone. It’s typically 16 digits, though some manufacturers use as little as 14 or as many as 19.

Cardholder’s name: This is the person authorized to use the card.

Smart chips: These tiny metal processors make cards more secure than traditional magnetic-stripe-only cards. Chips make it harder for thieves to use stolen credit card numbers.

Expiration date: You need to replace your card periodically. The move to smarter cards is just one reason banks issue new cards. Banks typically mail out new cards shortly before old cards expire.

Payment network logo: It’s essential to know what type of card you have. Common examples include MasterCard, Visa, and Discover. When paying online, there’s usually a drop-down menu that requires you to select which network your card belongs to. These logos are also helpful when you plan to use your card to pay for goods or services—merchants often display stickers or placards telling you which cards they accept.

Backside of the card:

The following subheadings contain information of details in the backside of the card. 

Magnetic stripe: This black strip contains information about you and your card, and specialized devices known as card readers gather that information. Every time you swipe your card at a merchant, you run the magnetic stripe through a card reader to provide your payment details.

Hologram: Some cards display a hologram, or a mirror-like area showing a three-dimensional image that seems to move as you change your viewing angle. Holograms are security features which help merchants identify valid cards (holograms are hard to fake). Sometimes holograms appear on the front of your card.

Bank contact information: If you need to get in touch with your bank, use the contact information on the back of your card. This is not only convenient—it’s also an excellent way to prevent fraud. When you use the contact information on your card, you know that you’re really talking with somebody from your bank. 

Signature panel: Your card must be signed before you can use it, so sign your name in this area.

Security codes: Cards are printed with an additional code to help ensure that anybody using the card number has a legitimate, original card.

Network logos: Your card might have additional network logos on the back, often in the lower-right corner. These logos help you figure out which ATMs you can use for free.

Credit Card

• Unlike debit cards, in case of credit cards, a customer can also withdraw beyond the amount of money present in his bank account.
• But there is a limit for each credit card up to which extra money can be withdrawn.
• And also there is a time limit up to which the extra money withdrawn should be paid back. This amount of money is paid back along with interest charges as applied by the issuer of card.
• They are issued by banks / other entities approved by RBI.
• The credit cards are used for purchase of goods and services at Point of Sale (POS) and E-commerce (online purchase)/ through Interactive Voice Response (IVR)/Recurring transactions/ Mail Order Telephone Order (MOTO).
• These cards can be used domestically and internationally (provided it is enabled for international use).
• The credit cards can be used to withdraw cash from an ATM and for transferring funds to bank accounts, debit cards, credit cards and prepaid cards within the country.

Prepaid Card

• The usage of prepaid cards depends on who has issued these cards. They can be issued by banks/non-banks.
• To get issue a prepaid card, the customer has to pay the amount in advance which is then stored in his prepaid card to be used whenever required.
• So a prepaid card is never linked to an account.
•  The maximum value that can be stored in a prepaid card at any point of time is Rs 1,00,000.
• The prepaid cards issued by the banks can be used to withdraw cash from an ATM, purchase of goods and services at Point of Sale (POS)/E-commerce (online purchase) and for domestic fund transfer from one person to another. Such prepaid cards are known as open system prepaid cards.
• However, the prepaid cards issued by authorised non-bank entities can be used only for purchase of goods and services at Point of Sale (POS)/E-commerce (online purchase) and for domestic fund transfer from one person to another. Such prepaid cards are known as semi-closed system prepaid cards.
• These cards can be used only domestically.

Debit card and Credit card

• Both can be used to withdraw cash from ATM, purchase of goods and services at Point of Sale (POS) and online purchase.
• Debit card only issued by banks and linked to bank account while credit cards can be issued by banks/other entities approved by RBI. If issued by banks, can be linked to account
• By debit card one cannot withdraw extra money than available in his account while by use of credit card one can withdraw extra money as permitted by the issuer.

Debit card and Prepaid card

• Both are used for withdrawing up to the amount present in these cards.
• Both can be used for purchasing goods and services at Point of Sale (POS) and online purchases.
• Debit card can store any amount (i.e. amount present in bank account) while Prepaid card at a time can store only up to Rs 1,00,000 as on December 2014. 
• Debit cards are only issued by banks while prepaid cards by both banks and non-bank entities.
• Debit cards can be used at ATMs to withdraw cash while prepaid cards cannot be used at ATMs.

Credit card and Prepaid card

• Both can be issued by banks/non-banks.
• Both can be used for purchasing goods and services at Point of Sale (POS) and online purchases.
• Credit card can store any amount (i.e. amount present in bank account + extra amount permitted to be drawn) while Prepaid card at a time can store only up to Rs 1,00,000 as on December 2014.
• Credit cards can be used at ATMs to withdraw cash while prepaid cards cannot be used at ATMs.
• If one withdraws extra amount by use of credit card, then he has to pay back the amount afterwards with rate of interest while in case of prepaid cards, amount is paid in advance and no rate of interest is to be paid.
• Credit cards can be linked to account when issued by bank while prepaid cards are never linked to account.