Businesses today are expected to thrive through accepting payments electronically. Consumers no longer carry large amounts of money, and they no longer need to be physically present to purchase something. Using cards is a convenient method that allows customers to pay online. However, a wide range are used for monetary exchanges that depend on the nature of the business transaction and the agreement with the bank involved.
Generally, a payment device is supplementary to another account holding funds owned by, or offering credit to the cardholder. Depending on how the account is managed, payment cards can be classified into different types.
Credit is a function of a system of payments named after the small plastic card offered to the users of the system. It entitles the owner to purchase anything, given that it will be paid for over a period of time. The issuing bank of the card grants the consumer a line of credit, allowing him or her to borrow money for payment to a business or as a cash advance.
Credit cards differ from charge cards, where the latter requires the amount borrowed to be paid in full by the next month. The former lets the consumer ‘revolve’ the borrowed amount, at the cost of interest. These are usually issued by local banks and credit unions.
Debit cards, also known as a bank or a checkcard, offer an alternative payment to shopping with cash. Similar to an electric check, it allows funds to be withdrawn directly from the bank account, or the remaining balance on the card. For the basis of e-commerce, some cards are exclusively designed for the internet, and there is no physical card issued.
Debit cards are slowly growing in popularity throughout the world, and they have overtaken both check and cash transactions, based on studies conducted by the Federal Reserve. Similar to credit cards, they are widely used on the internet and on the phone. In contrast, the funds are transferred from the card holder’s account instead of paying the balance at a later date.
Debit cards can also act as an ATM card, allowing for the withdrawal of cash, and as a check guarantee card. Business owners also offer a ‘cashback/cashout’ option for customers, allowing for a withdrawal immediately following a purchase before checkout.
These refer to cards where the funds and/or data are physically recorded on the card. They differ from prepaid debit cards in that these are usually anonymous, while the prepaid debit cards are issued in the name of the card holder. The value associated with the card is accessed with the use of a magnetic stripe, on which the information is encoded.
Used as payment in gas stations, fleet cards can also be used to pay for vehicle maintenance. Similar to all the other cards, this eliminates the need to carry a large amount of cash, therefore increasing security for fleet drivers.
Plastic cards are now becoming a replacement to cash and checks. Given this, businesses should continue to capitalize on this idea to ensure their success.