Now, let’s try to understand the usages of each type of card and their importance.
Debit card: A debit card is a type of cardwhich we useinstead of cash to make payment. When you use a debit card, money is immediately deducted from your bank account. A debit card is usually used to withdraw money present in a customer’s account via an ATM. It is linked to a customer’s bank account. Some debit card also allows the domestic account to account fund transfer.
Credit card: A credit card is generally a type of card that allows you to borrow money from financial institutions such as banks. Unlike a debit card, your money is not immediately deducted from your account while in the case of a credit card. In simple words, it allows you to take the same loans from the financial institutions quickly which you have to repay within the billing cycle that is usually within 50 days. These 50 days is your interest-free period. Bank allows you to spend a limited amount of money with a certain period which is known as your credit limit. Your credit limit is usually decided by the bank based on your income level and credit score. There are many advantages of a credit card if you use it wisely. A credit card can help you to build a good credit score, pay immediately as well as you can earn rewards. But, to enjoy these benefits of a credit card you have to pay the bill of credit card fully on monthly basis. That’s how you can avoid paying interest. Make sure you pay all your bills within the interest-free period. If not, you have to pay a huge interest rate on your spending along with the late fee. But you can easily avoid such a situation by spending money within your budget.
Prepaid cards: A prepaid card is almost similar to a gift card or a debit card. It provides you the facility to spend whatever amount of money is deposited on the card. Once the balance is utilized, you can reload the card at an ATM or online, a participating store, or another physical location. Prepaid cards are issued by banks and branded by major credit card companies, including Visa, Discover, American Express, and MasterCard.
Electronic cards: Electronic cards or e-cards can be considered as debit cards issued in special overdraft accounts which are in the nature of personal loans without any specific end-use restrictions. Usually, banks issue electronic cards to natural persons having overdraft accounts to permit domestic digital transactions in such accounts. For all purposes like Additional Factor of Authentication (AFA), security, Merchant Discount Rate (MDR), etc., the instructions relating to debit cards are applicable on such electronic cards as well.
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