Payment card

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Example of two credit cards Credit-cards.jpg
Example of two credit cards
An example of the front of a typical debit card: Issuing bank logo EMV chip Hologram Card number Card brand logo Expiration date Cardholder's name CCardFront.svg
An example of the front of a typical debit card:
  1. Issuing bank logo
  2. EMV chip
  3. Hologram
  4. Card number
  5. Card brand logo
  6. Expiration date
  7. Cardholder's name

Payment cards are part of a payment system issued by financial institutions, such as a bank, to a customer that enables its owner (the cardholder) to access the funds in the customer's designated bank accounts, or through a credit account and make payments by electronic transfer with a payment terminal and access automated teller machines (ATMs). [1] Such cards are known by a variety of names, including bank cards, ATM cards, client cards, key cards or cash cards.

Contents

There are a number of types of payment cards, the most common being credit cards, debit cards, charge cards, and prepaid cards. Most commonly, a payment card is electronically linked to an account or accounts belonging to the cardholder. These accounts may be deposit accounts or loan or credit accounts, and the card is a means of authenticating the cardholder. However, stored-value cards store money on the card itself and are not necessarily linked to an account at a financial institution. The largest global card payment organizations are: UnionPay, Visa, Mastercard and American Express. [2]

It can also be a smart card that contains a unique card number and some security information such as an expiration date or with a magnetic strip on the back enabling various machines to read and access information. [3] Depending on the issuing bank and the preferences of the client, this may allow the card to be used as an ATM card, enabling transactions at automatic teller machines; or as a debit card, linked to the client's bank account and able to be used for making purchases at the point of sale; or as a credit card attached to a revolving credit line supplied by the bank. In 2017, there were 20.48 billion payment cards (mainly prepaid cards) in the world. [4]

History

Historically, bank cards have also served the purpose of a cheque guarantee card, a now almost defunct system to guarantee cheques at point of sale.

The first bank cards were automated teller machine (ATM) cards issued by Barclays in London in 1967, [5] and by Chemical Bank in Long Island, New York, in 1969. [6] In 1972, Lloyds Bank issued the first bank card to feature an information-encoding magnetic strip, using a personal identification number (PIN) for security. [7]

The smart card, which was introduced in the 1970s, was adapted for use as a payment card. Smart payment cards were introduced to the banking sector in 1979, [8] and came into wider use in the mid-1980s. [9]

Card networks

In some banking networks, the two functions of ATM cards and debit cards are combined into a single card, simply called a "debit card" or also commonly a "bank card". These are able to perform banking tasks at ATMs and also make point-of-sale transactions, with both features using a PIN.

Canada's Interac and Europe's Debit Mastercard are examples of networks that link bank accounts with point-of-sale equipment.

Some debit card networks also started their lives as ATM card networks before evolving into full-fledged debit card networks, example of these networks are: Development Bank of Singapore (DBS)'s Network for Electronic Transfers (NETS) and Bank Central Asia (BCA)'s Debit BCA, both of them were later on adopted by other banks (with Prima Debit being the Prima interbank network version of Debit BCA).

Technical features

Payment cards are usually plastic cards, 85.60 mm × 53.98 mm (3.370 in × 2.125 in) and rounded corners with a radius of 2.88–3.48 mm, in accordance with ISO/IEC 7810#ID-1 standard.

They usually also have a unique card number conforming with the ISO/IEC 7812 numbering standard, the cardholder’s name and the card expiry date, in addition to other security features. Historically this text was embossed to produce an imprint on multi-part paper forms, and some cards are still produced this way.

Types

Payment cards have features in common, as well as distinguishing features. Types of payment cards can be distinguished on the basis of the features of each type of card, including:

Credit card

In the US and other countries, a credit card is linked to a line of credit (usually called a credit limit) created by the issuer of the credit card for the cardholder on which the cardholder can draw (i.e. borrow), either for payment to a merchant for a purchase or as a cash advance to the cardholder. Most credit cards are issued by or through local banks or credit unions, but some non-bank financial institutions also offer cards directly to the public.

The cardholder can either repay the full outstanding balance or a lesser amount by the payment due date. The amount paid cannot be less than the ”minimum payment,” either a fixed amount or a percentage of the outstanding balance. Interest is charged on the portion of the balance not paid off by the due date. The rate of interest and method of calculating the charge vary between credit cards, even for different types of cards issued by the same company. Many credit cards can also be used to take cash advances through ATMs, which also attract interest charges, usually calculated from the date of cash withdrawal. Some merchants charge a fee for purchases by credit card, as they will be charged a fee by the card issuer.

In other countries such as France, the distinction between debit and credit cards is based on when the customer's account is debited for the transaction. A debit card debits the customer's account as the transaction is made, while a credit card debits it at the end of the month automatically.

What is called a credit card in the United States - meaning the customer has a bill to pay at the end of the month - does not exist in the French banking system. However, credit companies can provide these cards, but they are separate from the regular banking system. In this case, the consumer decides the maximum amount, making it impossible to fall into debt by forgetting to pay a credit card bill.

Credit scores or credit history do not exist in France, and therefore the need to build a credit history does not exist. Personal information cannot be shared among banks, which means there is no centralized system for tracking creditworthiness. The only centralized system in France is for individuals who file for bankruptcy or those who have not repaid credit or issued checks without sufficient funds. This system is handled by the Banque de France.

Debit card

Purchasing by debit card I'm loving it -- debit card at the Guantanamo McDonalds.jpg
Purchasing by debit card

With a debit card (also known as a bank card, check card or plastic card) when a cardholder makes a purchase, funds are withdrawn directly either from the cardholder's bank account, or from the remaining balance on the card, instead of the holder repaying the money at a later date. In some cases, the "cards" are designed exclusively for use on the Internet, and so there is no physical card. [10] [11]

The use of debit cards has become widespread in many countries and has overtaken use of cheques, and in some instances cash transactions, by volume. Like credit cards, debit cards are used widely for telephone and internet purchases.

Debit cards can also allow instant withdrawal of cash, acting as the ATM card, 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. Merchants usually do not charge a fee for purchases by debit card.

Charge card

With charge cards, the cardholder is required to pay the full balance shown on the statement, which is usually issued monthly, by the payment due date. It is a form of short-term loan to cover the cardholder's purchases, from the date of the purchase and the payment due date, which may typically be up to 55 days. Interest is usually not charged on charge cards and there is usually no limit on the total amount that may be charged.[ citation needed ] If payment is not made in full, this may result in a late payment fee, the possible restriction of future transactions, and perhaps the cancellation of the card.

ATM card

An ATM card (known under a number of names) is any card that can be used in automated teller machines (ATMs) for transactions such as deposits, cash withdrawals, obtaining account information, and other types of transactions, often through interbank networks. Cards may be issued solely to access ATMs, and most debit or credit cards may also be used at ATMs, but most charge and proprietary cards cannot.

The use of a credit card to withdraw cash at an ATM is treated differently to an POS transaction, usually attracting interest charges from the date of the cash withdrawal. The use of a debit card usually does not attract interest. Third party ATM owners may charge a fee for the use of their ATM.

Most payment cards, such as debit and credit cards, can also function as ATM cards, although ATM-only cards are also available. Most charge and proprietary cards cannot be used as ATM cards. The use of a credit card to withdraw cash at an ATM is treated differently to a POS transaction, usually attracting interest charges from the date of the cash withdrawal. Interbank networks allow the use of ATM cards at ATMs of private operators and financial institutions other than those of the institution that issued the cards.

All ATM machines, at a minimum, will permit cash withdrawals of customers of the machine's owner (if a bank-operated machine) and for cards that are affiliated with any ATM network the machine is also affiliated. They will report the amount of the withdrawal and any fees charged by the machine on the receipt. Most banks and credit unions will permit routine account-related banking transactions at the bank's own ATM, including deposits, checking the balance of an account, and transferring money between accounts. Some may provide additional services, such as selling postage stamps.

For other types of transactions through telephone or online banking, this may be performed with an ATM card without in-person authentication. This includes account balance inquiries, electronic bill payments, or in some cases, online purchases (see Interac Online).

ATM cards can also be used on improvised ATMs such as "mini ATMs", merchants' card terminals that deliver ATM features without any cash drawer. [12] [13] These terminals can also be used as cashless scrip ATMs by cashing the receipts they issue at the merchant's point of sale. [14] In 2017, there were 20.48 billion payment cards in circulation worldwide [15] In 2018, the payment card fraud losses in the world were US$27.85 billion, and US$9.47 billion in the U.S. [16]

Stored-value card

With a stored-value card, a monetary value is stored on the card, and not in an externally recorded account. This differs from prepaid cards where money is on deposit with the issuer similar to a debit card. One major difference between stored value cards and prepaid debit cards is that prepaid debit cards are usually issued in the name of individual account holders, while stored-value cards are usually anonymous.

The term stored-value card means that the funds and or data are physically stored on the card. With prepaid cards the data is maintained on computers controlled by the card issuer. The value stored on the card can be accessed using a magnetic stripe embedded in the card, on which the card number is encoded; using radio-frequency identification (RFID); or by entering a code number, printed on the card, into a telephone or other numeric keypad.

Fleet card

A fleet card is used as a payment card, most commonly for gasoline, diesel and other fuels at gas stations. Fleet cards can also be used to pay for vehicle maintenance and expenses, at the discretion of the fleet owner or manager. The use of a fleet card reduces the need to carry cash, thus increasing the security for fleet drivers. The elimination of cash also helps to prevent fraudulent transactions at the fleet owner's or manager's expense.

Fleet cards provide convenient and comprehensive reporting, enabling fleet owners/managers to receive real time reports and set purchase controls with their cards, helping to keep them informed of all business related expenses. They may also reduce administrative work or otherwise be essential in arranging fuel taxation refunds.

Other

Other types of payment cards include:

Technologies

A number of International Organization for Standardization standards, ISO/IEC 7810, ISO/IEC 7811, ISO/IEC 7812, ISO/IEC 7813, ISO 8583, and ISO/IEC 4909, define the physical properties of payment cards, including size, flexibility, location of the magstripe, magnetic characteristics, and data formats. They also provide the standards for financial cards, including the allocation of card number ranges to different card issuing institutions.

Embossing

Israeli manual card imprinter Credit card imprinter.JPG
Israeli manual card imprinter

Originally charge account identification was paper-based. In 1959 American Express was the first charge card operator to issue embossed plastic cards which enabled cards to be manually imprinted for processing, making processing faster and reducing transcription errors. Other credit card issuers followed suit. The information typically embossed are the bank card number, card expiry date and cardholder's name. Though the imprinting method has been predominantly superseded by the magnetic stripe and then by the integrated chip, cards continued to be embossed in case a transaction needs to be processed manually until recently. [17] [18] Under manual processing, cardholder verification was by the cardholder signing the payment voucher after which the merchant would check the signature against the cardholder's signature on the back of the card. Cards conform to the ISO/IEC 7810 ID-1 standard, ISO/IEC 7811 on embossing, and the ISO/IEC 7812 card numbering standard.

Magnetic stripe

An example of the reverse side of a typical debit card: Magnetic stripe Signature strip Card Security Code CCardBack.svg
An example of the reverse side of a typical debit card:

Magnetic stripes started to be rolled out on debit cards in the 1970s with the introduction of ATMs. The magnetic stripe stores card data which can be read by physical contact and swiping past a reading head. The magnetic stripe contains all the information appearing on the card face, but allows for faster processing at point-of-sale than the then manual alternative as well as subsequently by the transaction processing company. When the magnetic stripe is being used, the cardholder will have been issued with a PIN, which is used for cardholder identification at the point-of-sale, and a signature is no longer required. The magnetic stripe is in the process of being augmented by the integrated chip.

Smart card

A smart card, chip card, or integrated circuit card (ICC) is any pocket-sized card with embedded integrated circuits which can process data. This implies that it can receive input which is processed –by way of the ICC applications –and delivered as an output. There are two broad categories of ICCs. Memory cards contain only non-volatile memory storage components, and perhaps some specific security logic. Microprocessor cards contain volatile memory and microprocessor components. The card is made of plastic, generally PVC, but sometimes ABS. The card may embed a hologram to avoid counterfeiting. Using smart cards is also a form of strong security authentication for single sign-on within large companies and organizations.

EMV is the standard adopted by all major issuers of smart payment cards.[ citation needed ]

Proximity card

A proximity card Proximity badge.km.jpg
A proximity card

Proximity card (or prox card) is a generic name for contactless integrated circuit devices used for security access or payment systems. It can refer to the older 125 kHz devices or the newer 13.56 MHz contactless RFID cards, most commonly known as contactless smartcards.

Modern proximity cards are covered by the ISO/IEC 14443 (proximity card) standard. There is also a related ISO/IEC 15693 (vicinity card) standard. Proximity cards are powered by resonant energy transfer and have a range of 0–3 inches in most instances. The user will usually be able to leave the card inside a wallet or purse. The price of the cards is also low, usually US$2–$5, allowing them to be used in applications such as identification cards, keycards, payment cards and public transit fare cards.

Re-programmable magnetic stripe card

Re-programmable/dynamic magnetic stripe cards are standard sized transaction cards that include a battery, a processor, and a means (inductive coupling or otherwise) of sending a variable signal to a magnetic stripe reader. Re-programmable stripe cards are often more secure than standard magnetic stripe cards and can transmit information for multiple cardholder accounts. [19]

Misuse

Due to increased illegal copies of cards with a magnetic stripe, the European Payments Council established a Card Fraud Prevention Task Force in 2003 that spawned a commitment to migrate all ATMs and POS applications to use a chip-and-PIN solution until the end of 2010. [20] The "SEPA for Cards" [21] has completely removed the magnetic stripe requirement from the former Maestro debit cards.

See also

Related Research Articles

<span class="mw-page-title-main">Debit card</span> Card used for financial transactions, usually without a credit line

A debit card, also known as a check card or bank card, is a payment card that can be used in place of cash to make purchases. The card usually consists of the bank's name, a card number, the cardholder's name, and an expiration date, on either the front or the back. Many new cards now have a chip on them, which allows people to use their card by touch (contactless), or by inserting the card and keying in a PIN as with swiping the magnetic stripe. Debit cards are similar to a credit card, but the money for the purchase must be in the cardholder's bank account at the time of the purchase and is immediately transferred directly from that account to the merchant's account to pay for the purchase.

<span class="mw-page-title-main">EFTPOS</span> Type of Electronic Funds Transfer system

Electronic Funds Transfer at Point Of Sale, abbreviated as EFTPOS, is the technical term referring to a type of payment transaction where electronic funds transfers (EFT) are processed at a point of sale (POS) system or payment terminal usually via payment methods such as payment cards. EFTPOS technology was developed during the 1980s.

<span class="mw-page-title-main">Stored-value card</span> Payment card with a monetary value stored on the card itself

A stored-value card (SVC) or cash card is a payment card with a monetary value stored on the card itself, not in an external account maintained by a financial institution. This means no network access is required by the payment collection terminals as funds can be withdrawn and deposited straight from the card. Like cash, payment cards can be used anonymously as the person holding the card can use the funds. They are an electronic development of token coins and are typically used in low-value payment systems or where network access is difficult or expensive to implement, such as parking machines, public transport systems, and closed payment systems in locations such as ships.

<span class="mw-page-title-main">Charge card</span> Credit card which must be paid in full

A charge card is a type of credit card that enables the cardholder to make purchases which are paid for by the card issuer, to whom the cardholder becomes indebted. The cardholder is obliged to repay the debt to the card issuer in full by the due date, usually on a monthly basis, or be subject to late fees and restrictions on further card use. Charge cards are distinct from traditional credit cards, which are revolving credit instruments that do not need to be paid in full every month and a balance may be carried over, on which interest is paid. Charge cards are typically issued without spending limits, whereas credit cards usually have a specified credit limit that the cardholder may not exceed. Most charge cards are held by businesses, corporations or executives thereof, and are issued to customers with a good or excellent credit score.

<span class="mw-page-title-main">EMV</span> Smart payment card standard

EMV is a payment method based on a technical standard for smart payment cards and for payment terminals and automated teller machines which can accept them. EMV stands for "Europay, Mastercard, and Visa", the three companies that created the standard.

<span class="mw-page-title-main">Maestro (debit card)</span> Debit card from Mastercard

Mastercard Maestro is a brand of debit cards and prepaid cards owned by Mastercard that was introduced in 1991. Maestro is accepted at around fifteen million point of sale outlets in 93 countries.

<span class="mw-page-title-main">Visa Electron</span> Debit card

Visa Electron was a debit card product that uses the Visa payment system. It is offered by issuing banks in every country with the exception of Canada, Australia, Argentina, Ireland and the United States. The difference between Visa Electron and Visa Debit, a similar product, is that payments with Visa Electron always require on-line electronic authorisation, and typically require that all the funds be available at the time of transfer, i.e., Visa Electron card accounts may not normally be overdrawn. Most Visa Debit cards, on the other hand, may be processed offline, without online authorisation, and may allow transfers exceeding available funds up to a certain limit. For that reason, Visa Electron cards are more commonly issued to younger customers or customers that have poor credit. Online stores and all offline terminals do not support Visa Electron because their systems cannot check for the availability of funds. In addition to point of sale debit payments, the card also allows the holder to withdraw cash from automated teller machines (ATMs) using the Plus interbank network.

ISO/IEC 7813 is an international standard codified by the International Organization for Standardization and International Electrotechnical Commission that defines properties of financial transaction cards, such as ATM or credit cards.

<span class="mw-page-title-main">ATM card</span> Type of bank card providing access to Automatic Teller Machines

An ATM card is a dedicated payment card card issued by a financial institution which enables a customer to access their financial accounts via its and others' automated teller machines (ATMs) and, in some countries, to make approved point of purchase retail transactions. ATM cards are not credit cards or debit cards, however most credit and debit cards can also act as ATM cards and that is the most common way that banks issue cards since the 2010s.

An interbank network, also known as an ATM consortium or ATM network, is a computer network that enables ATM cards issued by a financial institution that is a member of the network to be used to perform ATM transactions through ATMs that belong to another member of the network.

A contactless smart card is a contactless credential whose dimensions are credit card size. Its embedded integrated circuits can store data and communicate with a terminal via NFC. Commonplace uses include transit tickets, bank cards and passports.

<span class="mw-page-title-main">NETS (company)</span> Singaporean electronic payment service provider

Network for Electronic Transfers, colloquially known as NETS, is a Singaporean electronic payment service provider. Founded in 1986 by a consortium of local banks, it aims to establish the debit network and drive the adoption of electronic payments in Singapore. It is owned by DBS Bank, OCBC Bank and United Overseas Bank (UOB).

<span class="mw-page-title-main">Malaysian Electronic Payment System</span>

The Malaysian Electronic Payment System (MEPS) is an interbank network service provider in Malaysia. In August 2017, MEPS merged with Malaysian Electronic Clearing Corporation Sdn Bhd (MyClear) to form Payments Network Malaysia Sdn Bhd (PayNet).

ATM usage fees are what many banks and interbank networks charge for the use of their automated teller machines (ATMs). In some cases, these fees are assessed solely for non-members of the bank; in other cases, they apply to all users. There is usually a higher fee for the use of White-label ATMs rather than bank-owned ATMs.

The payment card industry (PCI) denotes the debit, credit, prepaid, e-purse, ATM, and POS cards and associated businesses.

<span class="mw-page-title-main">Credit card fraud</span> Financial crime

Credit card fraud is an inclusive term for fraud committed using a payment card, such as a credit card or debit card. The purpose may be to obtain goods or services or to make payment to another account, which is controlled by a criminal. The Payment Card Industry Data Security Standard is the data security standard created to help financial institutions process card payments securely and reduce card fraud.

An issuing bank is a bank that offers card association branded payment cards directly to consumers, such as credit cards, debit cards, contactless devices such as key fobs as well as prepaid cards. The name is derived from the practice of issuing cards to a consumer.

<span class="mw-page-title-main">Credit card</span> Card for financial transactions on credit

A credit card is a payment card, usually issued by a bank, allowing its users to purchase goods or services, or withdraw cash, on credit. Using the card thus accrues debt that has to be repaid later. Credit cards are one of the most widely used forms of payment across the world.

<span class="mw-page-title-main">Card security code</span> Security feature on payment cards

A card security code is a series of numbers that, in addition to the bank card number, is printed on a credit or debit card. The CSC is used as a security feature for card not present transactions, where a personal identification number (PIN) cannot be manually entered by the cardholder. It was instituted to reduce the incidence of credit card fraud. Unlike the card number, the CSC is deliberately not embossed, so that it is not read when using a mechanical credit card imprinter which will only pick up embossed numbers.

The term digital card can refer to a physical item, such as a memory card on a camera, or, increasingly since 2017, to the digital content hosted as a virtual card or cloud card, as a digital virtual representation of a physical card. They share a common purpose: identity management, credit card, debit card or driver's license. A non-physical digital card, unlike a magnetic stripe card, can emulate (imitate) any kind of card.

References

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  2. ↑ "Mastercard and Visa Gain Global Share Amidst China's Spending Slowdown". Datos Insights. 7 March 2024.
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  7. ↑ Wonglimpiyara 2007, p. 5.
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  13. ↑ "Mini ATM BRI". Archived from the original on December 30, 2011.
  14. ↑ thdabby (2009-02-05). Cashless Scrip ATM Terminals. Archived from the original on 2021-12-21. Retrieved 2018-01-30..
  15. ↑ http://www.nilsonreport.com/upload/issues/1140_0321.pdf Archived 2021-01-16 at the Wayback Machine .
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