The digital payment revolution

By Nashwa Beheiry
Digital banking expert

Although the pandemic accelerated the digital payment revolution, many people remain sceptical about using cards, whether Credit, Debit, Charge, Prepaid or Virtual cards. Here’s a 101 read about the different types of cards so that you can make informed choices.

Convenience

Is the precise word to describe all card types; they give you the benefits of:

• Not carrying cash or different currencies, especially if you are travelling

• Easy access to cash through ATMs or even banks 

• Millions of merchants around the world accept cards

• Paying bills; all utility providers accept card payments

• Managing your spending; card issuers provide statements that can help reconciliation, analysing, categorising and budgeting for your spending

• In case of dispute, the bank will take action on your behalf to solve the issue with the acquirer bank following rules and regulations of Credit card companies: Visa, MasterCard, American Express, depending on your card’s trademark

• Appropriate for travel, car rental, and hotel reservations

Depending on your card type and bank’s policies, you can also enjoy: 

• Extended warranty on purchases to protect any lost or stolen purchased goods

• In case of trip cancellation or baggage loss, you may be eligible for reimbursement

• Complimentary airport lounge access, free checked bag

• Free concierge services

• Worldwide luxury travel and exclusive entertainment offers 

• Cash-back whereby you earn points converted to cash for every transaction on your card

• Banks usually offer many promotions, discounts, and benefits. Always check these offers; this can help you save money and enjoy using your cards

Debit Cards

Debit cards offer direct Debit Cards is a key for direct access to your bank account. With this card, you can:

• Spend from the available balance in your account; this limits the risk of overspending

• Purchase goods without paying fees

• Withdraw cash. You don’t pay any fees when using an ATM that belongs to your bank. Fees will apply if you use another bank’s ATM

Some banks my take maintenance fees others may take annual fees all depending on your bank’s policy.

Charge Cards

Charge cards have a credit limit that allows you to fully utilise them and pay at the end of the card’s cycle. The main features of this card are: 

• You get a grace period to settle your outstanding balance in full up to (55 days), depending on the date of your transactions and the bank’s policy

• It helps you to control your spending

• Fees apply; issuing, late payment, interest, over-limit

Credit Cards

With credit cards, your bank grants you a credit limit to utilise and pay the minimum due amount at the end of each card cycle. This type of card will:

•Enable you to utilise the limit of the card without having the cash in your bank account

•Pay the minimum due amount monthly (a percentage of your outstanding balance) based on the bank’s policies

•The bank will charge interest on the outstanding balance, among other fees such as issuing, late payment, over-limit fees

With charge and credit cards, you must be careful when it comes to interest rates and fees. When they declare the interest rate as two per cent, it is calculated monthly. It is equivalent to 24 per cent annually.

Prepaid Cards

Prepaid cards are technically debit cards loaded with a certain amount of money instead of being linked to your bank account. You can load your card with the amount you wish.

The card will stop when your balance is zero, and then you can replenish the balance, and so on. This type of card is ideal for online transactions due to limited loss in case of fraud. It can also be a wonderful gift; some banks issue special prepaid gift cards.

Technology

The technology of cards evolved drastically during the last couple of decades from magnetic stripe to EMV Chip, then to virtual and Wi-Fi cards.

Magnetic stripe technology is that black stripe on the back of the plastic card where all the data is encoded. EMV Chip Cards have a smart encoded chip on the face of the card in addition to the magnetic stripe on the back; the chip adds more security features to the card.

Wi-Fi Contactless cards work with NFC (Near Field Communication Technology), enabling you to pay with your card without touching the Point of Sale machine. This technology complies with social distancing.

Virtual cards are designed for online transactions. The bank will provide you with 16 digits, expiry date, and CVV2 (three security digits) upon your request. Some banks issue disposable virtual cards for one-time use, adding more security layers to the card. 

You can’t use virtual cards with transactions requiring showing a physical card, like car rental or hotel reservations. With disposable visual cards, merchants can’t refund cardholders. 

Let’s talk about security 

• Never disclose any information regarding your card (name, number, expiry date, CVV2, limit)

• Never give your card to someone else

• Before applying for a card, read the terms and conditions, benefits and fees in detail, ask about what you don’t understand

• If you lose your card, immediately call your bank and report the lost card

• If you receive an SMS notification of a fraudulent transaction, call your bank immediately, report fraudulent use of the card, and ensuring they block the card

• Always use your card at reputable stores and never let your card out of your sight

• Do NOT give your PIN to the merchant and ask him to enter it for you

• Always use your credit card responsibly or you will end up in debt

Enjoy happy and safe shopping!

Reprinted with permission from Family Flavours magazine