Comprehensive Guide to Bank Cards: Debit, Credit, and More

Posted on Sep 1, 2024 in Economy

Bank Cards: An Overview

Bank cards, also known as “plastic money,” are payment methods that allow holders to purchase goods and services at participating establishments. They offer multiple benefits for banks, cardholders, and businesses, but also come with associated costs.

Benefits for Financial Institutions

Financial institutions have promoted the use of ATMs for cash withdrawals and deposits, reducing staffing costs. Interest income and commissions from card transactions are significant revenue streams.

Benefits for Businesses

Major companies, such as retailers and energy providers, have introduced their own cards to encourage customer loyalty and increase sales. For businesses, cards attract potential customers and boost turnover, though they do carry a financial cost.

• Large businesses typically pay lower transaction fees (0.5% to 3.5%) compared to smaller businesses.

Benefits for Customers

For customers, cards offer a convenient and straightforward payment method and easy access to cash, but they can sometimes come with high financial costs.

Debit Cards

Debit cards allow holders to withdraw funds, use ATM services, and make purchases at participating establishments, as long as there are sufficient funds in their linked bank account.

Features of Debit Cards

• Personal and non-transferable.
• Linked to a checking or savings account.
• Transactions are immediately debited from the associated account.
• Issued by individual banks.
• Limited validity period (typically two to five years).

Debit Card Networks

Card issuance is managed by a few companies that operate ATM networks, including:

• Servired
• 4B
• 6000 Network

While cardholders can use ATMs within these networks, transactions are typically free only within their own bank’s network.

Costs of Debit Cards

• Annual fee for issuance or renewal (varies by bank and can range from €0 to €14).
• Commissions for using ATMs outside the cardholder’s bank network or abroad.
• Minimum fees may apply to ATM transactions, especially if the percentage-based fee is lower than the minimum.

Main Benefits of ATMs

• Cash withdrawals (subject to account limits).
• Balance inquiries and recent transaction history.
• Cash and check deposits.
• Transfers between linked accounts.
• Bill payments.
• Mobile phone top-ups.
• PIN changes.
• Checkbook requests.
• Prepaid card reloads.
• Ticket purchases for events.
• Other services: stock information, job listings, auctions, etc.

Credit Cards

Credit cards are a deferred payment method that allows holders to make purchases even without sufficient funds in their bank account. They function as a line of credit provided by the issuing bank.

Features of Credit Cards

• Personal and non-transferable.
• Available to individuals and legal entities.
• Option to obtain additional cards for authorized users.
• Contractual agreement without requiring public documentation or broker involvement.

Credit Card Terms and Conditions

• Annual fee for issuance or renewal of the primary and additional cards.
• Linked bank account details.
• Credit limit, repayment methods, and card validity period.
• Interest rate, interest calculation method, and applicable fees.

Cost of Credit Cards

• Annual fee for issuance or renewal (varies by card brand (Visa, Eurocard, MasterCard), card type (Classic, Gold, Premier, etc.), and issuing bank).
• Interest payments on outstanding balances.
• Commissions for cash withdrawals at ATMs or bank branches.

Credit Card Repayment Options

Cardholders are typically required to repay all or a portion of their outstanding balance monthly, along with accrued interest and fees. Common repayment options include:

• Full payment
• Deferred payment
• Fixed monthly percentage

Operations and Benefits of Credit Cards

• Purchases at participating merchants worldwide.
• Cash withdrawals at ATMs and bank branches.
• Online payments.
• Monthly statements detailing transactions, outstanding balance, interest, and fees.
• Complimentary insurance coverage (e.g., life, travel).
• Free access to online banking services.
• Telephone assistance for emergencies, reservations, and other services.
• Travel assistance, legal support, and emergency medical services.

Direct Debits

Direct debits authorize a third party to collect payments from a bank account. There are two main types:

Direct Debit Collection Orders

• Used for recurring payments like salaries, pensions, and dividends.

Payment Orders

• Authorizations for the bank to process specific payments, such as utility bills, on behalf of the account holder.

Benefits of Direct Debits

• For banks: customer acquisition and retention, increased deposits.
• For customers: convenient, efficient, and secure payment method.

Bank Transfers

and similar transactions: the transfer is a transfer of funds from one account to another, from different individuals of the same or different entity. Involved two people between sender and receiver. The originator is the account holder q you are charged to the account. Theq beneficiary is the person receiving the funds, credited to an account of the q holds. The transfer is the transfer of money between accounts in the same holder, open to the same entity. Difference between negotiation and collection management purposes: the negotiation is available prior to maturity of the amount of it, paying for it some interest and a collection fee. The collection management give to the bank supposed to be responsible to collect the due date by paying a commission for it.