ATM card

 

An ATM card (also known as a bank card, client card, or cash card) is an ISO
7810 card issued by a bank, credit union or building society.



Its primary uses are:



at an ATM for deposits, withdrawals, account information, and other types of
transactions, often through interbank networks

at a branch, as identification for in-person transactions

at merchants, for EFTPOS (point of sale) purchases

Unlike a debit card, an ATM card can only be used for transactions in person
(and not by telephone, fax or internet), as it requires authentication through a
personal identification number or PIN. In other words, it cannot be used at
merchants that only accept credit cards.

 

Credit card

A credit card is a system of payment named after the small plastic card
issued to users of the system. A credit card is different from a debit card in
that it does not remove money from the user's account after every transaction.
In the case of credit cards, the issuer lends money to the consumer (or the
user). It is also different from a charge card (though this name is sometimes
used by the public to describe credit cards), which requires the balance to be
paid in full each month. In contrast, a credit card allows the consumer to
'revolve' their balance, at the cost of having interest charged. Most credit
cards are the same shape and size, as specified by the ISO 7810 standard.



In countries that don't have proper debit cards, such as Canada, an ATM card is
also known as a "debit card".



 

 

How credit cards work

A user is issued credit after an account has been approved by the credit
provider, and is given a credit card, with which the user will be able to make
purchases from merchants accepting that credit card up to a pre-established
credit limit. Often a general bank issues the credit, but sometimes a captive
bank created to issue a particular brand of credit card, such as Chase Credit
Card, Wells Fargo or Bank of America issues the credit.



When a purchase is made, the credit card user agrees to pay the card issuer. The
cardholder indicates their consent to pay, by signing a receipt with a record of
the card details and indicating the amount to be paid or by entering a Personal
identification number (PIN). Also, many merchants now accept verbal
authorizations via telephone and electronic authorization using the Internet,
known as a Card not present (CNP) transaction.



Electronic verification systems allow merchants to verify that the card is valid
and the credit card customer has sufficient credit to cover the purchase in a
few seconds, allowing the verification to happen at time of purchase. The
verification is performed using a credit card payment terminal or Point of Sale
(POS) system with a communications link to the merchant's acquiring bank. Data
from the card is obtained from a magnetic stripe or chip on the card; the latter
system is in the United Kingdom commonly known as Chip and PIN, but is more
technically an EMV card.



Other variations of verification systems are used by eCommerce merchants to
determine if the user's account is valid and able to accept the charge. These
will typically involve the cardholder providing additional information, such as
the security code printed on the back of the card, or the address of the
cardholder.



Each month, the credit card user is sent a statement indicating the purchases
undertaken with the card, any outstanding fees, and the total amount owed. After
receiving the statement, the cardholder may dispute any charges that he or she
thinks are incorrect (see Fair Credit Billing Act for details of the US
regulations). Otherwise, the cardholder must pay a defined minimum proportion of
the bill by a due date, or may choose to pay a higher amount up to the entire
amount owed. The credit provider charges interest on the amount owed (typically
at a much higher rate than most other forms of debt). Some financial
institutions can arrange for automatic payments to be deducted from the user's
bank accounts.



Credit card issuers usually waive interest charges if the balance is paid in
full each month, but typically will charge full interest on the entire
outstanding balance from the date of each purchase if the total balance is not
paid.



For example, if a user had a $1,000 outstanding balance and pays it in full,
there would be no interest charged. If, however, even $1.00 of the total balance
remained unpaid, interest would be charged on the $1 from the date of purchase
until the payment is received. The precise manner in which interest is charged
is usually detailed in a cardholder agreement which may be summarized on the
back of the monthly statement. The general calculation formula most financial
institutions use to determine the amount of interest to be charged is APR/100 x
ADB/365 x number of days revolved. Take the Annual percentage rate (APR) and
divide by 100 then multiply to the amount of the average daily balance divided
by 365 and then take this total and multiply by the total number of days the
amount revolved before payment was made on the account. Financial institutions
refer to interest charged back to the original time of the transaction and up to
the time a payment was made, if not in full, as RRFC or residual retail finance
charge. Thus after an amount has revolved and a payment has been made that the
user of the card will still receive interest charges on their statement after
paying the next statement in full (in fact the statement may only have a charge
for interest that collected up until the date the full balance was paid...i.e.
when the balance stopped revolving).[1]



The credit card may simply serve as a form of revolving credit, or it may become
a complicated financial instrument with multiple balance segments each at a
different interest rate, possibly with a single umbrella credit limit, or with
separate credit limits applicable to the various balance segments. Usually this
compartmentalization is the result of special incentive offers from the issuing
bank, either to encourage balance transfers from cards of other issuers, or to
encourage more spending on the part of the customer. In the event that several
interest rates apply to various balance segments, payment allocation is
generally at the discretion of the issuing bank, and payments will therefore
usually be allocated towards the lowest rate balances until paid in full before
any money is paid towards higher rate balances. Interest rates can vary
considerably from card to card, and the interest rate on a particular card may
jump dramatically if the card user is late with a payment on that card or any
other credit instrument, or even if the issuing bank decides to raise its
revenue. As the rates and terms vary, services have been set up allowing users
to calculate savings available by switching cards, which can be considerable if
there is a large outstanding balance (see external links for some on-line
services).



Because of intense competition in the credit card industry, credit providers
often offer incentives such as frequent flier points, gift certificates, or cash
back (typically up to 1 percent based on total purchases) to try to attract
customers to their program.



Low interest credit cards or even 0% interest credit cards are available. The
only downside to consumers is that the period of low interest credit cards is
limited to a fixed term, usually between 6 and 12 months after which a higher
rate is charged. However, services are available which alert credit card holders
when their low interest period is due to expire. Most such services charge a
monthly or annual fee.