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Frequently asked questions: Types of credit cards

credit card types faqs

Apnaloan.com Research Bureau

10 Aug 2007

What is a credit card?

A credit card is a piece of plastic that can be used to pay for products and services at over 20 million locations around the world. All you need to do is produce the card and sign a charge slip to pay for your purchases. The institution, which issued the card to you, makes the payment to the outlet on your behalf and would be reimbursed at a later date by you. The credit card means that you do not need to carry cash around with you.

What is a debit card?

Debit cards are substitutes for cash or check payments much the same way that credit cards are. However, banks only issue them to you if you hold an account with them. When a debit card is used to make a payment, the total amount charged is instantly reduced from your bank balance. A debit card is accepted only at outlets with electronic swipe-machines that can check and deduct amounts from your bank balance online.

What is a charge card?

A charge card carries all the features of credit cards. However, after using a charge card, you will have to pay off the entire amount billed by the due date. If you fail to do so, you are likely to be considered a defaulter and will usually have to pay up a steep late payment charge.

What is an Amex Card?

Amex stands for American Express and is one of the well-known charge cards. This card has its own merchant establishment tie-ups and does not depend on the network of MasterCard or Visa. This card is typically meant for high-income group categories and companies and may not be accepted at many outlets. There is a wide variety of special privileges offered to Amex card holders. For more information, click here.

What are MasterCard and Visa?

MasterCard and Visa are global non-profit organisations dedicated to promote the growth of the card business across the world. They have built a vast network of merchant establishments so that customers worldwide may use their respective credit cards to make various purchases. They also develop various technologies that are required for running the credit card business.

What is a smart card?

A smart card contains an electronic chip, which is used to store cash. This is most useful when you have to pay for small purchases, for example, bus fares and coffee. No identification, signature or payment authorisation is required for using this card. The exact amount of purchase is deducted from the smart card during payment and is collected by the smart card reading machine. No change is given.

What is the Diners Club Card?

Diners Club is a branded charge card. There is a wide variety of special privileges offered to the Diners Club cardholder. For instance, as a Diners Club cardholder, you can set your own spending limit. Besides, the card has its own merchant establishment tie-ups and does not depend on the MasterCard or Visa network. However, since this card is typically meant for high-income group categories, it may not be acceptable at many outlets. It would be a good idea to check whether a member establishment accepts the card or not in advance.

What is a photo card?

If your photograph is imprinted on a card, then you have what is known as a photo card. This helps identify the user of the credit card and is therefore considered safer. Besides, in many cases, your photo card can function as your identity card as well.

What is a global card?

Global cards allow you the flexibility and convenience of using a credit card rather than cash or traveler's cheques while traveling abroad for business or personal reasons.

What is a co-branded card?

Co-branded cards are credit cards issued by card companies, which have tied up with a popular brand for the purpose of offering some exclusive benefits to the consumer. For example, the Citi-Times card gives you all the benefits of a Citibank credit card along with a special discount on Times Music cassettes, free entry to Times Music events, etc.

What is an affinity card?

The card issuer ties up with popular organizations/institutions which are often non-profit organizations (e.g. Citi-WWF card or the StanChart-Cricket cards) to offer an affinity card. When the card is used, a certain percentage is contributed to the organization/institution by the card issuer.

What is an add-on card?

An add-on card allows you to apply for an additional credit card within the overall credit limit in the name of family members who include parents, spouse, siblings and all children above 18 years of age. Your billing statement would reflect the details of purchases made using the add-on card. You are liable to make good all the payments for the purchases made using the add-on card(s).

How many add-on credit cards can a customer get?

Normally, an issuing bank permits two add-on cards per credit card.

Is it possible to control the spending limit on add-on cards?

Yes. Some credit card issuing companies do set a limit for each transaction as well as for the total value of transactions allowed on a particular add-on card every month.