Electronic Payment Cards: The Different Types

Businesses today are expected to thrive through accepting payments electronically. Consumers no longer carry large amounts of money, and they no longer need to be physically present to purchase something. Using cards is a convenient method that allows customers to pay online. However, a wide range are used for monetary exchanges that depend on the nature of the business transaction and the agreement with the bank involved.

Generally, a payment device is supplementary to another account holding funds owned by, or offering credit to the cardholder. Depending on how the account is managed, payment cards can be classified into different types.

Credit cards

Credit is a function of a system of payments named after the small plastic card offered to the users of the system. It entitles the owner to purchase anything, given that it will be paid for over a period of time. The issuing bank of the card grants the consumer a line of credit, allowing him or her to borrow money for payment to a business or as a cash advance.

Credit cards differ from charge cards, where the latter requires the amount borrowed to be paid in full by the next month. The former lets the consumer ‘revolve’ the borrowed amount, at the cost of interest. These are usually issued by local banks and credit unions.

Debit cards

Debit cards, also known as a bank or a checkcard, offer an alternative payment to shopping with cash. Similar to an electric check, it allows funds to be withdrawn directly from the bank account, or the remaining balance on the card. For the basis of e-commerce, some cards are exclusively designed for the internet, and there is no physical card issued.

Debit cards are slowly growing in popularity throughout the world, and they have overtaken both check and cash transactions, based on studies conducted by the Federal Reserve. Similar to credit cards, they are widely used on the internet and on the phone. In contrast, the funds are transferred from the card holder’s account instead of paying the balance at a later date.

Debit cards can also act as an ATM card, allowing for the withdrawal of cash, and as a check guarantee card. Business owners also offer a ‘cashback/cashout’ option for customers, allowing for a withdrawal immediately following a purchase before checkout.

Stored-value cards

These refer to cards where the funds and/or data are physically recorded on the card. They differ from prepaid debit cards in that these are usually anonymous, while the prepaid debit cards are issued in the name of the card holder. The value associated with the card is accessed with the use of a magnetic stripe, on which the information is encoded.

Fleet cards

Used as payment in gas stations, fleet cards can also be used to pay for vehicle maintenance. Similar to all the other cards, this eliminates the need to carry a large amount of cash, therefore increasing security for fleet drivers.

Plastic cards are now becoming a replacement to cash and checks. Given this, businesses should continue to capitalize on this idea to ensure their success.

Should We Be Concerned When Using Electronic Payment Systems?

The world now operates largely through the World Wide Web. New internet based companies are springing up all the time to offer consumers products for less and without the hassle of having to pop down to the shops to pick the item up.

All of these websites need to have some form of electronic payment system to allow the customers to securely pay their money to the company in question and possibly the biggest single issue with shopping on the internet is the threat of your bank details being hacked by some online virus or tracker.

Obviously there will always be people that will attempt to hack peoples bank details, just like there will always be people who attempt to rob banks or perform muggings. But thankfully there are a number of individuals that have the task of constantly coming up with new ways to make the electronic payment systems more secure.

There have been several variations of the online electronic payment system, but the standard version that most people use today is PayPal. This service works as a go between for the client and the company selling products. The money is transferred securely to PayPal who then hold the money before passing it on to the company. Because of this there is no exchanging of bank details between the two individuals. All the bank details are stored on PayPal’s secure servers.

Other variations of the electronic payment system involve using a series of security number and passwords. For instance VISA’s latest version of their online electronic payment system includes using the three digit security code from the back of the card and also uses a specified password that the owner sets to verify that the card hasn’t been stolen.

Obviously you will never really eliminate all card crime, because as quickly as these companies can manufacturer new methods of keeping us all safe, someone is coming up with a way to crack the code and give the advantage back to the thieves.

If you really want to make sure that you stay safe when ordering your products online, then there are a number of rules that you should follow. Firstly, online shop on sites that you know are genuine and you trust, secondly ensure that you machine is updated with the latest security patches from your software manufacturer, and thirdly ensure when purchasing that the web address starts with https. As long as you follow these steps you should have a happy and safe online purchasing experience.

Disadvantages of Electronic Payment Systems

Electronic money, also known as e-money, electronic cash, e-currency or digital cash, refers to money or scrip which is exchanged electronically. Basically, electronic payment systems are key enablers for mass acceptance of electronic commerce over insecure systems such as the Internet. In Business-to-Business (B-2-B) e-commerce, there is a rapidly growing interest in processing payments online.

However, these electronic payment systems have a number of a number of disadvantages also. You need to record to the establishment in order to be empowered to perform money transactions with them. Now, you need to have a username and password, and for that you need to have password aegis. Moreover, you also need to keep up an account per organization, which can be very irritating or pesky for you.

To make sure that your online transactions are solid, it is essential that you observe strict security policies. If password is capable of being hacked, it can mean serious fiscal loss for you. Banks or financial institutes that have your financial information can expose it to cyber-terrorist. So, there is unstated risk of your personal and account particulars being stolen.

The transfer of digital currency arouses questions such as how to impose taxes and the potential ease of money washing. There are also possible macroeconomic results such as exchange rate stabilities and shortage of money supplies.

Moreover, you are always at a loss if your card is stolen. If the card falls in wrong hands, there is a danger of expenditure of entire bank balance. You will obviously inform the concerned authorities about the loss but the time taken between losing the card and informing the authorities is critical.

The purpose of the above article is not to discourage people from making electronic payments but to make them aware of the inherent dangers that such payment systems involve.