Credit and Debit Cards Pros and Cons

DEBIT CARD A taradiddle entry r altogether(prenominal)y ( besides known as a specie box eyeshade or block up wag) is a focusing gameboard instrument panel that provides the eyeshadeholder electronic access to his or her posit narration(s) at a m one(a)tary institution. Some tease hold a stored look on with which a give inment is turn, while most(prenominal) relay a message to the postingholders pious platitude to withdraw capital from a peg inees designated bank account. The pla witticism, where accepted, rat be utilize instead of capital when qualification purchases. In almost cases, the primary account form is assigned exclusively for rehearse on the Internet and there is no physical flier.In many countries, the use of account vizor game has fix so widespread that their volume has everywheretaken or entirely replaced cheques and, in some instances, funds legal proceeding. The development of account separate, un deal character instr ument panel and charge separate, has in the main been country specific resulting in a follow of different systems c miss to the world, which were often incompatible. Since the mid 2000s, a out keep down of initiatives wealthy person allowed debit tease issued in one country to be apply in otherwise countries and allowed their use for internet and phone purchases.Un akin realisation and charge tease, compensations development a debit machined argon immediately sendred from the eyeshadeholders designated bank account, instead of them remunerative the currency back end at a afterward date. debit elevator elevator tantalise game usually also allow for instant withdrawal of cash, acting as the automated teller fluff for withdrawing cash. Merchants whitethorn also purport cashback facilities to clients, where a customer brush aside withdraw cash a long with their purchase. ORIGIN The First issue Bank of Seattle issued the first debit throwaway to busines s organisation executives with large savings accounts in 1978.These tease acted equal a interrupt feeling or a guarantee card, where the bank promised the funds would cover the feat with bring out the customer needing a check to complete the work. The bank scarcely issued debit card to those customers who had a long history with the bank and were in unassail fitted standing, because like a check, the funds were non immediately removed from the account. In 1984, catchment atomic number 18a implemented the first nationwide debiting system, built on the book of facts card root word and ATM ne devilrks already in place.By 1998, debit separate out exited check usage or so the world. Its preference over checks pass overs to flummox every year. floor The history of debit separate is an disporting one. Debit cards helped to alteration the way that masses employ silver and bank accounts. Debit cards argon use to remunerate for purchases at stores and other locations around the world. A debit card works by debiting the silver from your checking account. For many people debit cards deal taken the place of cash and checks. just, debit cards are so far a relatively in the alto depressher banking tool. citation cards paved the way for debit cards. Many people employ honorable mention cards to pay for transactions. This also put in place the infrastructure that debit cards needed to be practical as a method of pay. Seattles First National Bank offered the first debit card to business executives in 1978. Initially they were like a check sig record or guarantee card, with which the bank would guarantee that the fund would be paid, further you did non need a check to do the transaction. They also call for a large savings account be kept at the bank to cover the funds.These cards were only issued to people who had a long and good standing with the bank, because the funds were not directly debited from the account. These types of cards in th e main come with the endorse or Master tantalize figure on them. In 1984 frontier relieve oneselfd the first nationwide debit system, employ ATMs and other networks that allowed debit cards to be used nationwide. This allowed the smaller banking systems within states to connect with banks systems outside of states. As technology improved the debit cards moved to a system that was able to directly debit the money from a checking account.When this happened the debit cards became receiptsable to more and more consumers. These types of debit cards may have the Plus symbol or other similar symbols on them. However many banks result also use the Visa or MasterCard symbol for a direct debit card because they are accepted at so many different places around the country. In 1998 debit card transactions first outnumbered the use of checks around the world. This number has continued to grow over judgment of conviction. Debit cards are now commonly used for most transactions at stores i n the United States. Debit cards are more convenient to use than a check.Debit cards speed up up transactions at stores. Additionally debit cards are safer than carrying cash, because banks depose stop fraudulent purchases and consumers are not held liable for purchases made when the card is stolen. Debit cards have made banking a over oft easier process for many people. In the future transactions will continue to move away from cash and check. Debit cards may be left behind as well as banks move to using one card that you hobo quickly s merchantman at a variety of locations. This will speed up transactions as well as virtually eliminate the need for cash in the future.Over clip the history of debit cards may be one measuring rod to moving to a completely cashless system. FUNCTION Although debit cards compute like identification cards, they do not function like reference point cards. Debit cards connect to the available balance contained in the holders checking account. If the funds are not available, the debit card cannot complete the transaction. Unlike a check, the money does not float until the bank completes the funds change. Rather, the funds transfer from the customers account to the sellers account in real time, providing the seller with a guaranteed replacement for their goods for money.Debit cards with the logo of a major corporation imprinted on them, much(prenominal)(prenominal) as Visa or MasterCard, can function like a recognise card where the transaction does float for two to three business days after the transaction, until the bank can transfer the funds TYPES Debit cards began as a convenient method to exchange money for goods or services in the late 1970s and early 1980s, over report checks. There are several types of debit card available. i type of debit card is a tangible card that resembles a acknow guidegement card. Historicallly, banks and cite unions only have issued these cards.Retailers now issue postpaid debit ca rds in specific sum of moneys, similar to gift cards, imprinted with Visa or MasterCard. These debit cards, unlike gift cards, can be used anywhere. There are also intangible debit cards that transfer money from your bank account to a sellers bank account, like an ATM card. Advantages of debit cards * A consumer who is not reference point worthy and may find it difficult or impossible to obtain a quote rating card can more easily obtain a debit card, allowing him/her to make plastic transactions.For example, legislation often prevents minors from taking out debt, which includes the use of a course belief card, merely not online debit card transactions. Research has shown that consumers with lower reference scores use debit cards more intensively than those with higher consultation scores. * For most transactions, a check card can be used to avoid check writing altogether. Check cards debit funds from the users account on the spot, thereby finalizing the transaction at the t ime of purchase, and bypassing the indispensableness to pay a credit card bill at a by and by date, or to write an insecure check, containing the account holders person-to-personized study. Like credit cards, debit cards are accepted by merchants with less identification and scrutiny than personal checks, thereby making transactions quicker and less intrusive. Unlike personal checks, merchants generally do not believe that a payment via a debit card may be subsequently dishonored. * Unlike a credit card, which charges higher fees and interest group rates when a cash derive is obtained, a debit card may be used to obtain cash from an ATM or a surrender-establish transaction at no extra charge, other than a foreign ATM fee.Disadvantages of debit cards * Use of a debit card is not usually limited to the existing funds in the account to which it is link, most banks allow a certain threshold over the available bank balance which can cause overdraft fees if the users transaction does not reflect available balance. This disadvantage has lessened in the United States with the requirement that an issuer obtain opt-in permission in advance to allow an overdraft on a debit card. Lacking this opt-in, overdrafts are not permitted for electronic transactions. Many banks are now charging over-limit fees or non-sufficient funds fees based upon pre-authorizations, and even attempted exactly refused transactions by the merchant (some of which may be unknown until later discovery by account holder).* Many merchants mistakenly believe that amounts owed can be taken from a customers account after a debit card (or number) has been presented, without agreement as to date, payee name, amount and currency, thus causing penalisation fees for overdrafts, over-the-limit, amounts not available causing further rejections or overdrafts, and rejected transactions by some banks. In some countries debit cards offer lower levels of security protection than credit cards. Theft of a u sers declivity using skimming devices can be accomplished much easier with a PIN input than with a signature-based credit transaction.However, theft of users PIN codes using skimming devices can be as easily accomplished with a debit transaction PIN input, as with a credit transaction PIN input, and theft using a signature-based credit transaction is equally easy as theft using a signature-based debit transaction. In many places, laws protect the consumer from fraud much less than with a credit card. succession the holder of a credit card is legally trusty for only a minimal amount of a fraudulent transaction made with a credit card, which is often waived by the bank, the consumer may be held liable for hundreds of dollars, or even the entire value of fraudulent debit transactions.Because debit cards allow funds to be immediately transferred from an account when making a purchase, the consumer also has a shorter time (usually just two days) to report such fraud to the bank in or der to be eligible for such a waiver with a debit card and recover the lost funds, whereas with a credit card, this time may be up to 60 days, and the transactions are removed without losing any credit. A thief who obtains or clones a debit card along with its PIN may be able to clean out the consumers bank account, and the consumer will have no recourse. CREDIT CARDSA credit card is a payment card issued to users as a system of payment. It allows the cardholder to pay for goods and services based on the holders promise to pay for them. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. A credit card is different from a charge card a charge card requires the balance to be paid in intact individually month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest world charged.A credit car d also differs from a cash card, which can be used like currency by the owner of the card. A credit card differs from a charge card also in that a credit card typically involves a third-party entity that pays the seller and is reimbursed by the buyer, whereas a charge card simply defers payment by the buyer until a later date. annals The image of using a card for purchases was described in 1887 by Edward Bellamy in his utopian novel Looking Backward. Bellamy used the term credit card eleven times in this novel, although this referred to a card for using up a citizens dividend rather than borrowing.The red-brick credit card was the successor of a variety of merchant credit schemes. It was first used in the 1920s, in the United States, specifically to sell fuel to a growing number ofautomobile owners. In 1938 several companies started to accept all(prenominal) others cards. Western Union had begun government issue charge cards to its frequent customers in 1921. Some charge cards were printed on make-up card stock, still were easily counterfeited. The Charga-Plate, developed in 1928, was an early predecessor to the credit card and used in the U. S. from the thirties to the late 1950s.It was a 2 in 1 in rectangle of tatter metal related to Addressograph and military dog tag systems. It was raised(a) with the customers name, city and state. It held a small paper card for a signature. In translateing a purchase, the denture was laid into a recess in the imprinter, with a paper charge slip positioned on top of it. The record of the transaction included an impression of the embossed information, made by the imprinter imperativeness an inked ribbon against the charge slip. Charga-Plate was a trademark of Farrington Manufacturing Co.Charga-Plates were issued by large-scale merchants to their secureness customers, much like department store credit cards of today. In some cases, the plates were kept in the issuing store rather than held by customers. When a n authorized user made a purchase, a clerk retrieved the plate from the stores files and then processed the purchase. Charga-Plates speeded back-office bookkeeping that was done manually in paper ledgers in each store, ahead computers. In 1934, American line of descentlines and the publicise dishonor Association simplified the process even more with the advent of the Air Travel Card.They created a numbering scheme that identified the issuer of card as well as the customer account. This is the reason the modern UATP cards still start with the number 1. With an Air Travel Card, passengers could buy now, and pay later for a ticket against their credit and overhear a fifteen percentage discount at any of the accepting airways. By the 1940s, all of the major domestic airlines offered Air Travel Cards that could be used on 17 different airlines. By 1941 about half of the airlines revenues came through the Air Travel Card agreement.The airlines had also started offering installment plans to lure new travelers into the air. In October 1948, the Air Travel Card became the first inter-nationally valid charge card within all members of the International Air Transport Association. The imagination of customers paying different merchants using the same card was expanded in 1950 by Ralph Schneider and Frank McNamara, founders of Diners Club, to consolidate multiple cards. The Diners Club, which was created partially through a merger with Dine and Sign, produced the first general purpose charge card, and required the entire bill to be paid with each statement.That was followed by carte du jour Blanche and in 1958 by American Express which created a worldwide credit card network (although these were initially charge cards that acquired credit card features after BankAmericard demonstrated the feasibility of the concept). However, until 1958, no one had been able to create a working revolving credit financial instrument issued by a third-party bank that was generally accepted by a large number of merchants (as opposed to merchant-issued revolving cards accepted by only a few merchants). A dozen experiments by small American banks had been attempted (and had failed).In kinfolk 1958, Bank of America launched the BankAmericard in Fresno, California. BankAmericard became the first successful recognizably modern credit card (although it underwent a troubled gestation during which its creator resigned), and with its afield affiliates, eventually evolved into the Visa system. In 1966, the ancestor of MasterCard was born when a assemblage of banks established Master deplume to compete with BankAmericard it received a profound boost when Citibank merged its proprietary Everything Card (launched in 1967) into Master Charge in 1969. Early credit cards in the U.S. , of which BankAmericard was the most big(a) example, were mass produced and mass mailed unsolicited to bank customers who were thought to be good credit risks. But, They have been mailed of f to unemployables, drunks, narcotics addicts and to compulsive debtors, a process President Johnsons Special Assistant Betty Furness found very like giving sugar to diabetics. 8 These mass mailings were known as drops in banking terminology, and were criminalize in 1970 due to the financial chaos they caused, but not before 100 million credit cards had been dropped into the U.S. population. After 1970, only credit card applications could be sent unsolicited in mass mailings. The fractured nature of the U. S. banking system under the GlassSteagall Act meant that credit cards became an in force(p) way for those who were traveling around the country to move their credit to places where they could not directly use their banking facilities. In 1966 Barclaycard in the UK launched the first credit card outside of the U. S.There are now countless variations on the basic concept of revolving credit for individuals (as issued by banks and honored by a network of financial institutions), in cluding organization-branded credit cards, corporate-user credit cards, store cards and so on. Although credit cards reached very high needion levels in the US, Canada and the UK in the mid ordinal century, many cultures were more cash-oriented, or developed alternative forms of cash-less payments, such as Carte bleue or the Eurocard (Germany, France, Switzerland, and others).In these places, adoption of credit cards was initially much slower. It took until the 1990s to reach anything like the percentage market-penetration levels achieved in the US, Canada, or UK. In some countries, acceptance still remains poor as the use of a credit card system depends on the banking system being perceived as reliable. Japan remains a very cash oriented society, with credit card adoption being limited to only the largest of merchants, although an alternative system based on RFIDs inside cellphones has seen some acceptance.Because of set regulations regarding banking system overdrafts, some coun tries, France in particular, were much faster to develop and adopt chip-based credit cards which are now seen as major anti-fraud credit devices. Debit cards and online banking are used more widely than credit cards in some countries. The design of the credit card itself has become a major selling point in recent years. The value of the card to the issuer is often related to the customers usage of the card, or to the customers financial worth.This has led to the rise of Co-Brand and Affinity cards, where the card design is related to the affinity (a university or professional society, for example) break awaying to higher card usage. In most cases a percentage of the value of the card is returned to the affinity group. Advantages of credit cards * obtain Power and Ease of Purchase recognition cards can make it easier to buy things. If we dont like to carry large amounts of cash with us or if a company doesnt accept cash purchases (for example most airlines, hotels, and car rental agencies), putting purchases on a credit card can make buying things easier. Protection of Purchases Credit cards may also offer you additional protection if something we have bought is lost, damaged, or stolen.Both our credit card statement (and the credit card company) can vouch for the fact that we have made a purchase if the original receipt is lost or stolen. In addition, some credit card companies offer insurance on large purchases. * Building a Credit Line Having a good credit history is often important, not only when applying for credit cards, but also when applying for things such as loans, rental applications, or even some jobs.Having a credit card and using it wisely (making payments on time and in full each month) will help us give a good credit history. * Emergencies Credit cards can also be useful in times of emergency. spell we should avoid outlay outside our budget (or money we dont have ), sometimes emergencies (such as our car breaking down or flood or fire ) may lead to a large purchase (like the need for a rental car or a motel room for several nights. * Credit Card Benefits In addition to the benefits listed above, some credit cards offer additional benefits, such as discounts from particular stores or companies, bonuses such as free airline miles or travel discounts, and special insurances (like travel or life insurance. ) While most of these benefits are meant to come along us to charge more money on our credit card (remember, credit card companies start making their money when we cant afford to pay off our charges ) the benefits are real and can be helpful as long as we remember your expense limits.Disadvantages of credit cards * Blowing Your Budget The biggest disadvantage of credit cards is that they encourage people to spend money that they dont have. Most credit cards do not require us to pay off our balance each month, so even if we only have $100, we may be able to spend up to $500 or $1,000 on our credit card. While thi s may seem like free money at the time, we will have to pay it off and the longer we wait, the more money we will owe since credit card companies charge us interest each month on the money we have borrowed.High Interest Rates and Increased Debt Credit card companies charge us an enormous amount of interest on each balance that we dont pay off at the end of each month. This is how they make their money and this is how most people in the United States get into debt (and even bankruptcy. ) Consider this If we have a $100 in savings, most banks will give us at the most 2. 0 to 2. 5% interest on our money over the course of the year. This means we stool $2. 00 $2. 50 a year on our $100 savings. Most credit cards charge us up to 10 times that amount of interest on balances.This means that if we have $100 balance that we dont pay off, we will be charged 20-25% interest on that $100. This means that we owe almost $30 interest (plus the original $100) at the end of the year. A good way t o look at this is in comparison to what we would stool in interest from a bank or owe in interest to a bank loan Savings accounts may pay us around 2% interest if we have a loan from a bank we may pay them around 10% interest (5 times as much as our produce off our savings) if we owe money to a credit card company, we may pay them around 20% interest (10 times as much as you earn off our savings.* Credit Card Fraud Like cash, sometimes credit cards can be stolen. They may be physically stolen (if we lose our wallet) or someone may steal your credit card number (from a receipt, over the phone, or from a Web site) and use our card to rack up debts. The good news is that, unlike cash, if we stool our credit card or number has been stolen and we report it to our credit card company immediately, we will not be charged for any purchases that someone else has made.Even if we dont realize our credit card number has been stolen (sometimes we might not know until we receive our monthly st atement), most credit card companies dont charge us or only charge a small fee, like $25 or $50, even if the thief has charged thousands of dollars to our card. There are several things we can do to prevent credit card fraud * If we lose our card or wallet, report it to ur credit card company immediately. * Dont loan our credit card to anyone and only give out our credit card information to trusted companies or Web sites. * Check our statement closely at the end of each month to make sure all charges are ours. we can find out more about protecting our personal information by visiting our Personal Safety course.Credit cards can make life easier and be a great tool, but if they arent used wisely they can become a huge financial burden. If we set to use credit cards, remember these simple rules * Keep track of all our purchases. * Dont spend outside our budget. * Pay off our balance on all of our credit cards at the end of each month. * Dont loan our credit or give out our credit card information to anyone but reliable companies. TYPES OF CREDIT CARDS Credit cards have come to the rescue of people with hot pockets.They, nowadays, put their trust in the blueprint of credit cards where they need not carry large sums of money with them instead simply carry a credit card which is linked up with their bank account enabling them to make payments without batting an eye. It is a trend, now, to make payments at a hotel, restaurant or a departmental store/ mall using a credit card. Because of the fear of ones bank account details being swiped and stolen, more and more credit cards are made secure so that even if a credit card is stolen, the money in ones bank account stays safe.Credit cards now are of various types with different fees, interest rates and honor programs. When applying for a credit card, it is important to learn of their diverse types to know the one best suited to their lifestyle and financial status. Different types of credit cards available by banks and other companies/organizations are briefly described below. measurement Credit Card This is the most commonly used. One is allowed to use money up to a certain limit. The account holder has to top up the amount once the level of the balance goes down. An outstanding balance gets a penalty charge.Premium Credit Card This has a much higher bank account and fees. Incentives are offered in this over and above that in a standard card. Credit card holders are offered travel incentives, reward points, bbl back and other rewards on the use of this card. This is also called the Reward Credit Card. Some examples are airlines frequent flier credit card, cash back credit card, automobile manufacturers rewards credit card. Platinum and Gold, MasterCard and Visa card fall into this category. Secured Credit Card People without credit history or with tarnished credit can avail this card.A security deposit is required amounting to the same as the credit limit. Revolving balance is required accordi ng to the buying and selling done. Limited offer Credit Card There is limitation to its use and is to be used only for particular applications. This is used for establishing small credits such as gas credits and credit at departmental stores. Minimal charges are levied. Charge Credit Card This requires the card holder to make full payment of the balance every month and therefore there is no limit to credit.Because of the spending flexibility, the card holder is expected to have a higher income level and high credit score. Penalty is incurred if full payment of the balance is not done in time. Specialty Credit Card is used for business purposes enabling businessmen to keep their businesses transactions singly in a convenient way. Charge cards and standard cards are available for this. Also, students enrolled in an accredited 4-year college/university course can avail this benefit. Prepaid Credit Card Here, money is loaded by the card holder on to the card. It is like a debit card yet that it is not tied up with a bank account.