Different types of payment cards you must know

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NEW DELHI: In India, there are broadly four types of cards through which you can make payments. These cards are debit cards, credit cards, prepaid cards, and electronic cards, which can be classified based on their issuance, usage and payment by the cardholder.

All of these cards are different in terms of making payments. While some cards are directly linked with one’s savings bank account, others can help build your credit score. In this piece, we take a look at different types of cards and their usage.

Debit cards: If you have a savings bank account, the bank is likely to issue a debit card that is directly linked to your savings account. Debit cards generally will have a credit network associated with them like VISA or Mastercard. Having these credit networks printed on cards means that there is the acceptability of debit cards as a form of payment in many countries, places.

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However, using a debit card will not help build your credit score. Besides, you can also withdraw money from ATM using your debit card.

Credit cards: The banks and a couple of non-banks (or NBFCs) generally issue such cards. However, other approved entities can also issue these cards. You can purchase goods and services at PoS terminals/e-commerce through credit cards. These cards can help you build a good credit score if the bills are paid on time.

You may use these cards domestically and internationally (provided they are enabled for such use).

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While credit cards can also be used to withdraw cash from an ATM, you must not do so because you are usually charged a fee upfront based on the amount you withdraw. You can also transfer money to bank accounts, debit cards, other credit cards and prepaid cards within India, subject to agreed limits and conditions.

Prepaid cards: Banks and non-banks issue prepaid cards against the value paid in advance by the cardholder and store them in such cards, which can be issued in the form of cards or wallets.

The norm of prepaid cards depends on the issuer of such cards. Prepaid cards can be open or semi-closed and can be used to withdraw cash from an ATM, purchase goods and services at PoS terminals/e-commerce. You can also make domestic funds transfers, subject to prescribed limits and conditions. While banks issue open system prepaid cards, semi-closed system prepaid cards can be issued by the bank and non-bank entities.

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Electronic cards: These cards can be considered debit cards issued in specific overdraft accounts like personal loans without any specific end-use limitations. Banks have been allowed to provide electronic cards to people having overdraft accounts to enable domestic digital transactions.

For all purposes like security and safety, Merchant Discount Rate (MDR), Additional Factor of Authentication (AFA), the instructions relating to debit cards are applicable on such electronic cards as well.

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