Each of us likes and prefers payment cards, which provide us with convenience, speed, security, and lack of sense of money spending are just some of the reasons why we often choose these payment methods. Banks and merchants also prefer them, and you can see that customers using payment cards are more likely to spend money because they do not see it physically and it is easier for them to spend it. Despite different opinions and opinions on this subject, bank cards are, apart from cash, the most popular method of non-cash payments. Below I will briefly describe what payment cards are, and take into account their structure, structure, and types, and we will address the issue of security of their use.
What is a payment card? A payment card (bank card) is an object of payment issued by financial institutions, most often banks. As the name suggests, the card is used to pay for purchased goods and services and for cash optimization from ATMs. Payment with such a card is a convenient way in relation to cash payment – we do not have to withdraw some money every time we plan to buy something. At the moment of transaction, it is enough to insert the card into the payment terminal, enter the PIN code, confirm, and the bank will take care of the rest of the formalities, regulating the payment of the customer for the goods or services received.
Physically, a payment card is a rectangular piece of plastic 54 mm by 86 mm in size, equipped with a magnetic stripe or chip on which data about the cardholder, bank name, card identifier, expiry date, and CVV or CVC code is necessary to make online payments are stored. It is placed only on the card and in the system of the bank in which we have the card. Each code is a unique number, is not printed anywhere, and is not included in any other databases, so we know that it is not possible to save it. Sellers cannot store our code from the card. It is checked only during the transaction, it must not be kept or stored in the memory of devices. As a result, even if the database is stolen, criminals only have access to the card number, but do not know the details of the card. This principle is valid all over the world, and its violation is associated with very high penalties and a total ban on accepting card payments.
What is the difference between a magnetic card and a chip card? Magnetic cards store information on the magnetic stripe, which makes them more likely to be accessible to counterfeit. Their low level of protection against fraud made it necessary to introduce a different type of protection because their current level of security was insufficient. The solution turned out to be chip cards, which instead of a magnetic stripe were equipped with a microprocessor that controls the processes of access to data. The stored information is additionally encrypted, making it more difficult for third parties to read. The use of chip cards also requires the cardholder to enter a PIN code, which further increases security. For some time now, banks have been supplying their customers with chip cards, thus pushing magnetic cards out of the market. During the period of changes and the introduction of chip cards, a large proportion of chip cards also have a magnetic stripe to ensure compatibility with older magnetic cards.
Types of payment cards: There are many methods of classifying payment cards. Most often they are divided according to how they are settled with the bank. The three basic types of payment cards are as follows:
Credit cards – a payment card based on the credit limit granted by the bank. From time to time, the credit card holder receives a list of card transactions and information on the method and date of settlement. A credit limit is usually associated with an additional interest rate, but the customer may avoid having to pay interest on non-cash transactions if he repays 100% of his obligations to the bank within a specified period. This feature is often used by the bank in credit card promotional materials because customers like to be tempted by the vision of free credit. Receiving a credit card does not always involve opening a bank account. If you are asking yourself questions like which credit card is best for me don’t be fooled by promotional materials made by marketing departments of the biggest banks. Always compare and analyze different offers to choose the credit card for you
Debit cards – cards issued to a bank account. At the moment of making a transaction with a debit card, the bank collects receivables from the account of the cardholder. The customer must have an appropriate balance on his account for the operation to take place. The name of a debit card may be a bit misleading, as a debit card can be understood as a debt on a bank account, while a debit card does not allow for a negative balance on the account. This name is related to the fact that when a debit card is used, the transaction is immediately booked, which automatically debits the bank account.
Debit cards – otherwise known as deferred payment cards. It can be said to be a combination of a credit card and a debit card. On the one hand, as in the case of a credit card, the bank grants the customer a credit limit, but on the other hand, the charge card is usually linked to a bank account. Deferred payment here consists of the fact that the customer undertakes to provide funds to repay the entire debt on a specified date, and the bank then collects funds from the customer’s account.
Prepaid cards are financial cards that require a top-up, e.g. by bank transfer to the so-called technical account of the bank issuing the card. Powered cards can then be used for transactions up to the amount of the balance on the card. After using the prepaid card funds, you can reload the card. These cards do not require any closer ties with the bank – you do not have to sign a contract or open an account. Prepaid cards can be issued as bearer cards, which means that they are not linked to a specific person and can be used as, e.g. gift or travel cards. The advantage of a prepaid card is also high security when a thief can steal only what is on the technical card.
Virtual cards – in terms of functioning they are similar to prepaid cards. The difference is that the virtual card is not issued in physical form. It is merely a number that you can use in a non-cash card, not present transactions. With a virtual card, you won’t be able to withdraw money from an ATM.
Classic cards – standard payment cards with essential functionalities, free insurance of such cards is currently quite rare.
Silver cards – cards for people with a higher level of income; such cards usually have a broader scope of insurance protection and the possibility of exemption from fees.
Gold cards – cards for high-income customers, offering insurance protection for the holder and his relatives, discounts at bank partners, exemptions from fees, and are also widely accepted.
Platinum cards – cards for affluent customers, providing high insurance coverage, upper credit limit, and additional services.
Exclusive cards – VIP cards offering the broadest range of services are often made of specific materials, e.g. gold or titanium.
Visa is the world’s largest and most popular card organization MasterCard – Visa’s biggest competitor, but more innovative and modern.
American Express and Diners Club – less successful card organizations, however, known and appreciated. cards of these institutions are considered quite prestigious, used to make payments
Contactless cards are payment cards enabling contactless payments. Physically, they are chip cards or cards with both a chip and a magnetic stripe, but they have an additional built-in antenna allowing transactions by bringing the card closer to the payment terminal. In addition to proximity cards, there are also other carriers that enable contactless payments. These include contactless stickers, which can be attached to a mobile phone or mp3 player. The popularity of proximity cards has triggered a broad discussion about their security. The fact that it is possible to make small payments without the need to approve PIN transactions makes it easy to lose cash from your account or even to create a debit balance if your contactless card is stolen.
A particular variant of proximity cards is the MasterCard Display card with a built-in miniature display. It has two PIN numbers – one for non-cash payments and the other for the show on the card. A small screen is used to display the balance of our account and messages from the bank. The card can also be used as a token to confirm transactions in online banking. The MasterCard Display, like most currently issued payment cards, has a contactless function, but it turns out that the payment method affects the timeliness of data appearing on display. The data on our account balance will be updated only when we pay with the card in the traditional (contact method) because then the terminal connects to the bank to confirm whether we have funds on the account. After such a transaction, by checking the account balance on the card display, we will obtain the real balance of our account. In the case of contactless payments, the card will display the balance of the account before making the payment.
The second innovative card on our market is the MasterCard Debit card with a variable code CVC2. On the back of the plastic, there is a small display on which every hour a different set of digits appears, i.e. CVC2 code. This code is used to secure online transactions and is required when, for example, we pay with a debit card for goods or services on the Internet.
Security of payment cards. Chip cards, which are currently offered to customers, are characterized by a much higher level of protection in comparison to cards with a magnetic stripe, which is gradually becoming obsolete because their security level is low. The primary security mechanism of a payment card is the PIN code. For security reasons, it is never on the card and should be remembered by the customer. At the moment of transaction, after entering the PIN code by the cardholder, data from the payment card together with the PIN code are encrypted with the use of an algorithm and then sent to the bank’s system. The system verifies the cardholder by comparing the submitted data with the information stored in the database of the banking system. After correct verification, the system enables the holder to access the bank account. The next step in the payment process is authorization, i.e. the process of checking whether the cardholder can perform a given operation. After a positive authorization, the transaction is approved and ready for execution.
I have presented above a tremendous amount of information about the cards and their types, and I think that now each of you will be able to find out which card will be the right card for you.