Page 227 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes Operation of the Credit Card

Credit cards operate quite differently from cheque cards. A cheque card guarantees payment of
a cheque, whereas a credit card guarantees against a sales voucher signed by the credit card
holder.
Credit cards may also be used for the purpose of obtaining cash from the branches of issuing
bank or branches of certain other banks with which arrangements have been made. Some
institutions make a specific annual charge to their cardholders.

Notes Encryption of personal information is used to prevent fraud.

Mechanism of Credit Card Operation

1. Customer applied and got the credit card.
2. Arrangements are completed between the banker and seller.

3. The customer makes the actual purchases and signs on the sale vouchers.
4. The seller sends the detailed vouchers to the bank.
5. The bank settles the claims of the seller.
6. The customer receives the intimation from the bank in this regard.
7. The customer makes the payment for the purchases made by him.

11.8 Debit Card

A debit card is a plastic card which provides an alternative payment method to cash when
making purchases. Physically, the card is like a credit card; however, its functionality is more
similar to writing a cheque as the funds are withdrawn directly from either the cardholder's
bank account (often referred to as a check card).
Depending on the store or merchant, the customer may swipe or insert their card into the
terminal, or they may hand it to the merchant who will do so. The transaction is authorized and
processed and the customer verifies the transaction either by entering a PIN or, occasionally, by
signing a sales receipt.
The use of debit cards has become widespread in many countries and has overtaken the cheque
and in some instances cash transactions by volume. Like credit cards, debit cards are used widely
for telephone and Internet purchases.
Card-holders' accounts are immediately debited against purchase or services through the
computer network. Hence, under debit card the card-holder must have adequate balance in his
account. This system is intended to replace the cheque system of payment.

Did u know? A cheque card guarantees payment of a cheque, whereas a credit card
guarantees against a sales voucher signed by the credit card holder.
A major development in banking brought i.e. through paper instruments namely cheques
and credit transfers about a second phase in payment system.

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