Credit and Other Cards

What is a credit card?

A credit card is a plastic card which is used to put whatever is purchased onto an account. This is paid for by an intermediary company and the balance is put onto the account, to be settled by the card-holder, within an agreed period of time at an agreed rate of interest.
Most banks and building societies issue credit cards as do several stores and other providers. The balance on a credit card must be paid off by an agreed date or the monies owed attract pre-agreed rates of interest. This rate of interest can sometimes be high and does not constitute an optimum way to borrow. There is always a minimum monthly amount to repay.

Debit cards

A debit card is a card used instead of cash. It acts as cash does insofar as the account it is associated with is instantly debited the amount signed for. There are no balances put on accounts to be paid later and, usually, the transactions are recorded and taken on the same day as the card was used. Most banks and building society accounts will issue these. Money can be withdrawn using a PIN number from a cahspoint (ATM) or often by using ‘cashback’ when making a purchase on the card.

Visa and Mastercard

Visa and Mastercard are separate schemes which work in a similar way. Most banks subscribe to one or the other of these schemes. Broadly, the transactions involving Visa and Mastercard will debit the account in a similar way to the debit card but the timescale can be longer. Visa and Mastercard can also be used in many different countries and at millions of outlets throughout the world. Money can be withdrawn from cash machines using Visa and Mastercard, so long as they are used with a PIN number. Visa and Mastercard also and mainly operate as credit cards do, in the way described above. Various cards have differences in the way that they can be used. Features include:
  • Card limit (the amount that can be put against the account).
  • Card perks associated with higher spending.
  • Different rates of interest.
  • Card Protection – ability to protect the card-holder from paying if there is damage to the goods purchased on the account, as a form of insurance.
There are different levels of card from standard to gold, to platinum. The types of cards are usually associated with higher levels of spend or status. The status is usually closely linked to the earning power of the card-holder. The higher your earnings, the better status/ higher limit card you may have. Credit and Debit cards are all currently moving over to the CHIP and PIN system. A small chip on the card replaces the need to sign for purchases. When the card is used, it is inserted into a machine where the chip is read and a personal pin number is typed in by the user. This adds security to the cardholder as the card cannot be used unless the pin number is known and eliminates the problem of forged signatures.

Credit and other card links