What are the different payment card types?
Over the last years, significant steps were made to revolutionise and shift towards a more integrated retail payments market in Europe. Payment cards have become one of the fastest-growing means of payment in Europe. According to the European Central Bank (ECB), card usage has increased significantly, with 544 million payment cards issued in 2018, which represents 1.6 payment cards per European Economic Area (EEA) inhabitant. At the same time, overall card payments accounted for 46% of the total number of non-cash payments in the Euro area. The number of card transactions more than doubled with the introduction of convenient contactless payment cards in recent years replacing the majority of low-value cash transactions. Find out what are the types of payment cards and what is the difference.
Technical characteristics of payment cards
Payment cards are usually manufactured from plastic, but issuers are not limited to material type, colour, or texture. Although there are several types of payment cards with non-contactless or contactless capabilities, all cards issued have to comply with ISO/IEC 7810#ID-1 standard. Moreover, a unique number must be embossed according to ISO/IEC 7812 numbering standard with the cardholders name, expiry date, 3-digit card verification number (CVV) on the card and which must have additional security features such as 3D Secure if the card issuer enabled it. Recently Visa and Mastercard have relaxed the rules, and card number, as well as cardholder’s name, can be placed on the back of the card. Most of the recently issued payment cards have a built-in RFID chip, compliant with ISO/IEC 14443, which allows contactless purchases up to the monetary limit set by the issuer.
A credit card is a type of payment card, which is linked to a credit account with a specific credit limit established by the issuer for the cardholder. Credit cards are typically issued through local banks and credit unions. This type of payment card provides the ability to borrow funds for the sake of making a card purchase or withdraw funds through ATM as a cash advance.
The cardholder is either required to repay the full outstanding balance or a minimum amount which is set by the issuer, while interest is charged on the part of the balance not paid off by the payment due date. Credit cards remain very popular for one main reason- it provides consumers with quick access to short term liquidity needs.
Charge payment card
Unlike a credit card, charge card holders are obliged to pay the full balance outstanding each month by the payment due date set by the issuer. The charge card is a short-loan type of payment card which covers card purchases from the date of purchase to the payment due date. Although interest is not charged and there is no credit limit if the balance outstanding is not paid in full, this may lead to additional fees and penalties.
A debit card is a type of payment card which is linked to the cardholder’s bank or electronic money account. When making a purchase or cash withdrawal from ATM, rather than repaying the funds borrowed at a later date, funds are withdrawn directly from the cardholder’s account. Debit cards are the most popular payment card type in Europe.
Pre-paid debit card
A pre-paid debit card is a type of payment card which is linked to a dedicated card account balance with the issuer. Funds are withdrawn directly from dedicated card account balance, and once the balance is depleted, the card can be reloaded. Pre-paid cards are quite popular because they are not tied to a specific bank or electronic money account, and cardholder feels more secure, in case if the card credentials are compromised, as fraudsters can’t steal more than the balance on the card, which is usually quite low.
Stored- value payment card
A stored-value card is a type payment card with specific value preloaded on them. Unlike pre-paid cards, stored value cards are anonymous and funds are physically stored on the card, and not in a dedicated card account maintained by the financial institution. The funds stored on the card can be accessed by using a magnetic stripe embedded on the card, and by using radio-frequency identification (RFID).
Fleet payment card
A fleet card or commonly known as fuel card is a type of charge card which is used for purchase of fuel at a service station and can also be used to pay for other expenses such as car maintenance. Fuel cards differentiate from other payment cards by specific usage, however at the same time they provide ability for fleet managers to receive real-time reports and set limits helping to keep up to date with business related expenses.
How can PSP Lab help you?
If you wish to learn how to start issuing your own payment cards reach out to us. PSP Lab can assist you throughout the whole cycle of card issuance, from finding a principal Visa/Mastercard member, that can facilitate co-branding for you, to assist you with becoming a principal member of Visa/Mastercard.