Do you already know
how debit, credit and prepaid cards differ, and all the uses you can give them?
This article has all the information so that you can decide which ones are the
most convenient for your business.
It is practically
impossible to imagine modern life without cards. Whether they are the classic
credit and debit cards that you use on the posnet, the prepaid and benefit
options, or even the virtual cards that you can use directly on your computer
or cell phone. Payment methods are renewed at all times and with new types of
cards, technologies and business models.
Due to these various
options that exist today, it is common to wonder correctly what are the
differences between them, and that is what we are going to show you in this
article! Just keep reading to understand what are the main types of cards
offered by banks and financial institutions, going through how each one works
and their differences.
The types of cards offered in the
market
Whether through banks,
fintechs and other companies authorized as financial institutions, there are
three main types of cards:
●
Credit;
●
debit;
● Prepaid (including
benefit cards)
Virtual, physical, corporate,
benefits... How is all this divided?
Although the three
main modalities (credit, debit and prepaid) are the basis of the card market,
each business model can offer different interesting possibilities for those who
want to offer their own cards to their customers.
The cards used as a
means of payment can be separated in various ways, such as according to their specifications:
For the use environment:
●
Physical cards: The famous cards that you use
to buy in physical establishments, but that can also be used for online
purchases;
● Virtual cards: They
are used only in the digital environment. That is, they are for online
purchases. Some institutions that offer it even allow the end customer to
delete and create a new virtual card whenever they want for security reasons.
By scope:
●
National: They are those cards with more
limited use: with coverage only in the national territory;
● International: They
can be used outside the national territory and usually offer higher limits, in
the case of credit cards, and advantages for frequent consumers;
By type of client:
●
Physical person card: Those issued by a bank,
fintech or payment company, financing the expenses of any person;
●
Corporate card: It is the one linked to the
bank accounts of a company, entity or body in the public service that employees
use for work purposes;
● Benefits: Banks and
finance companies also issue cards such as food stamps, meals, and other
benefits, which are generally prepaid and flagged (such as Visa or Mastercard).
In the case of issuers
that are not originally banks, the popularization of banking as a service has
made the figure of the white label increasingly common, that is, the card with
a flag, personalized and used mainly by fintechs and companies that offer
products financial and digital accounts to customers and associates.
What is the difference between debit
and credit?
“Credit or debit?” The
best-known card types on the market have in common:
●
The fact that they use the infrastructure and
services of the flags to be accepted anywhere;
●
The possibility of being national or
international; virtual or physical; and they also serve different uses, such as
individuals or corporations.
● Other than that, what
remains are clear differences in the business model of each.
How the debit card works
The debit card is the
main modality used among the cards at the regional level, and it is not in
vain. It works as a substitute for cash, since what you buy with this card is
debited directly from the checking account to which it is associated. You paid,
it was discounted!
With the debit card,
you can also use ATMs to make withdrawals, deposits, transfers and payments
from the account holder, among other things. In the event of a lack of funds, a
purchase may be declined or lead the cardholder to the bank's overdraft (if
enabled).
How the credit card works
For many it is
obvious, but it is worth specifying. The credit card allows you to buy (or
withdraw securities) today, and pay after the closing of your summary, which is
usually one month. Despite the convenience, in many cases it is accompanied by
the payment of an annuity for the services, depending on who is the issuer, or
commissions.
The credit card works
like a loan, based on the pre-established credit limit, according to details
such as the trustworthiness of the client as a payer, as well as the good
relationship with the issuing bank. With credit, there is an incidence of
interest on purchases in installments, on the overdraft and on any delay in
paying the invoice. On the other hand, consumers who spend more on credit often
have privileged access to benefit programs such as miles, VIP services and
discounts.
What is a prepaid card?
With a similar
operation to the debit card, the prepaid card is used by discounting
what you consume at the moment. However, the big difference is that it has a
predetermined balance type when you load the prepaid balance of the cell phone
or the transport card.
Prepaid cards tend to
have some more common uses, where what you load from the balance is what you
can consume:
●
International travel cards, in which you load
dollars, euros or the currency that you are going to use in a particular
country;
●
Cards that function as a "monthly
allowance" from parents to children, with control of the values given;
●
Alternative to debit/credit cards without
having a bank behind.
● The benefits cards
provided by the companies also act as prepaid, even if both use the usual
credit card networks, such as Mastercard and Visa. In your case, they are often
also enabled to use in the credit function, even if the value of it is
discounted like a debit card. This also allows them to be used for online
purchases and services.
Issuing your own cards is already a
reality for any company
In recent years,
technology has evolved very quickly, and today any company can offer its own
cards. All this thanks to the technological solutions associated with the
embedded finance model and the so-called banking as a service.
In other words, those
who want to issue cards, whether national or
international, physical or virtual, physical or corporate persons, can simply
join a technological partner for this or develop them internally, with their
own team. Understanding which of the two solutions is the best for your
business model and structure is essential. With all this, you can act as a
fintech, quickly offering your own cards, bank accounts and other financial
services such as credit and loans.
This revolution in the
market brings many possibilities, and not only the convenience of eliminating intermediaries
(such as banks, which previously had to be used to pay suppliers, employees or
customers). Some of the advantages of having your own financial services, for
example, include securing additional sources of income with the fees charged,
as well as being able to boost business with benefit, discount and cashback
programs, attracting, retaining and building customer loyalty. Do not miss it!