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Credit card

From Wikipedia, the free encyclopedia
   
Visa and MasterCard are two of the most prominent types of credit cards.   An example of the front in a typical credit card:
  1. Issuing Bank Logo
  2. EMV chip (only on "smart cards")
  3. Hologram
  4. Card number
  5. Card Network Logo
  6. Expiration Date
  7. Card Holder Name
  8. Contactless Chip
  An example of the reverse side of a typical credit card:
  1. Magnetic Stripe
  2. Signature Strip
  3. Card Security Code

A credit card is a payment card issued to users as a system of payment. It allows the cardholder to pay for goods and services based on the holder's promise to pay for them. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

A credit card is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. A credit card differs from a charge card also in that a credit card typically involves a third-party entity that pays the seller and is reimbursed by the buyer, whereas a charge card simply defers payment by the buyer until a later date.

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Debit card

From Wikipedia, the free encyclopedia

A debit card (also known as a bank card or check card) is a plastic payment card that provides the cardholder electronic access to his or her bank account(s) at a financial institution. Some cards may bear a stored value with which a payment is made, while most relay a message to the cardholder's bank to withdraw funds from a payer's designated bank account. The card, where accepted, can be used instead of cash when making purchases. In some cases, the primary account number is assigned exclusively for use on the Internet and there is no physical card.

In many countries, the use of debit cards has become so widespread that their volume has overtaken or entirely replaced cheques and, in some instances, cash transactions. The development of debit cards, unlike credit cards and charge cards, has generally been country specific resulting in a number of different systems around the world, which were often incompatible. Since the mid-2000s, a number of initiatives have allowed debit cards issued in one country to be used in other countries and allowed their use for internet and phone purchases.

Unlike credit and charge cards, payments using a debit card are immediately transferred from the cardholder's designated bank account, instead of them paying the money back at a later date.

Debit cards usually also allow for instant withdrawal of cash, acting as the ATM card for withdrawing cash. Merchants may also offer cashback facilities to customers, where a customer can withdraw cash along with their purchase.

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Cheque

From Wikipedia, the free encyclopedia
 
A cheque with Thomas Jefferson as payee and payor from 1809 A cheque from 1905 A cheque from 1933 A cheque sample from Canada 2006
       

A cheque (or check in American English) is a document that orders a bank to pay money from an account. The person writing the cheque, the drawer, has a transaction banking account (often called a current, cheque, chequing or checking account) where their money is held. The drawer writes the various details including the monetary amount, date, and a payee on the cheque, and signs it, ordering their bank, known as the drawee, to pay that person or company the amount of money stated.

Cheques are a type of bill of exchange and were developed as a way to make payments without the need to carry large amounts of money. While paper money evolved from promissory notes, another form of negotiable instrument, similar to cheques in that they were originally a written order to pay the given amount to whoever had it in their possession (the "bearer").

Technically, a cheque is a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specified transactional account held in the drawer's name with that institution. Both the drawer and payee may be natural persons or legal entities. Specifically, cheques are order instruments, and are not in general payable simply to the bearer (as bearer instruments are) but must be paid to the payee. In some countries, such as the US, the payee may endorse the cheque, allowing them to specify a third party to whom it should be paid.

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Current accounts

A current account is the form of transactional account found in the United Kingdom and other countries with a UK banking heritage; a current account offers various flexible payment methods to allow customers to distribute money directly to others. Most current accounts come with a cheque book and offer the facility to arrange standing orders, direct debits and payment via a debit card. Current accounts may also allow borrowing via an overdraft facility.

Lending

Current accounts have two different ways in which money can be lent: overdraft and offset mortgage.

Overdraft

In the UK, virtually all current accounts offer a pre-agreed overdraft facility the size of which is based upon affordability and credit history. This overdraft facility can be used at any time without consulting the bank and can be maintained indefinitely (subject to ad hoc reviews). Although an overdraft facility may be authorised, technically the money is repayable on demand by the bank. In reality this is a rare occurrence as the overdrafts are profitable for the bank and expensive for the customer.

Offset mortgage

An offset mortgage was a type of mortgage common in the United Kingdom used for the purchase of domestic property, the key principle is the reduction of interest charged by "offsetting" a credit balance against the mortgage debt. This can be achieved via one of two methods: either lenders provide a single account for all transactions (often referred to as a current account mortgage) or they make multiple accounts available which allow the borrowers to notionally split their money according to purpose whilst all accounts are offset each day against the mortgage debt.

Interest

In the UK some online banks offer rates as high as many savings accounts along with free banking (no charges for transactions) as institutions which offer centralised services (telephone, internet or postal based) tend to pay higher levels of interest. The same holds true for banks within the EURO currency zone.

 

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