Types of Credit Cards
In the previous section, Mr. B showed you what are the main features of a credit card, we also said that you have to be very careful not to send the information contained in a credit card into the hands of malicious strangers (loss and cloning).
Main types of Credit Cards
Now Mr. B shows you the differences between a credit card and other types of cards.
Credit Cards, Debit Cards or Bancomat Cards?
The credit card is different from a payment card, where it is required that the debt is always fully repaid at the end of each month.
In contrast, credit cards allow consumers a continuous balance of debts, always taking into account the established interest.
The credit card differs from an ATM, which can be used to withdraw cash but without the possibility of debit from the cardholder.
The credit card is different from a payment card: a credit card generally involves a third-party entity that pays the seller and is reimbursed by the buyer, while a payment card simply defer the payment by the buyer on a date to be decided.
The credit card holder can pay a single payment or in installments by repaying the debt.
In the second case, repayment by installments, a credit relationship is established between the cardholder and the card issuer. The credit card is ultimately not a credit card and is not a legitimacy document, since the supplier is obliged to ascertain the identity of the card holder.
Many credit cards have a dual function: they can be used both for payments in a solution and for payments by installment.
The customer chooses whether to pay the total balance each month (without interest), or to repay the payment in installments with an annual APR.
It is good to remember that all credit cards are characterized by a monthly maximum debt exposure. In fact, when using a credit card, the cardholder cannot exceed a certain amount called the credit line. Otherwise, the bank can revoke the installment payment and request the repayment of the sum in a few weeks, applying, in addition to interest, a maximum overdraft commission for the sum exceeding the credit limit.
Main types of credit cards
The main types of credit cards are the following:
Credit card “on balance”
The credit card is the most common credit card in Italy, generally offered and associated as an additional service when opening a current account. A credit card in balance allows the holder to defer payment of the expenses made during a short period of time (generally for a maximum of 45 days) without additional financial charges for the buyer.
The credit card with repayment in balance gives the holder the opportunity to pay all the expenses made within a calendar month, in a single payment, the following month.
The sum due is charged to the current account on the day established by the contract (usually the 1st, 5th, 10th or 15th day of the month). For example, if in January the credit card is used for a total of 500 euros (150 for withdrawals and 350 for purchases via POS), these will be charged to the current account in February on the day established by the contract.
Credit card installment (revolving)
The installment credit card is the payment instrument issued by a bank, or financial institution, which allows the payment of the purchased goods to be paid in installments.
Compared to the credit card, the debt rescheduling entails an additional cost for the cardholder due to the payment of interest on the loan, as long as the latter remains within a maximum limit, the credit line .
If the negative current account balance exceeds the credit limit, the cardholder must also pay a maximum overdraft fee.
The repayment of the debt takes place in installments, usually with the provision of a minimum installment.
Co-branded credit card
The co-branded credit card is the payment instrument in which the issuing company (bank or financial institution) agrees with a third company that facilitates the distribution of the instrument among its customers.
Usually a co-branded credit card offers additional services aimed at retaining credit card holders.
To finish our rundown on the types of credit cards you should also mention the existence of deprivation Credit cards or loyalty cards that consist of cards issued by a credit structure for the exclusive use of an industrial enterprise, or by a commercial company your customers.
Companies distribute their loyalty cards to their customers to increase their brand loyalty .
In the next section, Mr. B will show you the advantages and disadvantages of credit card interest rates on the market.