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Credit Card

Payment using credit card is one of most common mode of electronic payment. Credit card is small plastic card with a unique number attached with an account. It has also a magnetic strip embedded in it which is used to read credit card via card readers. When a customer purchases a product via credit card, credit card issuer bank pays on behalf of the customer and customer has a certain time period after which he/she can pay the credit card bill. It is usually credit card monthly payment cycle. Following are the actors in the credit card system.

  • The card holder − Customer
  • The merchant − seller of product who can accept credit card payments.
  • The card issuer bank − card holder's bank
  • The acquirer bank − the merchant's bank
  • The card brand − for example , visa or Mastercard.

Credit Card Payment Proces

Step 1Bank issues and activates a credit card to the customer on his/her request.
Step 2The customer presents the credit card information to the merchant site or to the merchant from whom he/she wants to purchase a product/service.
Step 3Merchant validates the customer's identity by asking for approval from the card brand company.
Step 4Card brand company authenticates the credit card and pays the transaction by credit. Merchant keeps the sales slip.
Step 5Merchant submits the sales slip to acquirer banks and gets the service charges paid to him/her.
Step 6Acquirer bank requests the card brand company to clear the credit amount and gets the payment.
Step 6Now the card brand company asks to clear the amount from the issuer bank and the amount gets transferred to the card brand company.

Debit Card

Debit card, like credit card, is a small plastic card with a unique number mapped with the bank account number. It is required to have a bank account before getting a debit card from the bank. The major difference between a debit card and a credit card is that in case of payment through debit card, the amount gets deducted from the card's bank account immediately and there should be sufficient balance in the bank account for the transaction to get completed; whereas in case of a credit card transaction, there is no such compulsion.

Debit cards free the customer to carry cash and cheques. Even merchants accept a debit card readily. Having a restriction on the amount that can be withdrawn in a day using a debit card helps the customer to keep a check on his/her spending.