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A payment card is any card that can be used to make a payment. These cards can be in the form of a credit card, debit card, or gift card. In addition, a payment card can be a fleet card, charge card, or stored-valued card. These cards are backed by funds owned by the cardholder or his or her company or credit loaned to him or her by a financial institution. A payment card generally has a magnetic stripe on the back so that magnetic card readers can authorize payment.
Credit cards are a popular type of payment card that rely on credit to fund purchases. The money spent must be paid back in full each month, or interest will be applied to the account. Many credit card companies offer rewards for regularly using the card.
Debit cards are similar in appearance to credit cards, but draw money directly from the cardholder’s bank account. These cards do not rely on credit, so the cardholder must have enough money in the bank account to cover his or her purchases. If not, fees are usually applied to the account for overdrawing.
Gift cards are another form of payment card and one of the most frequently given gifts in multiple countries. Many gift cards resemble debit or credit cards, complete with a magnetic stripe that can be used with card readers. These payment cards normally have a set amount of money on them that was applied by the original owner at the time of purchase.
Fleet cards are primarily used to purchase fuel for fleet vehicles. This type of payment card gives detailed reports of when and where the card was used to prevent and catch fraudulent activities. The use of the card can also be restricted to certain times of the day or week.
Another type of payment card is a charge card, which is frequently confused with a credit card. Unlike credit cards, charge cards often have no spending limit, but they must be paid in full each month, or the cardholder will suffer severe penalties. Common penalties are high interest rates and a spending limit being placed on the card.
Lastly, a stored-valued card is very different from other types of payment cards. The term refers to cards that have a monetary value, but the information is not stored in an external account. Gift cards, prepaid calling cards, and prepaid gaming cards are often stored-valued cards. Unlike other payment cards, this type of card is usually not replaceable or refundable if it is lost or stolen.