Join us in looking at the most used payment method of today and learn something new about what you carry in your wallet every day.
Payment card
Payment cards are the most widely used payment method today (source: pixabay.com)
Payment cards, one of the most important payment methods today, are probably used daily by most of us, and if not directly a payment card, then probably one of its alternatives, such as paying with a mobile phone or smart watch. In this article, however, we will look at what a payment card is, a brief history, the largest card issuers, some alternatives to payment cards, and much more.
What is a payment card?
Payment cards are so popular nowadays that you probably all know them, but if anyone still doesn’t, let’s take a brief look at what payment cards are. Payment cards are a financial tool created for cashless payments. Today, you can pay with them almost anywhere, both online and in brick-and-mortar stores. Payment cards are most commonly issued by banks, both to individuals and sometimes to legal entities. More often, however, they are issued to regular users and the cards are then linked to personal accounts. Thus, cards allow not only payments but also cash withdrawals from ATMs. Not all payment cards are the same, and there are two possible types. You have probably heard both names at some point in your life. These are debit and credit payment cards. However, there are fewer people who can explain the difference and correctly remember which is which, so let’s take a look at both types.
Debit card
The first type of payment card is the debit card. This card allows users to access their own funds stored in the associated bank account. This means that when you pay with a debit card, the amount paid to the merchant is immediately deducted from your account. This type of payment card is much more popular and common in the Czech Republic. There are 12 million such cards in the Czech Republic.
Credit card
Credit cards are much less popular in our country compared to debit cards, as evidenced by the number of 1.5 million issued cards, which is about 10 times less. But what is the reason for the lower popularity? And what are credit cards anyway? These cards look and work the same as debit cards, but the difference comes at the moment of money deduction. Credit cards provide you with the opportunity to borrow money from your bank or another financial institution up to a certain limit that you choose yourself. Essentially, credit cards function as short-term loans. You must then repay the money to the bank, often with a certain interest, but there is usually an interest-free period set by the bank, within which if you repay the money, you do not overpay. Credit cards are popular due to their flexibility during shopping and the possibility of deferred payment. However, with credit cards, the effect of payment cards deepens, where people often do not realize the amount of money spent and can eventually end up with high debt at the end of the month. For the issuance of credit cards, banks often verify the user’s ability to repay the subsequent loan (known as credit scoring). This score includes many characteristics of the holder, primarily assessing the regularity and amount of income.
How does a payment card work?
We have described above how payment cards worked in the past, but how do they actually work today? All payment cards, both debit and credit, have a built-in chip that contains the card information. Most of today’s cards already work contactlessly, so you just need to hold them to the terminal when paying and you no longer need to insert them inside. The whole process can be divided into three steps and looks as follows. When you hold the card, it electronically transmits the card information to the terminal. This step is called Authorization, where the merchant’s bank sends a payment authorization request to the payment card issuer, most commonly Mastercard or Visa, and then sends the request to your bank. The bank checks the validity of the card, the availability of funds, or in the case of a credit card, the credit limit, and if everything is in order, approves the transaction. The next step is Clearing. After transaction authorization, funds are transferred from the cardholder’s account to the merchant’s account. This entire process takes place online and is completed within a few seconds. The final step is Settlement. The payment is recorded in your account as outgoing and credited to the merchant’s account within 10 days at the latest. Each card user also receives a four-digit code, which they must or do not have to enter for each payment according to their preferences. However, it is usually set on the cards that payments up to €20 are made without the need to enter a PIN code. Payments on the internet with a credit card work similarly to those in brick-and-mortar stores. Unfortunately, however, no one usually has a payment terminal at home, so when paying, you have to fill in all the information that the chip on the card transmits during offline payment. The information required for online payment is: cardholder’s name, card number, card validity and CVC code, which is on the back of the payment card. Therefore, never send photos of your payment card to anyone, even if you cross out important information on it in Paint.
History of payment cards
The emergence of payment cards as a cashless payment option has completely changed the financial world. They contributed to greater security by eliminating the need to carry large amounts of cash and reducing the risk of robbery and losing all your money. They also protected your money from ordinary situations such as rain, which does not damage the card but destroys the money. They also brought us much greater convenience, as payment cards are much more compact and payments are faster with them. But have you ever thought about how long payment cards have been with us? And who actually invented them? And where were they first used? And when did they start to be widely used in our country? The entire history of payment cards as we know them today began in the United States of America, specifically at the end of the 19th century. And it all started with a simple idea of how to change so-called buying on credit to an official payment method. Merchants began stamping metal tags with payer information, these details were copied during payment, and the payer’s signature was added. The first payment card in the world was issued in 1914 by the Western Union Telegraph Company, which offered it free of charge to its regular customers. The reason was to retain its regular customers and motivate them to spend more frequently by providing payment convenience. At the end of the month, the company simply sent an invoice to the customer, who then paid it by check or bank transfer. These loyalty cards started gaining popularity, sparking a competitive battle. An interesting innovation was introduced by today’s Mobil Oil. It allowed cashless payments for refueling and purchasing spare parts throughout its network in the USA, thanks to its cards. The principle remained simple until today, with a single major difference. The customer had to sign for each payment. The merchant checked the card information, whether the signature matched the sample signature, and then checked the list of blocked cards. However, all cards were linked only for use within a particular merchant’s network. Universal payment cards were introduced by Diners Club, International in 1950. Its founders came up with the idea of a universal card after inviting their wealthy friends to a restaurant but did not have enough cash to pay. The 1970s were also interesting, with the emergence of today’s giants VISA and MasterCard. The cashless payment system reached Europe in 1966. When were payment cards first accepted in our Czech Republic? The first payment card transactions were accepted in the Czech Republic during socialism in 1968 when the travel agency Čedok made it possible. Čedok began accepting cards from Diners Club in its network of branches, hotels, and Tuzex stores. However, only foreign cards were accepted, and no one in the then Czechoslovak Socialist Republic could get such a card. The cards that people could obtain were issued in 1988 and were again only for shopping in Tuzex. In the 1990s, Česká spořitelna had a monopoly on payment cards in our country, but the entire network operated offline and only for ATM withdrawals.
Who are the largest issuers of payment cards?
The largest issuer of payment cards worldwide is VISA. VISA issues a variety of card types, including VISA Electron, Gold, and Platinum. Electron cards are basic debit cards for everyday shopping, and the customer cannot spend more money than they have in their account. This card often serves as the first card for young people or people with lower incomes. Gold is a credit card that provides a higher credit limit and benefits such as discounts at selected merchants or the possibility of travel insurance. Platinum is a premium card with the highest possible limit and exclusive benefits such as premium travel services, access to VIP lounges, and much more. Payment cards issued by Mastercard are also very common. Mastercard is the second largest issuer. Other global issuers are American Express or Amex, Discover, and UnionPay. These cards have the widest coverage worldwide, and customers can pay with them almost anywhere in the world.
Where can payment cards be used?
As we have written several times above, payment cards are one of the most used payment methods today. Popularity and the number of places where you can use card payments went hand in hand. Today, you can pay by card in almost all restaurants, bars, grocery stores, and even online merchants, who prefer online payments and some even do not accept other payments than card payments.
Online bookmakers and casinos that accept payment cards
Finding a bookmaker or an online casino where you cannot top up your account using a payment card is an impossible task today. Most modern companies now accept a wide range of payment methods such as e-wallets, bank transfers, cryptocurrencies, and payment cards are primarily found among established giants.
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How to pay with a payment card for online betting?
Paying with payment cards at online casinos and bookmakers works exactly the same as any other online purchases you may have made before. As described above in the article, Visa, MasterCard, and cards from other major issuers are accepted by almost all online bookmakers and casinos. Not sure how to make a card payment? No problem! Here is a simple guide.
- Go to the website of the company where you wish to bet.
- When paying, select payment card as the payment method.
- Enter the amount you want to deposit.
- Select your bank, where you have a bank account. (In most cases, it is selected automatically after entering your payment card details.)
- Log in to your online banking.
- Confirm in your online banking.
- The payment was successful.
How to withdraw cash from a payment card
Thanks to a very extensive network of ATMs, withdrawing cash with your payment card is very simple and available almost around every corner. The only thing you should be aware of when withdrawing from ATMs is whether it is an ATM of your bank. Some banks charge fees for withdrawals from ATMs of competing banking institutions, and often these are not small amounts. In the Czech Republic, for example, Raiffeisenbank offers free withdrawals from all ATMs, even those of other banks.
Security and payment card
By following a few security rules for handling your payment card, it is a very secure payment method, monitored by several institutions. Today, higher security is contributed by something some people might fear: online banking. Online banking provides us with several tools to increase our security. One of them is the quick blocking of your payment card in case of its loss, where after realizing you have really lost your card, you can block it within minutes. Some banks offer free card blocking, so it is better to block the card than to lose your funds. Let’s go through a few rules you must follow to keep your finances safe.
- Never share your PIN code: Under no circumstances share your PIN code or other payment card information with others. All information should be your personal secret.
- Be careful when shopping online: Pay with a payment card online only at merchants that offer secure payments. Such payments can be identified by a lock in the address bar of the browser. Always make sure the website you are shopping on is secure. It is always good to check reviews of the website, elsewhere than on the merchant’s website itself.
- Check: Regularly check your bank account statements. If you notice any suspicious transactions, immediately contact your bank.
- Be cautious in public places: When entering your PIN in public places, such as ATMs or stores, make sure no one is watching you enter the code. Always cover your hand with the other hand just in case.
- Update your bank’s contact information: Make sure your bank has up-to-date contact information so they can quickly contact you in case of any suspicious activity on your account.
- Beware of suspicious emails or SMS messages: Never respond to emails or messages asking for personal information or payment card details. Banks never request such information via email or SMS. Similarly, be cautious with emails containing dubious links. Always check if the email address matches what your bank provides on their website.
- Two-factor authentication: Banks often offer two-factor authentication, which secures your online payments by requiring verification via SMS or in your online banking.
Fees for using a payment card
Fees for using a payment card vary greatly depending on which bank you use. Here we will show the fees for card payments and the most common ones. Fee for the payment itself is almost non-existent in our country for any bank, but some may charge a fee for payments below a certain amount (e.g., 20 CZK). More commonly, however, there is a fee for payment or cash withdrawal abroad. You do not have to pay these fees if you have a card from Česká spořitelna, which offers free withdrawals from Erste Group ATMs (found in 7 European countries). Other fees that may occur with payment cards include card maintenance fees, reissuing a blocked card, cash withdrawal, currency exchange, card statement, and even for changing the PIN code.
Payment card limits
One of the limitations of payment cards is that from time to time you will still find a restaurant or bar that does not support card payments. You will need to resolve the payment by withdrawing cash from the nearest ATM. The limits you may encounter when making payments are single payment limits, weekly limits, online payment limits, cash withdrawal limits, and a combination of some of these limits. Most of today’s banks support online banking, where you can individually set all these limits according to your needs.
Alternatives to payment cards
To pay cashlessly, you no longer need to use only your payment card; there are many even more convenient options. You can upload your payment card to your smartphone or watch. For phones, it doesn’t even matter what operating system you have; today, mobile payment is available on both Android and iOS. Uploading a payment card to your phone is a very simple process, and you can find instructions on how to do it in the next section.
Payment card in your phone
The basic requirement for paying with your phone as you would with your payment card is to have a smartphone with an NFC chip. The NFC chip allows the transmission of information that your payment card usually transmits. If your smartphone is equipped with this chip, you should be able to use it for payment. Here is the instruction on how to do it.
- Open the Payment App
On most new smartphones, you will find a pre-installed payment app, such as Apple Pay on iPhones, Google Pay on Android devices, or Samsung Pay on Samsung devices. Now you can also use mobile payment on Huawei devices, where the function was long missing due to sanctions. It is now provided by the Curve pay service on Huawei devices. If your device does not have a pre-installed payment app, download it from the app store.
- Add Your Payment Card
In the app, select the option to add or upload a new card. You can enter the card details manually or use the phone’s camera to scan the card, which will automatically fill in the details.
- Card Verification
After entering the card details, verification from your bank or card issuer will probably be required. This may include entering a special code sent via email, SMS, or confirmation in your online banking. Card verification differs for each bank.
- Set as Default Card
If you want to use multiple different cards, you will need to set your chosen payment card as the default payment method in your app.
- Using Your Phone for Payments
After successfully uploading and verifying the card, you can use your phone for contactless payments. To make a payment, simply hold your phone to the terminal supporting contactless payments. There are slight differences between Android and iOS platforms. For Android devices, the phone just needs to be unlocked. iOS requires verification via FaceID or TouchID, depending on the device you are using.
Security Warning
If you decide to upload your payment card to your phone, always keep the phone secured with a PIN code, face recognition, or fingerprint. Never leave your device unlocked and unattended to prevent misuse. Most phones do not have a set limit that you might know from payment cards, where payments over €20 require entering the card PIN.
Advantages and disadvantages
Advantages
- Convenience – paying by card is very simple, just hold it to the terminal and you have paid.
- Speed – the payment is completed within a few seconds.
- Security
- Greater overview – all transactions are automatically recorded and you can easily view them in online banking or request a payment statement.
- Compactness – the card guarantees access to all your finances in your account and fits in your wallet.
Disadvantages
- Easy payment – why is easy payment a disadvantage? You probably thought of this question. The answer is simple. There are people who claim that due to the simplicity of payments, they do not realize it is real money and therefore spend much more.
- Limitations – unfortunately, there are still places today that do not support card payments.
- Security – if someone unauthorized gets hold of your wallet, you can lose a larger amount of money than with a lost wallet.
Cards for significant clients
The largest issuers of payment cards in the world have started issuing specially tailored payment cards for their most significant clients who spend the largest capital. Initially, in the Czech Republic, these exceptional cards were given primarily to banks such as Sberbank. VISA created a special payment card for Sberbank made of 24-carat gold, set with 26 diamonds.Rating
Rating payment cards today is very difficult because they have become an indispensable part of our society, and almost no one can avoid using them during their life. However, it is not a flawless payment method, and one of the major disadvantages is that payment cards are not the most anonymous method, as they are often registered in your name. Therefore, the merchant can see your name. If anonymity of your payments is an important factor for you, we recommend using e-wallets, reviews of some of which can be found on our website. On the other hand, payment cards bring us unparalleled convenience for both online and in-store payments. They have given us greater freedom in that we no longer necessarily need to carry cash and can buy anything, anytime, even for larger amounts, using just a plastic card in our pocket. Another advantage of payment cards is that if we always carry them with us, we will never face the same embarrassment as the founders of Diners Club, which led to the creation of payment cards.Frequently asked questions
1️⃣ How to upload a payment card to a phone?
Paying with a mobile phone or smartwatch is becoming increasingly popular today. The only thing necessary for such payments is to have a payment card and a smartphone with NFC support. The process of how to upload the card to the phone is very simple and can be found above in the article.2️⃣ How to block a payment card?
You can block a payment card in several ways. The simplest way is to block the card using your bank’s online banking. Another way is to block the card by calling a special hotline set up for these purposes by your bank. Remember, you must call from the number listed in your bank profile. If you cannot use the previous options to block your card, your last resort is to visit your bank’s nearest branch and block the card there.3️⃣ What information do I need to enter when paying by card online?
If you have decided to pay online using your payment card and are not using Apple Pay or GPay, you will need to manually enter your card information. This information includes your card number (the long number on the front), the card’s validity (expiry date), the cardholder’s name, and the security code from the back (CVV/CVC – this is a three-digit code).Don’t miss:
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