Payment cards

Published: 1/2/2015
Payment cards are a cashless payment instrument which enables payment of goods and services and cash withdrawals.

Because they are simple to use, save time, facilitate access to funds in the accounts, are safer to use than cash and enable purchases with deferred payment, payment cards are ever more present in our lives. However, aside from the numerous advantages ascribed to payment cards, it is important to bear in mind and take care of any additional costs and potential risks that they may carry so before deciding on a payment card, you are advised to consider if you really need a payment card and what you need it for so that when deciding on a particular payment card you can be certain that it will not place unplanned and unexpected financial burden on you in the future.

Special attention should be paid to the following

When considering a decision on submitting an application for issuing a payment card, it is necessary to collect information from more issuers, and depending on the type of payment card you are interested in, you should obtain detailed information on the following:

  • all fees associated with the issuing and use of the credit card;
  • annual fee;
  • fees in the case of loss of payment card and issuing a new one;
  • fees in the case of loss of the personal identification number (PIN);
  • possibilities and fee for issuing an additional payment card;
  • security features of the payment card;
  • all possibilities offered by the specific payment card;
  • the manner and frequency of submitting bills in the case of credit cards;
  • the procedure to be followed when a credit card get stuck in an ATM;
  • the conditions for settling obligations in the case of credit cards (such as, for instance, the interest rate) and the consequences of defaulting on bills due;
  • type of exchange rate applied in international payments to cash withdrawals abroad, etc.

A payment card is a means of payment and as such should be watched carefully and used in such a way that its security is not compromised. For instance, the personal identification number (PIN) should not be carried together with the payment card or be disclosed to another person. You should also bear in mind the fact that the payment card may only be used by its owner, i.e. the person whose name it bears.

In case of loss or theft of a payment card, you should immediately notify the card issuer who will, following receipt of the notification, immediately block your payment card and prevent its further unauthorised use. The speed of notification of the payment card issuer about such events is extremely important as it diminishes the possibility of costs being incurred and reduces the amount of costs as a result of its abuse until notification of its loss or theft.

IMPORTANT: It is in your interest to follow the rules on the security of payment card use as by doing so, you spare yourself unnecessary trouble and greatly diminish potential abuse of your payment card.

Types of payment cards

Generally, there are two types of payment cards, debit and credit cards.

Debit payment card is as a rule tied to your current and/or giro account and as such enables you to make payments and withdraw cash up to the amount that you have in your account (including the amount of the permitted overdraft on your current account). This means that, when using a debit card to withdraw cash or pay for goods and services, the funds are directly charged to your account. Therefore, you are advised to inquire with the credit card issuer about the possibility of automatic notification of changes in your account (e.g. by telephone or by e-mail notification), particularly in the situation where the amount of cash withdrawn from an ATM or where some other payment made by a debit card exceeds the permitted limit and/or where larger payments have been made.

Note: A debit payment card issuer (your credit institution) probably does not charge fees if you use your debit card to withdraw cash at its ATMs, but a fee is normally charged if you use ATMs of other issuers. To avoid this type of additional costs, when opening an account, you are advised to select the credit institution that has ATM's in your neighbourhood (in the vicinity of your home or work).

Credit card is a cashless payment system instrument which may also be used to withdraw cash at ATMs, but its main feature is that it enables purchase of goods and services with deferred payment. Credit cards are a widely used payment instrument accepted for payment at many points of sale in the country and abroad and have been increasingly used lately for Internet payments. A credit card is issued to a creditworthy consumer whose creditworthiness is assessed by card issuer. When issuing a credit card, the fees most commonly charged are the entry fee and annual membership fee. The terms and conditions applying to individual credit cards may differ substantially, so it is necessary to pay particular attention to the amount and type of interest charged when using the card, the method of interest calculation, the amount of annual fee and the terms and conditions in regard to payment of bills and the consequences which you may have to bear in case of failure to pay a bill on time.

Revolving credit card is card with a pre-approved personal credit limit (revolving facility), with the user of such card deciding on his/her own on the amount of loan used and the manner and the dynamics of its repayment. The issuer of a revolving card determines, among other things, the minimum percentage of the amount of loan used which has to be paid monthly as well as the interest on the amount used. However, before deciding on a credit card with such features, it is necessary to inquire about and get acquainted in detail with the terms and conditions of use and repayment of the amounts used and in particular with the consequences of failure to comply with the agreed terms and conditions.

The advantages of using a credit card:

  • they are simple and easy to use;
  • you do not have to carry cash with you;
  • give you the possibility to purchase goods and services with deferred payment;
  • you get a receipt on each purchase made so you can keep records of your costs; and
  • you are offered additional benefits such as air miles, etc.;

Disadvantages:

  • there are certain costs associated with the use of credit cards (entry fee, membership fee, interest, commissions, etc.);
  • the prices of some products may be higher when paying with a credit card; and
  • unless you keep records about how much you spend, you will probably get in a situation where you do not have sufficient funds to pay your due bills.
IMPORTANT: The best way to making full use of the advantages and avoid the disadvantages of credit card use is to make a good assessment of your financial possibilities in relation to your wishes and needs. After you decide how to use your credit card, it is important that you understand all its features so that you can manage your costs responsibly.

Usual safety warnings relating to the keeping and use of credit cards

In daily use:

  • sign your name on the back of the card;
  • do not keep your personal identification number (PIN) together with the card and do not keep it in your mobile phone;
  • keep your card in a safe place;
  • do not keep all your cards together; and
  • regularly check your payment card bills and report any suspicious or possibly suspicious unauthorised transaction to the issuer.

When making a purchase or withdrawing cash at an ATM:

  • when handing your card to the trader to pay for goods or services, make sure that you see your card all the time and that it has been returned to you after the transaction has been made;keep a receipt on each transaction made;
  • take a copy of the bill paid by credit card and check if you have been charged the right amount;
  • check if there is anything suspicious about the ATM from which you decide to withdraw cash;
  • check if there is someone watching you; and
  • when entering a PIN, protect the keyboard from view with your free hand.

When paying by using touchless technology (if your card has this functionality):

  • you must know where your card is at all times;
  • carry your cards in an inside pocket of your jacket or bag and not in your trouser pocket from where it is easier for someone to take it out and abuse it later;
  • regularly monitor and check the transactions made.

When paying on the Internet:

  • be particularly cautious in cases of very large discounts or particularly attractive online offers;
  • always read the text written in small print and make sure you pay attention to the text next to the boxes already marked as pre-approved;
  • do not respond to e-mail messages where someone asks for your account number, credit card number or date of its expiry;
  • keep records of the transactions made and do not keep information on the credit card and PIN in your computer unless you have protected it with a password known only to you; and
  • use your safe Internet search engines and avoid making transactions by publicly available computers.

In case of credit card loss or theft or if you suspect that someone knows your PIN or if your card gets stuck in an ATM, immediately contact your card issuer or ATM owner.

Destroy immediately the cards that you no longer use or which have expired by cutting them up with scissors.

Prepaid card

A prepaid card looks very similar to debit and credit cards and also enables cashless payments. However, unlike credit cards, prepaid cards may not be used for deferred payment purchases and unlike debit cards, this type of payment card is not linked to your account in a credit institution. 

To use a prepaid card, one first has to load a certain amount of money onto it. Once loaded, the card can be used for purchases until empty, i.e. until your card balance falls to zero. Some prepaid cards may be reloaded so that you can continue using them and some do not allow for this option (e.g. gift cards).

Given that different prepaid cards are issued for different purposes and that they have various functionalities, you are advised to get yourself acquainted with their terms and conditions and the possibilities they offer so that you can select the one best suited to your needs and avoid unexpected and unnecessary costs.