Plastic Cards

Plastic cards are one of the most popular forms of payment. They provide a handy alternative to cash and cheques and allow the cardholder to pay for goods and services virtually anywhere in the world, easily and conveniently.

Debit cards
Debit cards are often preferred to a large amount of cash as they are easier to carry. They are very widely accepted and can be cancelled quickly if they are lost or stolen.

You will generally be issued with a debit card with your bank or building society current account. You must usually be 16 or 18 years old to get a debit card.

When you use a debit card, the money that you spend is taken directly from your bank account. As long as you have enough money in your account, you can use your debit card to buy things in person, over the phone, by mail order and over the internet.

You can also use a debit card to:

  • withdraw money from your bank account using a cash machine or ATM;
  • guarantee your cheques (if the Cheque Guarantee Card Scheme logo is shown on the reverse of the card); and
  • get up to £50 cashback at a checkout, if this service is offered.
Depending on the type of bank account it is issued from, you may have one of four types of debit card: Maestro; Visa Electron; Solo; or Visa Debit. The services provided by these are very similar however, there are some differences.

The main difference is that, with a Solo or Electron debit card, the balance in your account is checked before each transaction, so if there is not enough money you will not be able to pay or withdraw cash with the debit card without prior agreement. If you have a Maestro or Visa Debit card, your account balance will not necessarily be checked and the payment may still go through.

If you use your card in a cash machine or in a shop you will have to input your PIN number. A PIN number should never be disclosed to any third parties.

Credit cards
A credit card allows you to pay for goods and services using credit, up to a limit agreed with your card issuer. You have to pay back what you borrow, and the costs and terms and conditions will vary from card to card.

Most credit cards give you a certain period of interest-free borrowing for purchases, so long as the bill is paid in full every month by the payment due date.

When you apply for a credit card the bank or card provider will undertake a credit assessment. This is an evaluation of your creditworthiness. You must be at least 18 to apply for a credit card, and some companies’ minimum age for one is 21.

You can use a credit card to set up a continuous payment authority, to allow a business to charge your card regularly, for example for a gym membership or a magazine subscription. This is different from setting up a direct debit on your current account because banks and businesses that belong to the direct debit scheme must follow a certain set of rules. That scheme gives you a Direct Debit Guarantee, by which your bank guarantees to refund your account immediately if anything goes wrong. There is no common scheme or set of rules for continuous payment authorities on credit cards and the Direct Debit Guarantee does not apply, so it is important that you check out a business before you give them authority to charge your credit card.

If you want to stop a continuous payment authority at any time, you must contact the business that has your authority. It is best to do this in writing, and to keep a copy in case they dispute this later. You should also write to your credit card company to tell them that you have cancelled the authority.

Store cards
Store cards are available from some large high street chains or groups. You must be at least 18 years old to apply for a store card. They are similar to credit cards in that you will have to undergo a credit assessment when you apply for one.

Unlike credit cards, you can only use store cards to pay for things within that chain or group of stores.

Be aware that the APR on store cards is often much higher than on other forms of payment, so make sure that you can afford to repay any purchases you make.

Charge cards
Charge cards are similar to credit cards in that you can pay for goods and services using credit. With a charge card you must pay off your balance in full at the end of each month.

You do not pay interest on any money you borrow on a charge card, but you will probably have to pay an annual fee. You must be at least 18 to apply for a charge card.

Charge cards often have no spending limit, and may also come with discount or reward schemes and other perks, like concierge services, travel insurance or breakdown cover. Many businesses use charge cards instead of company credit cards.

As you must pay off the balance on a charge card in full each month, they are not suitable for borrowing over a longer period. If you do not pay off your balance in full, you will have to pay late payment charges.

It can be quite difficult to obtain a charge card, as you often need to have a certain minimum salary and a very good credit rating. They are also not as widely accepted as credit cards.

Prepaid cards
Prepaid cards are growing in popularity, for example, as a replacement for paper-form gift vouchers which can then be used at a particular chain or group of stores.

Some prepaid cards are now scheme badged (Visa or MasterCard), which means that they can be used wherever Visa or MasterCard cards are accepted. They can sometimes also be used at cash machines.

You can add value to prepaid cards in several ways: in one of the stores that issued the card; online; by topping up by using your mobile phone; at a Post Office or using a Paypoint machine with cash, a card or (sometimes) a cheque; or (less commonly) by bank transfer.

When you use a prepaid card to pay for something, the amount is taken off the balance on the card. This means that you can only spend up to the amount available on the card and cannot get into debt.

Scheme-badged prepaid cards can be useful if you do not have a debit or credit card but want the convenience of paying for things with a card, or need to buy things from stores that only accept cards, e.g. online or mail order.

One of the main advantages of prepaid cards is that they can be cancelled and replaced for a small fee if they are lost or stolen, which makes them safer than carrying cash. You can also load the prepaid card over the phone or online (by quoting your debit or credit card details), so you do not have to put all your holiday money on to the card before travelling. Also, as they are not linked to your bank account, you will be protected against fraud.
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