ITTIHAD UNIVERSITY

COLLEGE OF MANAGEMENT AND INFORMATION SYSTEMS

Student Name: Zubaidah Abdul Rehman Al Din

Student ID: 20042080
Course: E-Commerce
Voluntary Participation

Credit and Debit Card differentiation

Terms and Definitions

A credit card system is a type of retail transaction settlement and

credit system, named after the small plastic card issued to users of
the system. A credit card is different from a debit card in that it does
not remove money from the users' account after every transaction. In
the case of credit cards, the issuer lends money to the consumer (or
the user). It is also different from a charge card (though this name is sometimes used by
the public to describe credit cards), which requires the balance to be paid in full each
month. In contrast, a credit card allows the consumer to 'revolve' their balance, at the
cost of having interest charged. Most credit cards are the same shape and size, as
specified by the ISO 7810 standard.
A debit card is a plastic card which provides an alternative payment method to cash
when making purchases. Physically the card is an ISO 7810 card like a credit card,
however its functionality is more similar to writing a check as the funds are withdrawn
directly from the cardholder's bank account; some cards are referred to as check cards.
The majority of our customers have discovered the convenience and benefits of using this
card as a debit card when making purchases at the grocery store, restaurants, gas
stations, clothing stores, etc. The difference between a debit card and a credit card is that
when you use a debit card, the money comes directly out of your checking account. It’s
like writing a check – only much easier and quicker.

Page 1 of 9
ITTIHAD UNIVERSITY
COLLEGE OF MANAGEMENT AND INFORMATION SYSTEMS

Student Name: Zubaidah Abdul Rehman Al Din

Student ID: 20042080
Course: E-Commerce
Voluntary Participation

Advantages

Credit Card:
 If you have an unexpected, large purchase, credit allows you to buy it
instantly and settle up later.
 Though you end up paying more, it enables you to spread the cost of
expensive purchases, like computers.
 If you shop around for a low-interest rate, this needn't be too costly.
 If you use your credit card cleverly, you can make a purchase and get up
to certain duration of days interest-free credit before settling the bill in full.
 Some credit card policies offer you the chance to insure items you
purchase with your card:
o If you buy something that turns out be faulty and then find that the shop won't help you,
you can make a claim against the credit company.
 In “credit,” you will sign a receipt instead of using your PIN. Banks suggests considering using the
“credit” option to avoid having your PIN stolen by someone watching as you key it in at the point
of sale.
 Even when you use the “credit” option when using this card, it is not a credit transaction; it will still
come directly out of your checking account.
 Every time you use a credit card, you are actually borrowing money that is made available to you
by a bank or other financial institution.
 The institution pays the debt to the vendor, and in turn, you pay the money back to the institution
with extra payment as interest. By signing up for a credit card, you agree to pay back the money
that you borrowed, in addition to any interest drawn on the amount you borrowed.

Page 2 of 9
ITTIHAD UNIVERSITY
COLLEGE OF MANAGEMENT AND INFORMATION SYSTEMS

Student Name: Zubaidah Abdul Rehman Al Din

Student ID: 20042080
Course: E-Commerce
Voluntary Participation

Advantages

 Cost effective: In comparison to credit card merchant brokers,

credit card payment processing associations offers rock bottom
prices. Thus merchants can avail the advantage of payment
processing at the cost of a very low set up fee.
 Lesser rejection: Unlike banks, it is much easier to get assistance
for setting up merchant account with credit card advantages of payment processing associations.
This is one reason why such organizations are becoming more popular with merchants.
 Better support system: Bolstering regular merchant account credit card processing services,
merchant account and payment processing service providers offer strong support system to help
merchant through every step while activating credit card processing functions.
 Hidden costs: Often service providers use gimmicks of discounted rates for selling merchant
account. It is recommended that merchants should understand all the costs involved in credit card
advantages of processing.
 Security: Security is a very important issue when it comes to payment processing. Merchants
should try to understand how safe their personal details are. This can be best judged by finding out
if they are using SSL with credit card processing for ensuring security.
 Authenticity check: It is essential to find out whether the payment processing service provider
offering merchant account is certified by Better Business Bureau or not.
 Usually issued only for current account holders.
 One final advantage of credit cards is that they are a great tool for consumers that are seeking to
establish or reestablish an attractive credit history.

Page 3 of 9
ITTIHAD UNIVERSITY
COLLEGE OF MANAGEMENT AND INFORMATION SYSTEMS

Student Name: Zubaidah Abdul Rehman Al Din

Student ID: 20042080
Course: E-Commerce
Voluntary Participation

Advantages

Debit Card:

 The money comes directly out of your checking

account.
 It’s like writing a check – only much easier and
quicker.
 Amounts are deducted from your checking
account similar to checks clearing transferring it to
the seller account.
 In “debit,” you will then be asked to key in your
Personal Identification Number (PIN), just as
you do at the ATM when you withdraw cash.
 With a debit card, you don’t have to carry cash or checks, and it is very convenient to shop at a
variety of places including gas stations, grocery stores, restaurants, and retail stores.
 They provide instant access to your money and are accepted worldwide.
 There is no amount limited in the card so purchases can be made with no apprehension.
 Debit cards are used much like credit cards, meaning that the store you are shopping at ‘swipes’
them.
 You also typically don’t have to show a picture ID.
 Purchase goods and services from any merchant who accepts VISA and get cash back.
 Use at ATM Machines to make deposits and withdrawals to and from your checking account it can
be savings or current account.
 Honored by all merchants that display the Visa Logo.
 The debit transaction will post to your checking account.
 PIN-less debit cards and more useful or highly demanded if provided by Banks.
 The debit card, which has no annual fee or per-usage charge, complements the free checking
product.

Page 4 of 9
ITTIHAD UNIVERSITY
COLLEGE OF MANAGEMENT AND INFORMATION SYSTEMS

Student Name: Zubaidah Abdul Rehman Al Din

Student ID: 20042080
Course: E-Commerce
Voluntary Participation

Disadvantages

Credit Card:
 It's easy to lose track of what you've spent - lots of small purchases can quickly add up, especially
as statements come through just once a month.
 If you don't keep up the minimum repayment, you can get into trouble.
 The goods you've purchased may be repossessed, you'll end up paying a lot more than the item is
worth and you may affect your credit rating - making it hard for you to get a mortgage, car loan or
credit card in future.
 Credit cards issue a monthly spending limit. Though they're generally very high, if you exceed it,
you can face even bigger charges.
 Credit cards can feel like 'free money' and the temptation to spend money you haven't got can be
hard to resist, especially when faced with special offers and discounts.
 The credit amount is limited when card is issued by Bank so it becomes an issue if excess purchase
is made.
 Others:
o Costly set-up fees
o Must qualify for merchant status
o Not suitable for sales of downloadable soft goods
o Some customers do not have credit cards
o Some customers fear credit cards online
o High interchange fees for “card not present” transactions
o Charge backs

Debit Card:
 Not having to drag out your photo ID when you use it--make fraud that much easier.
 If you don't keep up the minimum repayment, you can get into trouble.
 Unless reported quickly, theft of your debit card can quickly devastate your bank account.

 Even though you report the theft, you can be held responsible for paying for purchases or charges
that you didn’t make.

Page 5 of 9
ITTIHAD UNIVERSITY
COLLEGE OF MANAGEMENT AND INFORMATION SYSTEMS

Student Name: Zubaidah Abdul Rehman Al Din

Student ID: 20042080
Course: E-Commerce
Voluntary Participation

 In theft, the main thing to remember if you are using a debit card regularly is that it’s not just a
card; it’s ready access to your money so withdraw or move your funds right away.

Consumer Transactions, 2005 Projections

Processing Payment via Card Loop

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ITTIHAD UNIVERSITY
COLLEGE OF MANAGEMENT AND INFORMATION SYSTEMS

Student Name: Zubaidah Abdul Rehman Al Din

Student ID: 20042080
Course: E-Commerce
Voluntary Participation

Some Past and Present E-cash Systems:

• Checkfree

– Allows payment with online electronic checks

• Clickshare

– Designed for magazine and newspaper publishers

– Miscast as a micropayment only system; only one of its features

– Purchases are billed to a user’s ISP, who in turn bill the customer

• CyberCash

– Combines features from cash and checks

– Offers credit card, micropayment, and check payment services

– Connects merchants directly with credit card processors to provide authorizations for transactions in real time

• CyberCoins

– Stored in CyberCash wallet, a software storage mechanism located on customer’s computer

– Used to make purchases between .25c and $10

– PayNow -- payments made directly from checking accounts

• DigiCash

Page 7 of 9
ITTIHAD UNIVERSITY
COLLEGE OF MANAGEMENT AND INFORMATION SYSTEMS

Student Name: Zubaidah Abdul Rehman Al Din

Student ID: 20042080
Course: E-Commerce
Voluntary Participation

– Trailblazer in e-cash

– Allowed customers to purchase goods and services using anonymous electronic cash

– Recently entered Chapter 11 reorganization

• Coin.Net

– Electronic tokens stored on a customer’s computer is used to make purchases

– Works by installing special plug-in to a customer’s web browser

– Merchants do not need special software to accept eCoins.

– eCoin server prevents double-spending and traces transactions, but consumer is anonymous to merchant

• MilliCent

– Developed by Digital, now part of Compaq

– Electronic scrip system

– Participating merchant creates and sells own scrip to broker at a discount

– Customers can purchase items of very low value

– Brokers required for two reasons:

Payment Processing Services:
• Internetsecure

– Provides secure credit card payment services

– Supports payments with Visa and MasterCard

– Provides risk management and fraud detection, and ensures all proper security for credit card transactions is maintained

– Ensures all transactions are properly credited to merchant’s account

• Tellan

– Provides PCAuthorize for smaller commerce sites and WebAuthorize for larger enterprise-class merchant sites

– Both systems capture credit card information from the merchant’s form and connect directly to the bank network using dial-up or
private, leased lines
– Bank network receives credit information, performs credit authorization, and deposits the money in the merchant’s bank account

– The merchant’s web site receives confirmation or rejection of the transaction, which is communicated to the customer

• IC Verify

– Provides electronic transaction processing for merchants for all major credit and debit cards

Page 8 of 9
ITTIHAD UNIVERSITY
COLLEGE OF MANAGEMENT AND INFORMATION SYSTEMS

Student Name: Zubaidah Abdul Rehman Al Din

Student ID: 20042080
Course: E-Commerce
Voluntary Participation

– Also allows check guarantees and verification transactions

– A CyberCash company

• Authorize.Net

– Online, real time service that links merchants with issuing banks by simply inserting a small block of HTML code into their
transaction page
References:
e-book:
Building Competitive Advantage with a Successful Debit Card Program

Internet Links:
http://www.nodustech.com/credit_card_advantage.html
http://www.ivstandards.com/tech/articles/consumer/creditcard.asp
http://www.bbc.co.uk/radio1/onelife/finance/credit/creditcard2.shtml
http://www.yourdictionary.com/business_profile/debt/creditcards/credit-card-advantages.html
http://www.1stadvantage.org/convenience/debit_card.php
http://www.merchantwarehouse.com/HelpCenter/Debit-Card-Processing.htm
http://www.cardratings.com/nov00new.html
http://www.desktoprating.com/Credit-Cards/Debit-Card-vs-Credit-Card.htm
http://www.callfcu.org/asp/products/product_2_4.asp
http://www.sunflowerbank.com/sbweb.asp?page=sfbpersonal_cards

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