Credit and Debit Cards

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Payment cards are essential financial tools that allow users to make purchases or withdraw money. They are broadly classified into Credit Cards and Debit Cards, along with variants like Charge Cards, Prepaid Cards, Co-branded Cards, and Contactless Cards.

Types of Cards

• Credit Card: A card allowing users to borrow funds up to a preset limit to pay for purchases or withdraw cash, with repayment typically due monthly.
• Charge Card: Similar to a credit card but requires the entire balance to be paid off every month. No revolving credit.
• Prepaid Card: A card preloaded with money by the user; it is not linked to a bank account.
• Debit Card: A card linked directly to a bank account. Funds are debited in real-time during purchases.
• Co-branded Card: A card issued by a bank in association with a retail partner or brand, offering special rewards or benefits.
• Contactless Card: A card equipped with RFID technology that allows tap-and-go payments without swiping or inserting.

Mathematical Examples

1. Example 1: If a user spends ₹25,000 on a credit card with an annual interest rate of 24%, and pays only the minimum ₹5,000 in the first month, what is the interest on the remaining ₹20,000 for one month?
   Interest = (20,000 × 24%) / 12 = ₹400
2. Example 2: A prepaid card is loaded with ₹10,000. If the user spends ₹1,200 on groceries, ₹2,500 on fuel, and ₹3,300 on travel, how much balance remains?
   Balance = ₹10,000 - (₹1,200 + ₹2,500 + ₹3,300) = ₹3,000
3. Example 3: A debit cardholder withdraws ₹5,000 from an ATM that charges ₹20 per transaction after 5 free ones. If this is the 7th transaction, what is the net debit?
   Net debit = ₹5,000 + ₹20 = ₹5,020
4. Example 4: A credit card offers 2% cashback on fuel purchases. If ₹4,500 is spent on fuel, what is the cashback amount?
   Cashback = 2% of ₹4,500 = ₹90
5. Example 5: A contactless card has a transaction limit of ₹5,000 per tap. If a user makes three transactions of ₹4,000, ₹5,000, and ₹6,000, which transaction needs PIN entry?
   Answer: ₹6,000 (as it exceeds the contactless limit)

Multiple Choice Questions (MCQs)

1. Which card allows you to borrow money up to a limit and pay later?
   a) Debit Card
   b) Prepaid Card
   c) Credit Card
   d) Contactless Card
   Answer: c) Credit Card
2. Which card must be paid off in full every month?
   a) Debit Card
   b) Credit Card
   c) Prepaid Card
   d) Charge Card
   Answer: d) Charge Card
3. Which of the following is linked directly to a bank account?
   a) Credit Card
   b) Debit Card
   c) Charge Card
   d) Prepaid Card
   Answer: b) Debit Card
4. Which card is loaded with a fixed amount before use?
   a) Debit Card
   b) Credit Card
   c) Prepaid Card
   d) Co-branded Card
   Answer: c) Prepaid Card
5. What does a co-branded card typically offer?
   a) ATM withdrawals only
   b) Special offers from partner brands
   c) Higher interest
   d) Offline usage only
   Answer: b) Special offers from partner brands
6. Which technology enables contactless cards to work?
   a) OTP
   b) NFC or RFID
   c) Bluetooth
   d) Magnetic stripe
   Answer: b) NFC or RFID
7. Which of these is NOT a feature of a debit card?
   a) Real-time fund deduction
   b) Preloaded funds
   c) ATM access
   d) Linked to savings account
   Answer: b) Preloaded funds
8. Which card is most suitable for teenagers without bank accounts?
   a) Charge Card
   b) Debit Card
   c) Credit Card
   d) Prepaid Card
   Answer: d) Prepaid Card
9. If a contactless card has a ₹5,000 limit per tap, what happens if the transaction is ₹6,000?
   a) It is declined
   b) It is split into two taps
   c) Requires PIN entry
   d) Cashback is given
   Answer: c) Requires PIN entry
10. Which card may have an annual fee and allows interest-free credit for a period?
    a) Credit Card
    b) Debit Card
    c) Prepaid Card
    d) ATM Card
    Answer: a) Credit Card