ATM cards, debit cards, credit cards, garage cards and smart cards are all out there and you may have them all in your purse. but do you know how to use them to your benefit. Charlene Clayton reports.
Cards are simply financial tools and its up to you to make your cards work for you rather than you work for your cards.
Craig Rankin, assistant general manager at Nedcor, says with the range of cards on offer from banks you can decide exactly how you want to pay for your purchases.
More importantly, you can decide whether you want to borrow or access your own funds without having to carry wads of cash around.
Plastic is the name of the game and the bottom line is that carrying hard cash has become a hazard, not only for you but also for the banks and the shops - all face the threat of theft, muggings and robberies. Convenience is driving the move towards a cashless society.
How often have you drawn what you believed to be sufficient money to pay for your groceries, only to find that you are short of cash when you get to the tills? The answer to such problems is to pay with plastic.
Safety
A safeguard you enjoy with a credit card and a debit card is that if you find you have been billed for a purchase you did not make, you can dispute the transaction within 60 days and your bank will reverse it. This is a safeguard you enjoy under the Visa and Mastercard rules of use.
You are expected to take care of your cards and not divulge your personal identification numbers to anybody. Provided you do so, using a credit or debit cards is a safe and secure way of making payments.
To borrow or not to borrow
You have to decide whether you want to borrow to buy or not. This will determine whether you should pay by credit card or debit card.
A debit card is one which you hand over for payment, the shop swipes it through a machine and, hey presto, the money is transferred from your bank account into the bank account of the shop. Whether you will be paying with your own money will depend on whether you have money in your account and whether you have an overdraft facility on your account.
A credit card works in the same way, but you get to buy on credit for a certain period and then you are presented with a statement from your bank, usually at the end of the month. You can of course keep money in your credit card and earn interest on it. When using your card in this case, you will not be buying on credit until you have exhausted the funds you placed in your account.
Credit Cards
If you are clever, you can borrow on your credit card without paying interest by making use of the 55 days free credit offered to you by banks.
The key is to look at the date of your last statement (note, this is not the date when payment is due, but the date on which the statement is generated).
If, for example, this date was August 28, the date of your next statement will be September 28.
Goods bought on August 29 (the day after the date of your last statement) will be reflected only on your September statement and this will be payable only on October 22.
This means you have from August 29 to October 22 (55 days) free credit. The number of days you enjoy free credit obviously depends on when exactly you made your purchases.
It is important to realise that petrol and cash withdrawals from your credit card are treated differently from goods that you buy using your credit card. In these cases, interest is charged from the date of the transaction until full payment is received by the bank.
Debit Cards
Some debit cards, like Nedbank's NedCheque card, have been around since the late 1980s. These look like a credit card and work exactly like a credit card, except that the money is deducted off your current account. Standard Bank has a similar Visa debit card. Because the cards are supported by Visa or MasterCard, the card will be accepted by any shop that accepts Visa or MasterCard products.
These cards are signature-based. Signature-based cards require that you sign a slip of paper as proof that you made the transaction. The merchant should cross- check your signature on the slip with that on the card to make sure you are the rightful owner of the card.
Another type of debit card is the on-line, PIN-based debit card - this is a true debit card. there are two on-line card payment products available. The Visa product is Electron and Mastercard has one called Maestro. These cards are PIN-based, so you have to input your PIN into a terminal to activate the transaction.
You may have one of these cards in your pocket as some banks have already turned their ATM cards into these on-line debit cards.
The use of on-line debit cards depends on shops and organisations having the right terminals in place, because the transaction is verified and carried out on-line making use of communication links such as telephones.
A debit card gives you direct access to your cheque or savings account without the need to carry money or cheques. It is intended to make the payment of goods easier, cheaper, safe and quicker. It is your ATM card with the added advantage that you can also use it at many shops.
The costs of using a debit card are significantly lower than using cheques or cash because it is based on the latest technology and operates electronically, which means lower costs for consumers. With a debit card the money comes directly off your account within 48 hours and you can more easily keep tabs on your finances. A cheque may lie around in a person's drawer for days before he or she deposits the cheque.
Charles Chemel, a director of banking products at Standard Bank, says it is taking time to persuade retailers to switch to the system. There is also some debate among retailers as to who is really benefiting from the move to debit cards, them or the banks. From a consumer's point of view, convenience is the key and if merchants are reluctant to offer debit card payment facilities, they may lose business to a rival that does. So far about 20 000 merchants accept online debit cards.
Garage Cards
An outdated piece of legislation prohibits you from buying fuel with your Visa or MasterCard and as a result garage cards were introduced. A garage card can be a debit or a credit card. Where the card is linked, for example, to your current account, and the money is deducted from your account soon after you buy petrol, your garage card is a debit card.
You can also link your garage card to your credit card account or even have a separate account all on its own. In these cases you are using your card as a credit card, because your purchases are debited to your account and you pay the bill later.
The banks treat fuel payments and cash withdrawals differently from true credit card transactions. You are charged interest from the day the fuel transaction appears on your account.
The advantage of using a garage card is that it is accepted by all garages, whereas debit cards may be limited to certain garages.
ATM Cards
When you open a bank account today, you are issued with a card which allows you to access your account. The card, once inserted into the ATM machine, will allow you to check your balance and draw money. Certain banks allow you to transfer money between accounts and pay your bills (once they have been linked).
ATM cards can be used as debit cards at some merchants and garages around the country.
Smart Cards
Financial services will take a giant leap forward once smart cards are used, but it will be a few years before smart cards will take off. Smart cards, which are based on chip technology, are starting to make an appearance. For example, if you bank with People's Bank you may have one of the bank's V-Chip Cards. The big advantage over traditional debit and credit cards is that smart cards can be used off-line. They carry all the necessary information, such as your bank details. Your credit limits are stored on the card and the card does not need to link back to your bank via a telecommunications link.
Some smart cards also have what is called a purse on which you can "load" money. Smart cards will truly take us into a cashless society. One day you will, for example, be able to download "money" from your bank via your computer into your cell phone. When you need to pay somebody you would simply dial them up and download the "money".
Tips:
* Take great care of your cards and keep a record of your personal identification numbers (PIN);
* Never keep your PIN with your card, preferably memorise it. Some banks allow you to choose your own PIN so you can choose a number which is easier to remember, such as your mother's birthday. You may change it at any time;
* Stick to using your bank's own ATM machines, otherwise you will pay a lot more;
* Pay the full amount due on your credit card (not only the minimum due) on or before the due date unless you are prepared to pay interest charges;
* There are no transaction charges for buying on your credit card;
* If you keep a credit balance in your credit card you can earn interest on your money, but be aware that some banks offer a tiered rate of interest which offers relatively low interest on amounts under R15 000; and
* The benefit of a credit card is that you have a record of all your purchases.