DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : Raja Sekhar Koduru
Designation : Lecturer In CCP
Branch : DCCP
Institute : GPW,Kakinada
YEAR/SEMSTER : VI SEMSTER
Subject : Banking II
Subject Coce : CCP-604(B)
Topic : Customer Facilities Offered By Bank
Duration : 50 Mts
Sub Topic : Credit Cards and Debit Cards
Teaching Aids : Power Point & Pictures
CCP.604(B).26 1
Objectives:

On completion of this period, you

would be able to explain the
 Concept of Debit cards
 Features of debit cards
 Differences between debit card and credit
card
 Smart Cards

CCP.604(B).26 2
Recap

 In the previous class, we have learned about

the Automatic Teller Machines, their working
and the advantages of ATMs to Customers,
Banks, and traders.

CCP.604(B).26 3
Debit Cards
DEFINITION
 Debit cards are basically electronic cheque

providing access to the customer deposit account

CCP.604(B).26 4
Debit Cards
Where to use
 Debit cards can be used at
Automated Teller Machine
to withdraw cash from his
own (customer’s) account

CCP.604(B).26 5
Debit Cards
Where to use
 Debit card can also be used
for the purpose of shopping.
However the amount is
debited to the cardholder’s
account. This can be done
through swipe machine.

CCP.604(B).26 6
How to get Debit Cards

Procedure to get debit card

 Debit card is issued to the account holder
only by the respective bank branch.
 The customer has to open a saving account
with the bank.
 He has to apply for debit card
 The respective branch process his application
and issue a debit card

CCP.604(B).26 7
How to get Debit Cards

ALLOTING PIN NUMBER

 The bank also informs the PIN (Personal
Identification Number) to the customer.
 The most important security aspect concerning
the use of an ATM card is PIN
 If it falls into the hands of an unauthorized
person the card will be misused

CCP.604(B).26 8
How to get Debit Cards
Safety to pin number
 To prevent this, the plastic card and the PIN
relating to them are posted separately to the
customer and Bank branch.
 Accordingly, the plastic (Debit) card is posted to
the customer first….
 …and then PIN relating to them are posted by
the head office to the branch which is given to
the customer at his bank branch in sealed cover
after showing the debit card.
CCP.604(B).26 9
How to get Debit Cards

Safety of pin number

 The branch bank after seeing the debit card
submitted by the customer, issues the
sealed cover containing the PIN after
obtaining the acknowledgement from the
customer.
 This would also help prevent an illicit user
from intercepting the card so as to gain
knowledge of the card’s PIN

CCP.604(B).26 10
Advantage Of Debit Cards

Pin validates the customer

identity
 When the card is swiped through
the electronic terminal, it dials the
acquiring bank system either
Master Card of VISA that validates
the PIN and finds out from the
issuing bank whether to accept or
decline the transaction

CCP.604(B).26 11
Advantage Of Debit Cards

 The customer can never overspend

because the system will reject any
transaction that exceeds the balance in his
account
 The bank will never face a difficulty
because the amount spent is debited
immediately from the customer account

CCP.604(B).26 12
Advantage Of Debit Cards

No paper work
 The transactions through debit cards are
not materially different from cheque
system, except that fund transfers are
electronically carried out, thereby avoiding
all paper work.

CCP.604(B).26 13
Advantage Of Debit Cards

No need to carry cash

 If you carry the debit card, then there is no need
for carrying cash or even travelers cheques
 Debit card is as good as money in the accounts
with your bank
 If you are averse to be a borrower, debit card has
an advantage to you, here is no risk of
overspending as you can spend what you have

CCP.604(B).26 14
Debit Card Vs. Credit Card

Debit card Credit card

1. Debit card is issued 1. Credit card can be
to the account holder issued to non-
only account holder also
2. The amount 2. The amount
withdrawn is from the withdrawn is a loan
customer’s account from the bank to the
only customer
3. He need not pay 3. He has to pay
services charges for services charges for
withdrawal withdrawal

CCP.604(B).26 15
Debit Card Vs. Credit Card
Debit card Credit card
1. No question of over- 1. The customer can
spending the money spent more than
since the amount is what he has, since it
deducted from the is a loan from the
customer’s account. bank.

3. No question of bad 3. Possibility of bad

debts since the debts. – since it is a
amount withdrawn is loan there may be
from the customer’s bad debts
account only.

CCP.604(B).26 16
Debit Card Vs. Credit Card

Debit card Credit card

1. No question of 1. If the payment is
interest, since the delayed the
amount is withdrawn customer has to pay
from his account only. the interest on the
balance amount
3. Debit card annual 2. Credit card annual
maintenance charges maintenance
is very less charges ranging from
Rs.500 to Rs.2000.

CCP.604(B).26 17
Smart Cards

Definition
 The smart card technology
is also widely used by
bankers to market their
products

CCP.604(B).26 18
Smart Cards

Model Smart Card

 Smart card, which is chip-
based card.
 A microchip was
embedded in the smart
card.

CCP.604(B).26 19
Smart Cards

Mechanism Of Smart Card

 This microchip will store a monetary value.
 When a transaction is made using the smart
card, the value is debited and balances comes
down automatically.
 Once the monetary value comes down to nil,
the balance is to be restored all over again so
that the card becomes operational as usual.

CCP.604(B).26 20
Smart Cards

Advantage Of Smart Card

 It is more secure than ATM Debit and
Credit Cards, because card related frauds
and crimes cannot take place in a smart
card.
 It provides communication security as it
verifies whether the signature is genuine or
not.

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Smart Cards

Smart Card Advantages

 The smart card also recognizes different
voices and compares with the recorded
original voice.
 It is used for making purchases without the
necessity of requiring the authorization of
Personal Identification Number as in a debit
Card.

CCP.604(B).26 22
Smart Cards –
Benefits to the Customer

 Online (over internet) customer account

checking is not necessary at transaction
time
 Cash handling costs are reduced
 Increases the customer’s confidence in
carrying funds in a secure manner

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Smart Cards –
Benefits To The Customer

 Funds stored in the protected purse i.e., smart

card, can be refunded when the card is lost,
damaged or stolen, since others cannot use it.
 Increases revenue system.
 Smart cards prove to be a panacea (universal
remedy) for all problems associated with fraud
joint with debit and credit cards.

CCP.604(B).26 24
Smart Cards –
Benefits To The Customer

 The smart card would emerge as an

alternative method of paying for various
services…..
 ….and would also serve as a data carrier
and identification system.

CCP.604(B).26 25
Summary

 Though the debit card and credit card

seem to be one and same, there are
certain difference between them
 Debit card allows to withdraw the
money from the customer’s account
 Hence he need not pay any penalty,
service charges or interest to the
banker

CCP.604(B).26 26
Summary

 Since there may be possibilities for

fraud, if some one knows the PIN
of the debit/credit card, the smart
cards are introduced.
 The smart cards are embedded
with microchip which will store a
monetary value.

CCP.604(B).26 27
Quiz

1. Debit cards enables the customer to

withdraw more money than what he has
in his account ?
 True
 False
4. Debit card holder must be account holder
in the bank
 True
 False
CCP.604(B).26 28
Debit Card
1. Debit card has to pay interest on withdrawals
 True
 False
4. Debit card allows the customer to take a short
term loan from bank
 True
 False

CCP.604(B).26 29
Frequently Asked Questions
Briefly explain the term Debit Card (4marks)
2. Distinguish between Credit card and Debit card
(4marks)
3. List out the advantages of Debit card (4 marks)
4. What is smart Card
5. What are the advantages of smart Card

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