Payment Cards is the generic name used to indicate all kinds of cards that allow the cardholder to transact using them. A Payment card can be a Debit Card or a Credit Card or a Prepaid Card. Banks issue these card types to suit particular customer segments and those cards can be used for some specific, defined purposes. We will see what all these card variants mean, in a moment. But if you are reading this article on this website, chances are that you already have some kind of a Payment Card in your wallet, or at least have somebody at home, who has one. And before we actually touch the central theme of this write-up (which is how to avoid falling victim to Card Frauds), it will be worth the while to have a little practical information about the amazing world of Payment Cards.
We will not be delving deep into the history of Payment Cards. It is sufficient to know that Payment cards as we know today have evolved over the last 50 years and more. The Magnetic Stripe card that we see today originated over 30 years ago. These cards, although they have basically remained the same in form & design, have added various features over the years to facilitate immediate recognition & identification, to ease usage, and to enhance security. Some of these features include the inclusion of Holograms, Special Embossed or Indent-Printed characters, Special anti-counterfeiting markings and micro-printing, Tamper-evident signature panels, inclusion of a unique Card Verification Code/ Value (CVC or CVV) indent printed on the signature-stripe of the card etc.
Most payment Cards are either issued on a MasterCard or a Visa platform by the Card Issuing Institutions, which in India are Banks. There are other proprietary card brands such as American Express, Diners Club, Discover and JCB which are issued in some regions. But MasterCard & Visa card products are the ones which are universally issued and accepted by Banks and financial institutions and this article will dwell mostly on those. In practice, you will never see a payment card with just a MasterCard or a Visa logo or brandmark. MasterCard & Visa are called “Card Associations” or “Schemes”, and they license Member Banks to issue cards with rigourous controls and standard specifications. Cards issued under this licensing regime by banks are therefore called bankcards.
There are over 20,000 or so member institutions worldwide, which issue either MasterCard or Visa branded cards .These cards are expected to give the holder unique privileges and rights to use the product seamlessly at any outlet, which is capable of accepting the same, across the globe. Most payment cards can be used both at Point-Of-Sale (POS) machines to pay for goods & services and at Automated Teller Machines (ATMs) to withdraw cash.
Therefore the elements & components of a payment card are very standard. These cards need to be universally recognized by Merchants, and should work well on the existing card acceptance infrastructure. The Cards acceptance infrastructure has a common architecture or backbone for all the countries across the world, but has varying levels of sophistication depending on how progressed that country is. Under the MasterCard or Visa licensing regime, a member Bank which issues a payment card is called an “Issuer”, and a member Bank which accepts a payment card through an ATM owned & operated by it or through a POS machine located at a Merchant recruited by it is called an “Acquirer”. A member bank can both be an Issuer and Acquirer of Cards, and often, Banks opt for issuance and acceptance of both MasterCard & Visa products. Such banks are therefore called dual issuers or acquirers.


Some of the things that MasterCard & Visa do are as follows:
1. Encourage Member Banks to issue various Payment Cards, under strict licensing & operating regimes, to suit various customer segments. They encourage Member Banks to recruit merchants & set-up cardholder interaction devices (EDC/ Card Swipe/ POS machines, ATMs, Proximity readers etc) where these cards can be used. Both issuance and acceptance of cards are commercial decisions of the Member banks, and Banks are free to offer the services & charge fees for features which they think will be most attractive to their target consumers – both cardholders and merchants.
2. Set-up the standards & systems for the reasonably secure & efficient networks which allows all these 20,000+ Member Banks to “talk” to , or have interface with each other for authorization and daily settlement process between them. Thus MasterCard & Visa help set-up the infrastructure for payment Card usage and administer the same.
3. Intervene in and resolve any disputes between the Member Banks as per the operating regulations. Refine the operating regulations to meet evolving challenges.
4. They also work hard to protect the integrity & value of their respective brand by controlling what their cards, systems and networks can be used for. They manage the risks associated with Payment Card transactions.
MasterCard & Visa do NOT do the following:
1. They do not issue any cards directly under their brand names (often advertisements give a wrong impression)
2. They do not encourage nor tolerate an environment where the usage of a card product by a consumer is disadvantaged in favour of other forms of payment (such as cash or cheque). Thus, MasterCard & Visa require Member Banks not to tolerate practices such as surcharging of Cardholders by Merchants, except wherever permitted by local laws (In India, for example, Petroleum Companies and Railways surcharge their cardholder customers since this is allowed by local regulations)



Types of Cards, by product features:
Credit Cards: These are “Buy Now- Pay Later” cards. A credit card is offered to a customer who has adequate and declared income resources and often a well-established credit standing with a financial institution. The Issuer is effectively giving an unsecured line of credit to the cardholder, and bearing the credit risk for the same. Therefore, often this is a fee-based product to partly offset the credit risk of the issuing bank. A fixed credit limit is assigned to the customer after careful profiling & scrutiny of his/her credentials & income, and perceived ability and willingness to repay. Depending on the transaction date and the billing date, the customer enjoys an interest-free credit period of between 20-50 days. The customers are also given the option of typically repaying back anything between 5% to 100% of their total monthly outstanding, and to roll-over or “revolve” the remainder to suit their financial convenience. Interests or “Annual Percent Rates” charged for such revolved amounts can be very high – often to the tune of about 36-45%. A credit card is typically used by a customer for high-ticket spends such as purchasing durables, travel & entertainment etc. Credit Cards can also be used in both Cardholder Present (CP) mode as in a shop, or in Cardholder-Not-Present (CNP) mode, which are Mail Order or Internet E-Commerce transactions. Comparatively, there can be more risks in the latter.
Most Credit Cards in India are signature based for use at the Point-Of-Sale, but in the near future many Indian Banks are likely to issue Chip based credit cards which are more secure and versatile. Most countries in Europe have already migrated to Chip + PIN based cards because their issuance & acceptance infrastructure is geared-up for such cards.
Debit Cards: These are “Buy Now- Pay Now” type of cards. The Cardholder has an account with the card issuing bank, and for all practical purposes, s/he is accessing their own account or funds to pay for a transaction at a merchant location or to access cash at an ATM. These are technically “deposit access” cards. Thus this card is purely used as a convenient payment mechanism rather than to draw on credit. Issuers in India and other developing countries have started seeing a huge upswing in the number of customers opting for debit cards because many customers in these countries are traditionally credit-averse, or because they are often unable to meet the credit approval norms of the Issuers. Thus they use the monies in their Bank accounts through these cards. Most Debit Cards are indent printed (not embossed), and many Issuers restrict their debit cards usage only to the scenario where the cardholder is present at the scene of transaction, such as on a POS machine or at an ATM.
Prepaid Cards: These cards are “Pay Now- Buy Later” Cards and the most common examples are “Gift Cards”, “Travel Cards” or “Payroll / Employee Benefits Cards” etc. These are aimed at particular segments of the market to migrate and wean customers away from cash.
Gift Cards are a niche market, and can come in attractive alternate shapes and forms.
Travel Currency Cards can be denominated in one or more currencies of the country where the customer is intending to travel, and Foreign Exchange allowance can be purchased in Indian Rupees and loaded onto the Card in terms of the designated Foreign Currency.
Payroll/ Employee Benefits Cards are for organizations to streamline their payroll functions & facilitate payouts of commission, allowances etc by avoiding writing & dispatching of cheques for recurring payments to agents/vendors etc. These cards help overcome logistical hurdles.
Risks associated with Payment cards:
Well, now that you have reached thus far within this write-up, let us address the main theme of the same. Please note that the risks dealt with here are from a Cardholder perspective.
Risks associated with Debit Cards:
Since issue of debit cards and prepaid cards involves interaction with and scrutiny by the Bank’s internal staff, often these will be issued to you across the counter within committed turn-around time after due verifications.

In case personalized debit cards are to be sent to the account-holder, banks often send debit cards and PIN-mailers separately through two different channels (One by courier & another by post) and with a time lag. Then also banks often require that the Debit cards be activated by cardholder for POS purchase by using them first at their own ATMs with the correct ATM PIN.
What the cardholder needs to remember is to change the PIN at the first usage, and never to write the PIN on the card or keep it along with the card. The PIN should be committed to memory. Some banks issue photo-cards, which affords an additional security.
Signature-based Debit Cards: MasterCard unembossed, and Visa Electron are the two common debit card types which are signature-based for acceptance at POS terminals. You should immediately sign the card on receipt therefore, and keep it at all times securely within your full control. In case the card goes missing, you should immediately get it blocked and replaced by calling-up your Bank’s Customer Service helpline, and following it up with a written complaint. Usually, but depending on the Bank’s policy your liability for any POS misuse of a lost/ stolen signature-based debit card ceases the moment you have reported the loss in writing.
“PIN-required-at-POS” Debit Cards: You may additionally consider the benefits of a PIN enabled Debit Card (MasterCard’s Maestro Debit Card in India is the one debit card that also requires usage of PIN at Point of Sale machine, apart from at ATMs). Please check with your Issuer, if they issue such a card. Sometimes customers can not remember their PINs at POS machines, or the POS machine may not have a PIN pad. These can be limiting factors, and according to some people, hinder convenience. It is an individual preference, which debit card type to opt for.
Some banks will give you the option of enabling your Debit Card for Cardholder-Not-Present transactions. Consider the pros and cons fully before you give the consent to activate this feature on your card.
Risks associated with Credit Cards:
A credit Card is an unsecured product, but that does not mean that Issuers will tolerate the Cardholder’s negligence or active / passive participation in allowing their misuse, should it ever happen. In case you ever fall prey to a fraud, immediately report the matter to the Bank in writing. Follow-up with a written complaint to the Law Enforcement authorities, if the Bank’s primary investigation indeed points out to a fraud/ misdemeanor. This way, you shall be demonstrating your good faith and sincere intent. In negligence or collusion on your part is ruled out, you will be immune from any losses.
Application Fraud: If you are applying for a Credit Card through a Direct Sales Executive of the Bank, please verify his/ her credentials and check the ID proof. Most people who get conned by unscrupulous elements simply sign a credit card application form, without filling-in the details; and also hand over the legitimate collaterals such as the pay-slip, address proof etc to an individual whose identity and credentials they have never checked.
Cases of identity theft are sometimes uncovered, where the bad guys use copies of these documents to apply for loans & credit cards of other banks, by mentioning their own address as the primary address for communication. If the Issuer does not properly scrutinize an application at multiple points, and fails to physically verify all the details, they may end up issuing a card in your name, but to the bad guys. When Credit Cards are thus fraudulently obtained, the fraudsters misuse these. When collection attempts fail, and Issuers come to the secondary address (which is most often your work address), you realize that you have been conned. Convincing the Issuers & banks of your innocence and keeping a clean credit reputation then becomes difficult.
To avoid such situations, you should always fill-in the form completely and accurately in your own handwriting. You should also sign and date it. Strike out what is not applicable, including portions in the form for add-on cards, if you are not applying for one. Always keep a photocopy of the entire set of documents submitted, including the numbered application form. Please be careful while responding to tele-verification calls and do not be tempted by the offers from agents to confirm the details of having applied for Card from another Bank