Chapter 10: Credit and Debit Cards (JAIIB – Paper 4)
1. What is the main difference between a credit card and a charge card?
A. Credit cards require full payment each month, charge cards allow partial payment
B. Credit cards allow revolving credit, while charge cards must be paid in full each month
C. Credit cards do not have a credit limit, charge cards have a fixed limit
D. Credit cards are only for retail purchases, charge cards are only for corporate use
Credit cards provide revolving credit, meaning the user can pay minimum amounts and carry forward balances. Charge cards require full settlement every month.
2. Which of the following fees is commonly charged on credit cards if the outstanding balance is not paid in full?
A. Joining fee
B. Annual fee
C. Cash withdrawal fee
D. Interest/Finance charge
Credit cards charge interest or finance charges on any unpaid balance after the due date. Other fees are fixed, not balance-dependent.
3. Which of the following is a key benefit of a charge card over a credit card?
A. Encourages disciplined spending as full payment is required each month
B. Offers a higher credit limit than any credit card
C. No annual fees
D. Allows cash withdrawals without interest
Charge cards require the user to pay the full amount each month, which promotes disciplined spending, unlike credit cards which allow revolving balances.
4. Which statement about credit card rewards programs is correct?
A. Rewards are mandatory for all credit cards
B. Rewards are only for debit card transactions
C. Rewards may include cashback, points, or airline miles for eligible purchases
D. Rewards cannot be redeemed for statement credit
Credit card rewards programs offer incentives like cashback, points, or miles for eligible transactions, which can be redeemed in multiple ways.
5. A customer uses a debit card for a purchase. Which of the following happens?
A. Money is immediately debited from the customer’s bank account
B. Credit limit is reduced temporarily
C. Payment can be deferred for up to 30 days without interest
D. Bank pays on behalf of the customer and recovers later
Debit cards deduct funds directly from the customer’s bank account at the time of the transaction. Unlike credit cards, there is no credit facility.
6. Which of the following best describes a prepaid card?
A. A card linked to a credit line
B. A card loaded with a fixed amount of money in advance
C. A card that allows cash withdrawal only
D. A card that accrues interest on balance
Prepaid cards are loaded with a specific amount beforehand and can be used for purchases or withdrawals until the balance is exhausted.
7. Which type of prepaid card is specifically issued for general spending and not tied to any bank account?
A. Salary card
B. Gift card linked to account
C. Payroll card
D. Open-loop prepaid card
Open-loop prepaid cards can be used anywhere the network (Visa, Mastercard, RuPay) is accepted and are not linked to a specific bank account.
8. What is the main difference between a debit card and a prepaid card?
A. Debit cards are linked to a bank account; prepaid cards are loaded with a fixed amount in advance
B. Debit cards cannot be used for online payments
C. Prepaid cards do not have a balance limit
D. Debit cards are issued by non-banking institutions only
Debit cards withdraw money directly from the linked bank account, whereas prepaid cards require loading money in advance and are not necessarily linked to a bank account.
9. Which of the following features is common to both debit and prepaid cards?
A. Interest is earned on outstanding balance
B. Revolving credit facility is available
C. Can be used for POS and online transactions
D. Must be paid in full every month
Both debit and prepaid cards can be used for point-of-sale (POS) purchases and online transactions, although their funding sources differ.
10. What is a main regulatory requirement for issuing prepaid cards in India?
A. Must have a credit score above 750
B. Must follow RBI guidelines on issuance, KYC, and maximum balance limits
C. Can be issued without KYC for unlimited value
D. Only banks can issue them, non-banks are prohibited
RBI regulates the issuance of prepaid cards, including KYC compliance, maximum balance limits, and types of issuers (banks and non-banks with RBI approval).
11. Which of the following statements is correct about ATM usage for debit and prepaid cards?
A. Debit cards cannot withdraw cash from ATMs
B. Prepaid cards cannot be used at ATMs
C. Only credit cards can be used at ATMs
D. Both debit and prepaid cards can be used for cash withdrawal at ATMs
Both debit and prepaid cards can be used for ATM cash withdrawals, subject to balance availability and daily withdrawal limits.
12. What is a co-branded card?
A. A card issued only by a non-banking financial company
B. A prepaid card without any bank linkage
C. A card issued by a bank in partnership with a company or brand offering rewards or benefits
D. A charge card requiring full payment every month
Co-branded cards are issued jointly by a bank and a brand (airline, retail chain, or fuel company) providing rewards, loyalty points, or special discounts for using the card.
13. Which of the following is a key benefit of using a co-branded card?
A. Unlimited cash withdrawals without fees
B. Earning brand-specific rewards or loyalty points
C. No KYC is required
D. Free international travel insurance
Co-branded cards are designed to give customers rewards or loyalty points specific to the partner brand, such as airline miles, fuel points, or shopping discounts.
14. Contactless cards allow transactions by:
A. Swiping through a magnetic stripe reader only
B. Inserting into an ATM only
C. Using PIN verification for every transaction
D. Tapping the card on a terminal using NFC technology for small-value transactions
Contactless cards use NFC (Near Field Communication) technology to allow small-value payments quickly by tapping the card on the terminal without entering a PIN.
15. Which of the following is a safety feature of contactless cards?
A. Transactions above a certain limit require PIN verification
B. Unlimited use without any verification
C. No encryption of transaction data
D. Only works at ATMs
Contactless cards have a limit for PIN-less transactions, and any transaction exceeding the limit requires PIN verification to ensure security.
16. What is the primary purpose of the EMV chip on a card?
A. To allow contactless payments only
B. To securely store cardholder data and prevent cloning
C. To display rewards points balance
D. To link the card to multiple accounts
EMV chips store cardholder information securely and generate unique transaction codes, preventing card cloning and fraud.
17. Which security feature is used to authenticate online card transactions?
A. Magnetic stripe
B. Signature verification only
C. ATM PIN
D. OTP or 3D Secure authentication
Online card transactions use OTP (One-Time Password) or 3D Secure authentication to verify the cardholder’s identity and prevent fraud.
18. Which of the following fees may a credit cardholder incur?
A. Annual fee, late payment fee, cash advance fee
B. Only joining fee
C. ATM withdrawal fee only
D. None, credit cards are free of charge
Credit cards may have multiple fees including annual fee, late payment charges, cash advance fees, and sometimes joining fees depending on the card type.
19. Which of the following rewards can be offered by banks on cards?
A. Free electricity bills
B. Guaranteed cash every month
C. Cashback, points, or airline miles
D. Free bank account maintenance
Banks offer rewards like cashback, points, or airline miles to incentivize usage of credit, debit, or prepaid cards.
20. Which of the following is a right of cardholders under RBI guidelines?
A. Unlimited credit without approval
B. Protection against unauthorized transactions and timely grievance redressal
C. No need to follow KYC norms
D. Exemption from annual fees for all cards
RBI guidelines ensure cardholders have protection against unauthorized transactions and access to a grievance redressal mechanism within a specified time frame.
