Which type of card does not result in a direct transfer of funds from the Payor to the Payee?

Which type of card does not result in a direct transfer of funds from the Payor to the Payee?

• A. Credit cards
• B. Debit cards
• C. Prepaid cards
• D. Gift cards

Answer: (A)

Credit cards are a form of payment that does not result in a direct transfer of funds from the payor to the payee at the time of the transaction. Instead, when a credit card is used, the credit card issuer essentially functions as the intermediary. The cardholder borrows money from the credit card issuer to make the purchase, and the issuer pays the merchant on behalf of the cardholder. The cardholder then incurs a debt that they are obligated to pay back to the issuer, usually with interest, if not paid in full by the due date. This contrasts with debit cards and prepaid cards, which draw directly from the funds in the user's bank account or available balance at the time of the transaction. Gift cards, while they may seem similar to credit cards in that they are used to purchase goods and services, are also funded directly by the initial purchase amount loaded onto the card, meaning they also facilitate a direct transfer of funds at the time of use.

Credit cards are a form of payment that does not result in a direct transfer of funds from the payor to the payee at the time of the transaction. Instead, when a credit card is used, the credit card issuer essentially functions as the intermediary. The cardholder borrows money from the credit card issuer to make the purchase, and the issuer pays the merchant on behalf of the cardholder. The cardholder then incurs a debt that they are obligated to pay back to the issuer, usually with interest, if not paid in full by the due date.

This contrasts with debit cards and prepaid cards, which draw directly from the funds in the user's bank account or available balance at the time of the transaction. Gift cards, while they may seem similar to credit cards in that they are used to purchase goods and services, are also funded directly by the initial purchase amount loaded onto the card, meaning they also facilitate a direct transfer of funds at the time of use.