Available to the self-employed and any type of business, payment by payment card applies in the following cases:

• transport-related expenses (fuel, tolls, maintenance, tyres, etc.);
• travel and entertainment expenses (train tickets, airline tickets, car hire, hotels, gifts, etc.);
• food-related expenses (restaurant, supermarket, etc.);
• day-to-day management expenses (purchase of basic equipment, etc.).

For the business as cardholder

• the holder of a payment card or the employer in whose name the card is issued, as well as the shopkeeper, must have a bank account;
• the shopkeeper must accept payment cards as a means of payment;
• the holder of a payment card must know their secret personal identification number (PIN);
• the bank account of the holder of the payment card or the employer in whose name the card is issued must have sufficient funds or have a credit line enabling the payment to be executed.

For the business accepting payment by payment card

• electronic device (point-of-sale terminal) to accept card payments;
• contract with an electronic payment transfer entity (e.g. Cetrel).

Application

Expenses

The charges depend on various criteria, such as the bank in question, the type of card, the services available with the card, etc.

Limit

Debit cards normally come with a transaction limit, which varies depending on the bank and quality of the customer. For new customers, most Luxembourg banks offer a debit card without a credit line.

Credit cards normally come with a transaction limit and a credit line, which vary depending on the bank and quality of the customer. In some cases, several of a company's credit cards may be linked to a single limit which may therefore be much higher. This is generally avoided for reasons of security.

Validity period

Payment cards are generally valid for 2 to 3 years and are automatically renewed before expiry.

Payment time frames

For payment cards, current accounts are debited almost immediately.

When a credit card is used, payment of the debit amount corresponding to the sum of purchases made during a given month may be deferred to the following month or carried out in instalments (automatic payment at the end of the month of 10 % of the sum of purchases or repayment according to the terms and conditions agreed between the bank and the customer).

Advantages, disadvantages and risks

Advantages

For the business as holder of a payment card:

• easy to use (card and code/signature);
• withdrawal of cash at ATMs;
• can be used as a credit instrument as the amount will not be debited until the month after the payment is made (credit card);
• can be used to provide deposits, especially to vehicle rental agents;
• bookkeeping, proving and monitoring of expenditure facilitated by the monthly statements provided by the bank.

For the business accepting payments by payment card:

• accounting entries made easier;
• credit received immediately after the bank receives the invoice;
• financial aspect of the sale is simplified: payment not made in cash and cheques do not have to be cashed;
• reduction in the risks and uncertainties associated with payment by cheque and reduction in issues relating to security with respect to handling and transporting cash;
• payment and credit facility offered to cardholders.

Disadvantages

For the business as holder of a payment card:

• incentive to spend, which could lead to high levels of debt.

For the business accepting payments by payment card:

• high costs depending on the country or the payment card company.

Risks

For the business as holder of a payment card:

• loss or theft of card.

For the business accepting payments by payment card:

• payment card fraud and forgery.