Final answer:
Preauthorized checks and debit/credit cards facilitate automated transactions by allowing funds to be transferred directly from a bank account or as a short-term loan. Debit cards withdraw funds immediately from the user's account, while credit cards bill the user later. Smart cards store a value for use in specific transactions or locations.
Step-by-step explanation:
Preauthorized checks and debit/credit cards are methods of payment that allow for automated transactions without the need for direct physical exchange of money or manual input each time a transaction occurs. A debit card functions almost like a check, since it instructs the user's bank to transfer money directly and immediately from the bank account to the seller when a purchase is made.
Unlike credit cards, which are not linked to a bank account but rather represent a short-term loan from the credit card company to the cardholder, a debit card is directly tied to the account holder's available funds in a saving or checking account.
Using a debit or credit card bearing a Visa, Mastercard, or Discover logo allows for the convenience of paying for goods and services in places where these major cards are accepted. However, the distinction lies in the fact that with a debit card, the transaction amount is immediately deducted from the holder's account. In contrast, with a credit card, the company fronts the payment and then bills the user later, effectively loaning money that needs to be repaid.
Moreover, smart cards offer a different approach by allowing users to store a certain value of money on the card itself, which can then be used for purchases. However, these smart cards often have limitations, as they might only be valid for specific types of purchases or at particular locations.