Credit Card
A Credit card is mainly used for paying debts. It is a card made of plastic that is given to the user (customer) by local banks or credit unions. The card holder can use the credit card to purchase goods and services thus ensuring the trader to pay for these goods and services. This card accords a series of credit to the cardholder from whom the user can have a loan for payment to a retailer or as an early payment to the user.
USES OF A CREDIT CARD :
When the cardholder uses the Credit card to make purchases, he signs a receipt with a documentation of the card details, (generally the sum owed by the user.) or enters a ‘Personal Identification Number (PIN)’. Credit cards can also be used in online transactions. Nowadays retail traders regard favorably to electronic authorizations (via Telephone/Internet). This type of transaction is known as ‘Card/Cardholder Not Present (CNP)’ transaction and is extensively accepted worldwide. The merchants can ensure the validity of the card with the help of the ‘Electronic Verification Systems’. ECommerce is also utilized for the purpose of verification (cardholders’ validity/acceptance, security code, address etc). The cardholder will be updated with the purchases made, owing amount, etc. every month so that he can enquire about the erroneous charges (Ref: ‘FAIR BILLING ACT’- US regulations). The customer must clear a fair amount of his debts on or before the due date mentioned in the statement.
Traditional Transactions : EndorsementThe Credit Card number, transaction type and the sum owed is acquired from the user by the merchant who surrenders it to the acquiring bank. The acquiring bank verifies the above details and holds back the card’s credit bounds for the merchant. An Endorsement will engender an authorization code that is accumulated by the merchant in addition with the transaction.
Grouping : The acquirer lays up endorsed Credit transactions in “groups/batches” that are generally proposed at the last part of the business day. Those transactions that are not proposed in groups will be applicable for a short amount of time and will be restored to the customer’s remaining credit.
Reimbursements :The Credit card association charges the credit distributor and helps in the financial standing of the acquirer. In a transaction, the acquirer is benefited by the issuer.
Finance :The acquirer, once received the debt, forfeits the retailer. The retailer will be given the total financial amount involved in the transaction excluding the “discount rate” that acts as the processing fee for the acquirer.
Charge Backs : The cardholder will usually be the initiator for the event of ‘Chargeback’. If a certain amount of debt is being detained due to a disagreement, it is a Chargeback. In this event, the credit provider sends the payment back to the acquirer for solving, who in turn sends it to the retailer or tests it.
TYPES OF CREDIT CARDS:
BUSINESS CREDIT CARDS :A Business Credit card helps the business owner to differentiate professional and personal expenditures. This type of credit card bestows further more services and prospects than the individual credit card. This credit card helps us have an updated record on our expenditures.
STUDENT CREDIT CARDS : A lot of credit providers distribute Student Credit cards with low credit limit and less concession. The main motive is to help students keep their expenses in control dispute while repaying.
CREDIT CARDS FOR BAD CREDIT : A Credit card can be procured even with bad credit. These types of cards are distributed with a strange limitation- the interest rate will be higher than the credit limited. Certain other limitations are to have a savings or some type of account to pay the expenses of the card.
CASH BACK CREDIT CARDS : Numerous Credit providers motivate us by offering cash back Credit cards. This offer is based on the usage of the card and the availability of balance. Companies like Sears will give you clear off purchase while some others might give you 1% off your balance. Choosing this credit card is a fashionable option.
Thus, Credit cards are a very useful tool in today’s world for managing our expenses, online transactions, cash-back incentives etc. Using a Credit card has become one of the smart ways of living life.