Credit Cards

Credit cards are one of the most popular payment mediums in the contemporary world. A credit card is a major component of personal financial services and personal banking. Through credit cards, different consumer goods and costly household items can be bought on credit as per a particular credit limit.

About Credit Cards

A credit card is a popular transaction medium. By using a credit card, customers can purchase precious items and consumer goods on credit according to a specific credit limit.

A credit card is not similar to a debit card because after the usage of credit card, cash is not transferred from the customer's account following each transaction. Furthermore, there are no similarities between a credit card and a charge card. In case of a charge card, the total balance is required to be paid every month. On the contrary, a credit card offers the option of revolving the balance of the customers against the charging of some interest. The credit card payment arrangements are being adopted in the majority of countries all over the world. Some credit cards can also be used as ATM cards for withdrawing cash from ATM machines subject to a certain cash limit.

Configuration of a Credit Card

The majority of credit cards are of similar size and shape and this has been defined by the ISO 7810 benchmark. Credit cards are manufactured in the form of a small plastic card. The most familiar size of credit card is termed as ID-1 and the size is 85.60 × 53.98 cm.

How Credit Card Works

A credit card is issued to an individual after his application has been accepted by the credit card issuer. The cardholder can use the card for buying any commodity or availing any service on credit subject to a specific credit limit. After anything is bought or any service is availed, money is lent to the customer or the credit card holder for the purpose of paying the merchant. In other words, money is paid to the merchant by the credit card issuer on behalf of the credit card holder. Following this, the credit cardholder enters into an agreement to repay the credit card issuer. If the payment is done within a grace period of 20 or 30 days, no interest is charged by the credit card issuer. If the payment is done after that, interest is payable by the credit card holder.

Parties Involved in a Credit Card Transaction

Following are the parties that are involved in a credit card transaction:

•  Credit card holder or the customer

•  Merchant or establishment, which accepts credit card     payments

•  Card-issuing bank, which issues the credit card to the     customer

•  Independent sales organization (ISO), which are resellers     of the acquiring bank's services to the merchant

•  Acquiring Bank, which accepts the payment for the     commodities and services on the merchant's behalf

•  Merchant Account, this is the company the merchant is dealing with

•  Affinity Partner, such as universities, sports teams, and charitable organizations

•  Transaction Network, which is the arrangement that applies the techniques of computerized transactions.     Important transaction networks include VisaNet, Cardnet, Paymentech, Nova and Omaha.

•  Credit Card Association, which is an organization of credit card issuers and is responsible for     establishing terms and conditions of transactions.