Credit cards are one of the most popular payment mediums in the the world today. 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 with a particular credit limit.
Credit Card Facts
A credit card is a popular transaction medium. By using a credit card, customers can purchase items and consumer goods on credit, with a specific credit limit.
A credit card is not similar to a debit card because after the usage of a credit card, cash is not transferred from the customer's account following each transaction.
There are no similarities between a credit card and a charge card. In the case of a charge card, the total balance is required to be paid every month. A credit card offers the option of revolving the balance against charging some interest. Credit card payment arrangements are being adopted in the majority of countries throughout the world. Some credit cards may 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 a 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 any service on credit subject to a specific credit limit. After purchases or any service, 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. Next, the credit cardholder enters into an agreement to repay the credit card issuer. If the payment is paid within a grace period of 20 or 30 days, no interest is charged by the credit card issuer. If the payment is received after that, interest is payable by the credit card holder.
Parties Involved in a Credit Card Transaction
Following are parties involved in a credit card transaction:
- Credit card holder or the customer
- Merchant or establishment, which accepts credit card
- 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, the company the merchant deals with.
- Affinity Partner, such as universities, sports teams, and charitable organizations.
- Transaction Network, 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.
