Credit card Work
How credit card Work?
A user is issued a credit card after an account has been approved by the credit provider with which the user will be able to make purchases from merchants accepting that credit card up to a pre-established credit limit.
When a purchase is made, the credit card user agrees to pay the card issuer.The card holder indicates their consent to pay, by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a PIN.
Electronic verification systems allow merchants to verify that the card is valid and the credit card customer has sufficient credit to cover the purchase in a few seconds, allowing the verification to happen at time of purchase. The verification is performed using a credit card payment terminal or POS system with a communications link to the merchant’s acquiring bank. Data from the card is obtained using from a magnetic stripe or chip on the card; the later system is commonly known as Chip and PIN, but is more technically an EMV card.
Each month, the credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed.he credit provider charges interest on the amount owed (typically at a much higher rate than most other forms of debt). Some financial institutions can arrange for automatic payments to be deducted from the user’s accounts.
Low interest credit cards or even 0% interest credit cards are available. The only downside to consumers is that the period of low interest credit cards is limited to a fixed term, usually between 6 and 12 months after which a higher rate is charged. However, services are available which alert credit card holders when their low interest period is due to expire. Most such services charge a monthly or annual fee.
