What is credit card and how it works?

Credit Card

We all know that how the importance of money in our daily life? But we ever think that how the online money transaction works & how can we send money or withdrawal money in seconds?

A credit card is a card given to the cardholders to pay the amount to the merchants for purchasing goods and taking other services from the card. Users have a limit to use this card for debt and it takes extra charges for extra service. 

About credit card
about  credit card 

About credit cards?

The credit card is the size of a thin rectangle shape and it is made of plastic and metal which is issued by finance institutions. A credit card is linked to the bank account of a cardholder and when a cardholder swipes a debit card, this money is deducted from his account, and in case, the money is taken from your pre-approved limit. The card limit is decided by the institution issuing the card based on the credit score and history. This card is also used in online transactions. A credit card detail is always secured with the card user. 

Types of credit card

There are many types of Credit Card as mentioned below according to their work.

types of credit card
Types of credit card 

  • Travel Credit Card
  • Shopping Credit Card
  • Reward Credit Card

How a credit card issued

The bank-issued credit cards such as Visa and MasterCard and for travel and entertainment which is also called charge cards such as American Express or Diner's Club. The minimum payment has to pay a cardholder per month is the smallest amount of money to keep the account in good standing. In a Credit card, the Credit limit is given to the cardholder by the Credit card issuer and its credit limit is the maximum amount that can be borrowed by the cardholder. Instead of giving the full loan in cash to the cardholder, the card issuer lets him(cardholder) take as much of the credit limit as he wants at a given time. As a cardholder pays off what he borrowed, he can borrow again.

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Working on a credit card

When a cardholder has to purchase at a brick and mortar retailer, then he(Cardholder) has to insert the credit card into a card reader so there is a security chip on the card that can be read. 

working of credit card
working of credit card

A cardholder has to be asked to enter his billing ZIP code. And anywhere at an online retailer, Card number, Expiration date, Security code(which is on the backside of the card), Name, and billing address will be asked to the cardholder. When a cardholder swipes the credit card to purchase goods and taking another service, the merchant's credit card terminal asks the credit card issuer whether the card is valid and has enough available credit. After it, the Credit card issuer sends back a message whether the transaction is approved or declined. If the transaction is approved, then the cardholder can make a purchase and if the transaction is declined, then the Credit card may be deactivated due to unusual purchases.

sequrity in credit card

A credit card is a bit like a loan. An issuer gives money on the credit and a cardholder can purchase goods and taking another service from them. But at the end of the payment period, the bill of credit card has to be paid by the cardholder. If a cardholder doesn't pay the entire credit card amount, he has to pay interest on the loan amount. The credit card also offers many conveniences and allows a cardholder to save money through cashback offers and rewards. So in easy words, a Credit card is neither good nor bad. It must be used with care.

Thanks for Reading

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