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About credit
cards
1. How credit cards work
2. Interest charges
3. Benefits to customers
4. Grace period
5. Benefits to merchants
6. Parties involved
7. Transaction steps
8. Rewards
9. Fees charged to customers
10.Credit cards in ATMs
11.Tips
12.Types of cards in INDIA
Credit cards
A credit card is part of a system of payments after the small plastic
card issued to users of the system.
It is a card entitling its holder to buy goods and services based on
the holder's promise to pay for these goods and services.
The issuer of the card grants a line of credit to the consumer (or the
user) from which the user can borrow money for payment to a
merchant or as a cash advance to the user.
Credit
cards
Credit card
numbering
The card number's
This is the first six digits for MasterCard and Visa cards.
The next nine digits are the individual account number.
And the final digit is a validity check code.
In addition to the main credit card number, credit cards also
carry issue and expiration dates (given to the nearest month),
as well as extra codes such as issue numbers and security
codes. Not all credit cards have the same sets of extra codes nor
do they use the same number of digits.
Credit card
numbering
An example of the reverse side of a typical
credit card:
Magnetic Stripe
Signature Strip
Card Security Code
ii.
Benefits to customers
The main benefit to each customer is convenience.
Compared to debit cards and cheques, a credit card allows
small short-term loans to be quickly made to a customer
who need not calculate a balance remaining before every
transaction, provided the total charges do not exceed the
maximum credit line for the card.
Credit cards also provide more fraud protection than debit
cards.
In the UK for example, the bank is jointly liable with the
merchant for purchases of defective products over 100.
Benefits to customers
Many credit cards offer rewards and benefits packages,
such as offering enhanced product warranties at no cost,
free loss/damage coverage on new purchases, and points
which may be redeemed for cash, products, or airline
tickets.
Additionally, carrying a credit card may be a convenience
to some customers as it eliminates the need to carry any
cash for most purposes.
Grace period
A credit card's grace period is the time the customer has to
pay the balance before interest is assessed on the
outstanding balance.
Grace periods vary, but usually range from 20 to 50 days
depending on the type of credit card and the issuing bank.
Usually, if a customer is late paying the balance, finance
charges will be calculated and the grace period does not
apply.
Finance charges incurred depend on the grace period and
balance; with most credit cards there is no grace period if
there is any outstanding balance from the previous billing
cycle or statement (i.e. interest is applied on both the
previous balance and new transactions).
However, there are some credit cards that will only apply
finance charge on the previous or old balance, excluding
new transactions.
Benefits to merchants
For merchants, a credit card transaction is often more
secure than other forms of payment, cash, because they
discourage theft by the merchant's employees and reduce
the amount of cash on the premises.
For each purchase, the bank charges the merchant a
commission (discount fee) for this service and there may be
a certain delay before the agreed payment is received by the
merchant.
The commission is often a percentage of the transaction
amount, plus a fixed fee (interchange rate).
Some small merchants require credit purchases to have a
minimum amount to compensate for the transaction costs.
Parties involved
Parties involved
Merchant account: This could refer to the acquiring bank
or the independent sales organization, but in general is the
organization that the merchant deals with.
Credit Card association: An association of card-issuing
banks such as Visa, MasterCard, Discover, American
Express, etc. that set transaction terms for merchants, cardissuing banks, and acquiring banks.
Transaction network: The system that implements the
mechanics of the electronic transactions. May be operated
by an independent company, and one company may
operate multiple networks.
Rewards
Fees charged to
Late payments or overdue payments
customers
Charges that result in exceeding the credit limit on the
Types of cards in
INDIA
Premium Credit Cards
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