Credit Cards

Unless you`ve been living in a cave you know that a credit card is a small piece of plastic that easily fits can be considered a form of cash. We can define credit cards as a credit method that allows the consumer to borrow money from a bank or a financial institution and use it to make payments to merchants for goods.

In order to obtain a credit card, the consumer needs to apply for a credit card. This becomes an agreement between the credit card company and the credit card consumer. The credit card company approves the application and provides the consumer with a small piece of plastic (i.e. the credit card). This plastic (or credit card) contains electronically encoded security information in the form of a magnetic strip (which is most likely located at the back of the credit card). This info is used for authorising payments when the consumer uses the credit. The consumer can use the credit for shopping at merchant outlets or on the internet stores etc. Of course, this is subject to merchant’s capability to accept credit card payments. Accepting the credit card is not enough, the merchant should be able to accept payments made through the credit card provided by that credit card company (of which you hold the credit card) i.e. VISA, MasterCard etc. You can also use credit card to withdraw cash from ATMs (automatic cash machines) – also known as ATM or Day/Night machines.

There are eight main credit card organisations and most of them operate in a lot of countries world wide. These are MasterCard, VISA, AMEX, Citi, Diners Club, Discover, and JCB. Master card and VISA are the most popular of those. Then there are credit card suppliers or issuers who have tie-ups with these organisations and issue credit cards on their behalf e.g. you have various banks that issue VISA cards (like HSBC VISA card)

To make a payment using a credit card, the credit card has to be either swiped into special credit card processing machine (when shopping in person at shops) or the details of the credit card have to be entered on the merchant’s website (when shopping online). The credit card company sends across the bill for these transactions to the consumer who is then required to pay either the full amount or a partial (minimum) amount. If you pay in full, the credit card supplier doesn’t charge any interest on the amount you owe, otherwise the pre-agreed interest rate is charged. The credit card company always puts a limit on the maximum amount you can spend per month using your credit card so be sure to know your limit and stay under this when shopping.