Credit Cards

Credit card, the term is not unfamiliar to anybody and is right now the most widely used form of payment for purchases on the net. A credit 'card operates by extending a buyer credit at the time of purchase, with the actual payment occurring later through a monthly bill. Visa and Master card are two major players in the credit card market worldwide. In a credit card, a buyer has, a fixed limit till whick he can spend.

The card issuing bank while registering assesses this. limit. Charge cards work essentially in the same way. But for the difference that there is no limit on how much a user can spend through a charge card. In credit cards a user can extend the credit on his purchases, although he would have to pay the interest on it. Charge card payments have to be made within the stipulated time period and there can be no extension of credit. Because there is no operational difference between the two for the, purpose of understanding, we will study them as one. Debit cards on the other hand, do not extend any credit to the consumer. Instead, they are linked to an account of the user with the bank and any purchases by him are immediately debited from the account.

Let us now examine the various terms that are a part of the whole process of card payments.

Consumer Credit: The payment cards in most cases (except debit cards), extend a credit to the cardholder., This credit may vary from bank to bank, but is generally between 30 to 50 days. There are no extra charges to the cardholder, then those at the time of registration. Of course if the cardholder fails to pay up his bins in the stipulated time, he would have to pay the interest on the credit balance.

Immediate payment:Have you ever thought, what happens once you have left the shop after signing the bill on your shop. Like, when does the merchant get paid? Actually, these transactions are paid up almost immediately to the merchant; say in at the most a day or two. This rapid payment helps the merchant in reducing the cost of inventory. Insurance: The cardholder is insured against loss. If in the event of theft of the card, the cardholder notifies the bank. The card is immediately disabled and no possible transactions can be made on it.

Financial Clearinghouse: Perhaps the biggest advantage and the most difficult to achieve is the inter bank working. Even if the cardholder's bank is different from the merchant's bank, credit cards will work. This makes commerce much more convenient for both the parties.

Global Service: Credit cards have an in built functionality to handle multiple currencies. Which in simple terms means that a cardholder can pay any merchant in his currency, and receive the bill in his desired currency.

Record keeping: The credit card issuing bank sends monthly bills to all its cardholders, which makes counter checking easier for both bank and consumers.

Customer service and dispute resolution: In case of any dispute with the merchant, the cardholder can complain to his card issuer. The merchant's acquiring bank can stop or reverse payment to the merchant, which gives a lot of power to the consumer.

Enable merchant trust: Consumers invariably like to buy from merchants who accept cards. Accepting cards, to a great degree add credibility to the merchant's image. A customer always has this in the back of his mind that whenever he has any trouble down the line, the card issuing bank is there to resolve it.

Enable consumer trust: While talking of business on the net, a merchant can always trust a customer with a credit card. Provided the card is valid, he is always sure to get paid. This greatly facilitates commerce.

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