Credit Cards

Credit cards have become an everyday part of the lives of millions of people today all around the world, it is a system of payment named after the small card (plastic) issued to users of a system usually implemented by the local banks or credit unions.

The difference between a credit card and a debit or charge card is that after a purchase is made the debit or charge requires the balance to be paid either immediately from a bank account or in full at the specified date on the agreement each month. A credit card allows the user up to 30 days free credit if paid in full or for a minimum payment each month, credit on the purchases made, interest is calculated and then added to the balance by the issuer.

After an account has been approved by the credit provider, the cardholders can use the credit card to make purchases at shops and merchants that accept that type of card.

Certain cards such as Visa and MasterCard are accepted by millions of places all around the world. Some of the advantages of a credit card is that the user does not pay the shop directly when using the card, there is no need to carry cash for purchases, large and expensive items can be bought easily, payments are made at a later date and the balance can be paid off over a number of months if necessary.

When the user purchases an item the credit card user agrees to pay the card issuer that amount. The cardholder has indicated their consent to pay by signing a receipt which has a record of the purchase amount and card details. This can also be done by entering a Personal identification number or PIN number or by verbal authorizations via telephone and quite often through electronic authorization (this can be used as a cardholder not present or CNP when ordering items on the Internet or over the telephone).

Each month the user is sent a statement, this shows the cardholders details and card numbers including the credit limit of the card, the purchases undertaken with the credit card and the amount of each individual purchase, any outstanding amounts are also shown along with the total amount owed and the minimum payment required.

If the cardholder believes that any of the purchases are incorrect or the amounts are incorrect they may contact the issuer to challenge those transactions. The cardholder must pay the defined minimum payment of the bill by the due date given on the statement. They may also choose to pay a higher amount up to the entire amount owed. Usually the credit card issuer does not charge interest if the total amount is paid. If the full payment is not made the credit provider charges interest on the outstanding balance from the date of each purchase. The interest rates are different for each credit card issuer and this rate as well as transfer rates help potential customers to choose a card that is suitable for their needs.