A credit card is one of the payment methods and it allows you to pay for goods in brick-and-mortar, as well as on the internet. What do you need to know about credit card? Read the post to find out more.
Credit card is given to a cardholder usually by bank or financial institution affiliated with the card association. With this card you can pay for goods and services, without money and balance transaction on credit, based on the cardholder’s promise to pay back.
The credit card issuer also create a revolving account and give cardholder access to line of credit, from with the cardholder can borrow money to make his/her transactions as a cash advance. This institution is also the one that establishes the credit limit available to the credit card.
Credit cards have a standard size, according to the ISO/IEC 7810 ID-1 standard, and it’s usually 85.60 mm × 53.98 mm, including rounded corners with a radius of 2.88–3.48 mm. So, it’s the same size as ATM and other payment cards.
The credit card contains a printed or embossed Card number, Card Security Code, Cardholder Name, Expiration Date – all together called the credit card information plus the credit card also carries the Issuing Bank and Card Network Logo. Many modern credit cards have a computer EMV chip embedded in them as a security feature.
In applying for a credit card, the card issuer uses two decisive aspects to determine the application approval and the credit limit to it. They are:
- Credit history: the credit card issuer checks the credit history of the applicant to see if the applicant is trustworthy. Having a low credit score or rating could result in a refusal.
- Income: the applicant income is also check to weight the person’s ability to pay off his debts. This may also determine the credit limit allow on the credit card.
A credit card does not function like the charge card which requires the cardholder to fully repay the amount in debt every month. In contrast, credit cards allow the consumers a continuing balance of debt by paying the designated minimum amount and failure to make the monthly minimum payment will subject to interest being charged. Credit card issuers however usually waive interest charges provided that the cardholder paid the amount in debt in full each month or within the interest-free period.
On approval of a credit card, a revolving account is created by the issuer in which the cardholder transaction will be registered with the outstanding balance on the credit card. The issuer use this account to provide information regarding the due date and the minimum payment for the month.
Benefits of using credit card
Although, credit cards are primarily used for short term financing, and it also has some other benefits such as:
- Credit cards offer an easy way to get access to instant credit
- Credit cards are generally acceptable in both online and offline transaction and across the world
- They can also be used for online or telephone shopping
All in all, choosing credit card is a convenient way to pay online, and nowadays it is the most popular payment method. It’s good to know what’s behind the credit card term.