Credit Cards : Simplified : Credit Card

1516 WordsNov 6, 20147 Pages
Credit Cards – Simplified What is credit card? A credit card is one of the most simple and convenient modes of payment. Borrowing from the definition in Wikipedia, ‘It allows the cardholder to pay for goods and services based on the holder 's promise to pay for them. The issuer of the card creates a revolving account and 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 are examples of how power can be vested in as small a thing as an 85.60 × 53.98 mm plastic card with a magnetic stripe embedded in it. Contents of the card and their significance- How the system works- 300 Transaction steps Authorization- The cardholder gives the card as payment. The merchant submits the transaction to the concerned bank. The bank verifies the card details and the amount after which an approval code is generated. Batching- Authorised transactions are kept in ‘batches’ which are sent to the acquirer at a fixed period of time usually once in a day. Clearing and Settlement-The batch transactions are sent by the acquirer through the credit card association which debits the issuers for payment and credits the acquirer. Funding- The acquirer in return pays the merchant for which he gets the processing fee. Chargebacks- Sometimes, the money in the merchant account is held due to a transactional dispute mostly initiated by the cardholder. In the event of a chargeback, the issuer

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