Article Navigation

Credit Cards

Simply put, a credit card is a small piece of plastic that easily fits nicely in your wallet. Well, it’s not ‘just a piece of plastic’; it’s a very powerful piece of plastic which can be considered a compressed form of cash. We can define reward credit cards as a credit system that allows the consumer to borrow money on the fly from a bank or a financial institution and use it to make payments to the merchants for goods.

In order to obtain a credit card, the consumer needs to fill-in a reward credit card application that is actually like an agreement between the credit card provider and the reward credit card consumer. The reward credit card provider approves the application and provides the consumer with a small piece of plastic (i.e. the reward credit card). This plastic (or credit card) contains electronically encoded security information in the form of a magnetic strip (which is generally located at the back of the reward credit card). This information is used for authorising payments whenever the consumer uses the credit card. The consumer can use the credit card t build rewards, for shopping at merchant outlets or on the internet etc. Of course, this is subject to merchant’s capability to accept reward credit card payments. Accepting the credit cards is, however, not enough. The merchant should be able to accept payments made through the credit card provided by that credit card organization (of which you hold the credit card) i.e. VISA, MasterCard etc. You can also use reward credit card to withdraw cash from ATMs (automatic cash machines) – also known as cash machines 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, American Express, Citi, Diners Club, Discover, and JCB. Master card and VISA are the most popular of those. Then there are credit card providers 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 provider 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 reward credit card provider doesn’t charge any interest on the amount you owe, otherwise the pre-agreed interest rate is charged. If you don’t pay the minimum, you might land up with a late fee too. Further, the reward credit card provider generally puts a limit on the maximum amount you can spend per month using your reward credit card.

.