Credit Card:

Credit card is an electronic payment system normally used for retail transactions. A credit card enables the bearer to buy goods or services from a vendor, based on the cardholder’s promise to the card issuer to payback the value later with an agreed interest. Every credit card account has a purchase limit set by the issuing bank or the firm. A credit card is different from a debit card where the credit card issuer lends money to customer instead of deducting it from customer’s bank account instantly.

The term credit card was first mentioned in 1887 in the sci-fi novel “Looking Backward” by Edward Bellamy. The modem credit cards concept was bom in the U.S.A, in the 1920s, when private companies began to issue cards to enable their customers to purchase goods on credit within their own premises.

The term credit card was first mentioned in 1887 in the sci-fi novel “Looking Backward” by Edward Bellamy. The modem credit cards concept was bom in the U.S.A, in the 1920s, when private companies began to issue cards to enable their customers to purchase goods on credit within their own premises.

Advantages of credit card:

1. Most credit cards are accepted worldwide.

2. It is not necessary to pay physical money at the time of purchase. The customer gets an extra period to pay the purchase.

3. Depending on the card, there is no need to pay annuity.

4. Allows purchases over the Internet in installments.

5. Some issuers allows “round up” the purchase price and pay the difference in cash to make the transactions easy.

Key players in operations of credit card:

1. Bearer:

The holder of the credit card account who is responsible for payment of invoices in full (transactor) or a portion of the balance (revolver) the rest accrues interest and carried forward.

2. Merchant:

Storekeeper or vendor who sell or providing service, receiving payment made by its customers through the credit card.

3. Acquirer:

Merchant’s bank that is responsible for receiving payment on behalf of merchant send authorization requests to the issuing bank through the appropriate channels.

4. Credit Card Network:

 It acts as the intermediate between the banks. The Company responsible for communicating the transaction between the acquirer and the credit card issuer. These entities operate the networks that process credit card payments worldwide and levy interchange fees.

E.g. Visa, MasterCard, Rupay

5. Issuer:

Bearer’s bank, that issue the credit card, set limit of purchases, decides the approval – of transactions, issue invoices for payment, charges the holders in case of default and offer card-linked products such as insurance, additional cards and rewards plan.