Repair Your Credit Profile

What is really a Credit card?

Put plainly, a charge card is just a small piece of plastic that easily fits in your wallet. Well, it’s not ‘just a piece of plastic’; it is a really powerful piece of plastic which can be regarded as a compressed form of cash. We can define credit cards as a credit system that allows the customer to borrow money on the fly from a bank or a financial institution and use it to create payments towards the merchants. 

In order to obtain a charge card, the consumer needs to fill-in an application form that is really like an agreement between the charge card supplier and the charge card consumer. The credit card supplier approves the application form and provides the consumer with a little piece of plastic (i.e. the charge 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 charge card). This information is used for authorising payments whenever the customer uses the charge card. The customer can use the charge card for purchasing at merchant outlets or about the internet etc. Of course, this is subject to merchant’s capability to accept credit card payments. Accepting the credit cards is, nevertheless, not enough. The merchant should be able to accept payments made via the charge card provided by that charge card organization (of which you hold the charge card) i.e. VISA, MasterCard etc.  You can also use credit card to withdraw money from ATMs (automatic cash machines) – also known as money machines or Day/Night machines.

There are eight primary charge card organisations and most of them operate in a lot of countries world wide. These are American Express, Citi, Diners Club, Discover, JCB, MasterCard and VISA. Master card and VISA are probably the most well-liked ones.  Then there are credit card suppliers or issuers who have tie-ups with these organisations and issue credit cards on their behalf e.g. you’ve numerous banks that issue VISA cards (like HSBC VISA card)

To create a payment using a charge card, the credit card has to be either swiped into special credit card processing machine (when shopping in person at shops) or the details from the charge card need to be entered about the merchant’s web site (when purchasing online).  The credit card supplier sends across the bill for these transactions towards the customer who is then required to pay either the full quantity or a partial (minimum) quantity. If you pay in full, the credit card supplier doesn’t charge any interest on the quantity you owe, otherwise the pre-agreed interest rate is charged. If you don’t pay even the minimum, you may land up with a late fee too. Moreover, the charge card supplier generally puts a limit about the maximum amount you can spend per month using your charge card.

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