How Does A Credit Card Work?

Statistics reveals that every American on an average have 2 credit cards with them. What made them to sign up for the credit cards? Of course it is a convenience factor. Unlike the past years when we need to carry large sum of money wherever we go, now carrying the cash became very easy with the credit and debit cards.

If you have a card just choose whatever you want and hand in the products and card to the merchant. Shopping made easy! Isn’t it?

Apart from the portability many credit card offering banks offer the features like cash back offers (mostly 1%), 0% interest credit, discount offers on the selected shops and the reward points for the timely payments.

So all these features make the people to use the credit card rather than prepaid cards. So are you eager to know “how does a credit card work “when I hand in my credit card to the merchant? Let’s learn now.

When you finish your purchases and submit the credit card to the cashier of the store he swill swipe it in the merchant’s electronic system known as POS or point of sale system.

This POS will be directly connected to the merchant’s bank through the communication link. When connected to the merchant’s system, this POS will help in the process of verifying the inputted data by making use of the electronic verification method.

During the verification your card validity and whether your card has the sufficient balance to pay off the current purchase will be verified. This information will be available at the magnetic strip which can found at the back of your credit card.

During the process these inferred data will be send out to the merchant’s bank in turn they will transmit the data to the card holder’s bank. Now your banker will check the information and will authorize the payment if everything is in order. When the authorisation information is transmitted back to the merchant’s bank, they will reduce the amount from the card’s credit limit so they will reimburse the amount later on to the merchant.

The verification process will generate one approval code which is send to the merchant.  When 2 charge slips are generated by the POS, cashier will key in the code. So what is this charge slip? It is actually an agreement that states you are liable to pay the purchased amount to your card issuer. You will be asked to sign in one of the copy and you can carry the remaining copy along with your purchase.

Typically thousands of people will make credit card payment. Whenever credit card purchases are made the POS will generate a charge slip. These all will be collected and submitted to the merchant bank at the end of every single day. These slips will then be sent to your card issuer bank for the record keeping.

So now you know how does a credit card work. If you are interested in getting the one for you should make credit card comparisons by considering so many factors.

Although everyone who has crossed their 18 can apply for the credit card, getting the first credit card is not an easy one.  When you fail to obtain the standard credit cards try to apply for the easy approval credit cards.

If you have a poor credit or bad credit then getting the unsecured credit card is one of the toughest task that anyone shouldn’t experience. But there are some companies which offer easy approval credit cards even with the bad credit. But these cards are designed to have a lower credit limit.  However since you are having a bad history or no history sign up for these cards or secure visa credit cards will help you in building the credit history.