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Card Credit Service - How Do Credit Card Services Work?

cards technology charge payment

Cash is becoming less and less common in an increasingly digital world. Over the past few decades, physical money has been slowly replaced by credit card services.

First of all, a credit card is a means of payment that implements a specific technology. Generally, those who receive credit card service will be issued a plastic card. This card can be swiped through an electronic reader at different retailers as a means to make payment for goods or services. The information from the card will be transferred via a magnetic strip on the back of the card when it is passed by the reader.

Alternatively, credit cards in certain other countries use a technology that implements a plastic card together with a computer chip. Using this variant of the technology, the computer chip communicates with a retail service terminal. The card owner will them have to provide a four digit PIN number to verify ownership of the card. This variant of the credit card is commonly used in the United Kingdom.

However, the presence of the physical card is not required for all transactions. For example, online transactions at online retail stores usually only require the credit card number imprinted on the front of the card, a three digit security number printed on the back of the card, the full name of the card owner, and the expiration date of the card. Actual use of the magnetic strip is not required for purchases made this way over the internet.

However, this kind of technology is often used for alternative forms of payment as well. For example, a debit card will most usually implement the same kind of plastic card with magnetic strip as a credit card does. However, a debit card works more like a checking account. Charges made to the debit card will be deducted from a checking account at a bank.

Another use of the technology is for something referred to as charge cards. The terminology of charge card is sometimes used interchangeably with the term credit card. However, in regards to financial products, a charge card specifically refers to a kind of card used to charge purchases that must be paid in full every month.

A credit card refers to a financial process that is distinct from both these forms of payment that implement the same technology. Much like charge cards, a credit card is used to purchase goods or services by creating debt that must be paid back. However, unlike a charge card, what is charged to a credit card does not have to always be paid back in full. The balance can be paid in full. However, if it is not, interest charges will be made. These interest charges are the main way that companies who offer credit card services make money.

How this interest is charged to the user of the credit card will be defined in the contract that the credit card user agreed to when applying for the use of the card. A typical situation, however, would be the case of a person who charged $500 to a card. If the $500 is paid off in full during that payment period, the credit card user will receive no charges. However, if he or she fails to pay back even $2 of that amount, the credit card owner will likely be charged interest on the entire $500 purchase.

Typically, credit cards come in two distinct forms. These include secured credit cards and unsecured credit cards. Generally, the kind of card offered to an individual will depend on that person’s credit score. A credit score is a kind of rating a person receives based on an analysis on his or her credit history.

A secured credit card is offered to individuals with poor credit ratings. It will also require a cash deposit be made that is equal to that card’s credit limit. This deposit is made to insure against a scenario in which the credit card user does not make payments on his or her purchases.

An unsecured credit card, however, does not demand this kind of deposit. Unsecured credit cards are only offered to individuals who have good credit scores. The credit score assures the issuer of the card that the credit card owner is likely to make the appropriate payments when due.

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