Introduction of Credit Cards
When coming to Credit Cards, Banks provide numerous facilities for people all over the world. It is an organization where people can invest their savings and can borrow money for loans and mortgages.
To know more about the regulation and working of banks refer to my blog banking system in India. One of the basic facilities that are provided by banks all over the world is the facility of credit cards.
A credit card is usually made up of plastic or metal which may be stainless steel, gold, titanium, etc.
A credit card is a card issued by the bank for the users to facilitate the user to borrow the amount of money over the specific amount of balance in the account. The cardholder can pay money to any merchant or company for goods and services availed based on the cardholder’s accrued debt.
The card issuer which is usually a bank or financial union offers credit to a certain extent which the cardholder can use for payment. The cardholder cannot withdraw an amount over the line of credit.
The credit card indicates hints of identification such as a signature or picture of the cardholder on which he/she can withdraw money from the card issued. The credit card also includes the card number, issuing bank logo, EVM chip, expiration date, Hologram, etc.
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There are different types of Credit Cards:-
- Secured credit card
- Business credit card
- Digital credit card
- Prepaid card
Secured credit card
It is a type of credit card which is secured by a deposit account possessed by the cardholder.
Business credit cards
These cards are issued by financial institutions to certain entities, organizations or companies. The amount is solely used for performing business transactions.
Digital credit card
It is a virtual representation of an identification card or payment card such as a credit card.
Prepaid credit cards
They are also known as debit cards in which the cardholder can withdraw money that is contained in the account. No credit is allowed on this type of card.
The idea of using cards for purchases was provoked by Edward Bellamy in 1887 in his novel Looking backward? The use of credit cards commenced in the 1920s, United States. Although the use of credit cards is now extremely common in developed nations, still many underdeveloped nations rely on cash-oriented transactions.
Understand the parties that are involved in transactions through Credit Cards
The person who has requested the issue of the credit card on behalf of the account opened in any bank or financial institution. The cardholder is eligible to purchase through his/her credit card.
It is any bank or any financial organization that gives the facility of credit to its customers. It bears the risk if the card is used fraudulently.
It can be an individual as well as an organization that provides goods or services to the cardholder. The cardholder pays the expense to the merchant through the credit card.
The financial institution accepts payments from the cardholder’s organization for the goods and services availed by him. This bank regulates the account of the merchant.
There is various card association that executes transaction terms on behalf of the merchant, card issuer, or acquiring bank. Some prominent card associations are MasterCard, Discover, VISA, American Express, etc.
Thus the credit card can be used as the currency of the owner which helps in day-to-day transactions. Although India is a developing nation the demand for credit cards and transactions through credit cards is boosting day by day.
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