
CREDIT
CARD
A credit card is a payment card issued to users (cardholders) to enable
the card-holder to pay a merchant for goods and services based on the
cardholder's promise to the card issuer to pay them for the
amounts so paid plus the other agreed charges. The card issuer
(usually a bank) creates a revolving account and grants a line of
credit to the card-holder, from which the card-holder can borrow
money for payment to a merchant or as a cash advance. In other words,
credit cards combine payment services with extensions of credit.
Click
Here to
apply Now
Credit
Card Repayment Calculator
SIX
THINGS YOU MUST KNOW BEFORE APPLYING for CREDIT CARD
-
Your
Income is an important parameter for Credit Card Eligibility
-
Existing
relationship with bank fastens the process
-
Your
past credit history matters [Click
here to
generate your FREE CIBIL Score in 3 Steps]
-
Be
clear about the purpose of credit card
-
FREE
vs. Annual Fee credit card
-
You
can also get a credit card against a Fixed Deposit
TRANSACTION STEPS
Authorization:
The cardholder presents the card as payment to the merchant and the
merchant submits the transaction to the acquirer (acquiring bank).
The acquirer verifies the credit card number, the transaction type
and the amount with the issuer (card-issuing bank) and reserves that
amount of the cardholder's credit limit for the merchant. An
authorization will generate an approval code, which the merchant
stores with the transaction.
Batching:
Authorized transactions are stored in "batches", which are
sent to the acquirer. Batches are typically submitted once per day at
the end of the business day. If a transaction is not submitted in the
batch, the authorization will stay valid for a period determined by
the issuer, after which the held amount will be returned to the
cardholder's available credit (see authorization hold). Some
transactions may be submitted in the batch without prior
authorizations; these are either transactions falling under the
merchant's floor limit or ones where the authorization was
unsuccessful but the merchant still attempts to force the transaction
through. (Such may be the case when the card-holder is not present
but owes the merchant additional money, such as extending a hotel
stay or car rental.)
Clearing
and Settlement:
The acquirer sends the batch transactions through the credit card
association, which debits the issuers for payment and credits the
acquirer. Essentially, the issuer pays the acquirer for the
transaction.
Funding:
Once the acquirer has been paid, the acquirer pays the merchant. The merchant receives the amount totalling the funds in the batch minus
either the "discount rate", "mid-qualified rate",
or "non-qualified rate" which are tiers of fees the merchant pays the acquirer for processing the transactions.
Chargebacks:
A chargeback is an event in which money in a merchant account is held
due to a dispute relating to the transaction. Chargebacks are
typically initiated by the card-holder. In the event of a chargeback,
the issuer returns the transaction to the acquirer for resolution.
The acquirer then forwards the chargeback to the merchant, who must
either accept the chargeback or contest it.

Parties Involved
Cardholder:
The holder of the card used to make a purchase; the consumer.
Card-issuing
bank:
The financial institution or other organization that issued the
credit card to the cardholder. This bank bills the consumer for
repayment and bears the risk that the card is used fraudulently.
American Express and Discover were previously the only card-issuing
banks for their respective brands, but as of 2007, this is no longer
the case. Cards issued by banks to cardholders in a different country
are known as offshore credit cards.
Merchant:
The individual or business accepting credit card payments for
products or services sold to the cardholder.
Acquiring
bank:
The financial institution accepting payment for the products or
services on behalf of the merchant.
Independent
sales organization:
Resellers (to merchants) of the services of the acquiring bank.
Merchant
account:
This could refer to the acquiring bank or the independent sales of the organization, but in general, is the organization that the merchant
deals with.
Credit
Card association:
An association of card-issuing banks such as Discover, Visa,
MasterCard, American Express, etc. that set transaction terms for
merchants, card-issuing banks, and acquiring banks.
Transaction
network:
The system that implements the mechanics of electronic
transactions. It May be operated by an independent company, and one
company may operate multiple networks.
Affinity
partner:
Some institutions lend their names to an issuer to attract customers
that have a strong relationship with that institution, and get paid a
fee or a percentage of the balance for each card issued using their
name. Examples of typical affinity partners are sports teams,
universities, charities, professional organizations, and major
retailers.
Insurance
providers:
Insurers underwriting various insurance protections offered as credit
card perks, for example, Car Rental Insurance, Purchase Security,
Hotel Burglary Insurance, Travel Medical Protection etc.
The the flow of information and money between these parties — always
through the card associations — is known as the interchange, and it
consists of a few steps.
Pros
You
don't have to carry a large amount of cash all the time
Purchasing
power increases because of the higher credit limit being offered to
customers
Almost
all major establishments accept credit cards
You
can buy things online
Credit
cards also serve those who frequently travel internationally
Cons
Uncontrolled
spending can result in a bad financial situation
Credit
cards are prone to security issues when spending online
Credit
cards impose high interest rates and other applicable fees. So if you
do not make the payments as soon as possible, you might end up paying
more than the price of the item or service you purchased.