Santa Claus comes around just once a year. In the meantime, there are Credit Cards.
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  • How Does a Credit Card Work? is Rated as "Excellent!" by 94196 Users

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    How Does a Credit Card Work?

    Credit cards have made it easy for a lot of people around the globe to make purchases on credit. It is a form of plastic money and can be used to make payments offline and online. It seems almost magical that by swiping a plastic card you can pay for products and services, but in actual there is advance technology and multiple players involved in making the whole credit card system work.

    The credit card functions differently for a cardholder and for the other parties.

    For a credit cardholder:

    When you apply for a credit card, the card provider will check if you are financially eligible to own it or not. If you are eligible, then based on the amount you earn, the bank or Credit Card Company will set a credit limit for you.

    Once you receive your credit card, you can use it to make payments on credit. By using this card, you are borrowing money from your card provider (Credit Card Company or bank). Every billing cycle you can use either the full credit limit or a portion of it. If you exceed your credit limit, you will have to pay a penalty.

    At the end of every billing cycle, the lender expects you to repay the amount you have borrowed. There is a fixed interest free credit period, within which the cardholder is supposed to pay either the full amount due or a part of it. Credit card providers generally specify the minimum amount that cardholders have to pay every billing cycle, to avoid being considered a defaulter.

    If the cardholders pay the full amount due, they do not have to pay any interest on their card. In case they pay only the minimum amount due or do not repay any money, then they will have to pay an interest on the outstanding balance and on the new purchases. The card provider will keep charging the interest until they pay the full outstanding balance.

    For the other parties:

    The other parties involved in the credit card system are:

    • Merchants or sellers – They use the POS (Point of Sale) Terminals to swipe the credit cards of the customers to get their money.
    • Payment Gateway – It is the online version of the POS machines used at retail outlets. The payment gateway authorises the purchases that are made using a credit card online.
    • Credit Card Issuers – These are the banks or Credit Card Companies that offer credit cards, collect the monthly bills and deal with the customers.
    • The Acquirer – It is the bank or financial institution that process the credit card payments on behalf of the merchants. The Acquirers provide the POS machines to the merchants.
    • Association or Network – It refers to the payment processing network, which collect information from the processors, authorizes and collects the payments for the purchases, etc. For example - Visa, MasterCard, American Express, etc.
    • Payment Processors – The payment processors take care of collecting the data and sending it to the Network. The right network is identified by the first and last digits of the credit card numbers.

    Process:

    When a cardholder swipes his/her credit card to make payment at a merchant outlet, a request is submitted by the merchant to the acquirer via a phone or network connection. The acquirer forwards this request to the card issuer to authorize the transaction. The card issuer has to check if the cardholder has enough credit available in his/her account to make the purchase. If yes, then an authorization code is sent by the issuer to the acquirer, who then approves the transaction and the purchase is made.

    A merchant does not swipe just one card on the POS machine in a day. Depending on the number of customers, there can be many requests sent by the merchant to the acquirer. So, in order to track the sales, merchants send the requests to the acquirer in batches through the card association or network to the issuers to get the payment. The association distributes the transactions according to the issuers. The issuers deduct the interchange fee and transfers the amount to the acquirer, who after deducting their share, sends the balance to the merchants. The transaction rates varies from merchant to merchant and is dependent on the transaction numbers, type, category, etc. The payment process is same in case of online purchases as well except that the payment are processed by payment gateways such as PayUMoney, VeriSign, etc.

    Credit Card Reviews

    • HDFC Bank Credit Card
      "Good card"
      0.5 4.0/5 "Great!"
      I have been using HDFC credit card for long time, they have not charge me any annual fee in this card and i am happy with my credit limit they have given me,and even i have applied for loan amount it was very easy to apply and and it is paperless approval bank, overall service is good.
      Was this review helpful? 0
      , new delhi
      Reviewed on Dec 13, 2018
    • Axis Bank Credit Card
      "Excellent card"
      0.5 5.0/5 "Blown Away!"
      I have been using Axis bank credit card for while,they have not charged me annual fee in this card, it is life time free credit card, and i am happy with my credit limit which they have given me in this card, there provide good offers in maximum products.
      Was this review helpful? 0
      , new delhi
      Reviewed on Dec 13, 2018
    • Bank Bazaar Credit Card
      "Good service"
      0.5 4.0/5 "Great!"
      I have been bank bazaar service for first time, and i came to know about bank bazaar service through on line , and i have been using website it is easy to access, there customer service is good, they have keep on follow up for my application,overall service is good.
      Was this review helpful? 0
      , new delhi
      Reviewed on Dec 13, 2018
    • IndusInd Bank Credit Card
      "Average card"
      0.5 3.0/5 "Satisfactory"
      I have applied for Indusind bank credit card recently, they have not charged me annual fee in this card, it is life time free credit card, and i am not happy with my credit limit they have given me very less credit limit i had expected up to 2,00,000 to 5,00,000 but they have just given me up to 75,000 only, i got card on time, there overall service is good.
      Was this review helpful? 0
      , new delhi
      Reviewed on Dec 13, 2018
    • Axis Bank Credit Card
      "Good Banking with Axis"
      0.5 5.0/5 "Blown Away!"
      It was near to my earlier place, the minimum balance maintenance around Rs. 25,000 on monthly basis. Axis is good, I don't think there is a limit for the online transaction but for the cash withdrawal upto Rs. 50k but I have not using that account hence I gave the request to close the account.
      Was this review helpful? 0
      , new delhi
      Reviewed on Dec 13, 2018
    • SBI Cards Credit Card
      "Excellent card"
      0.5 5.0/5 "Blown Away!"
      I have been using Sbi credit card from long time,they have charged me annual fee in this card up to 500 ,but there is waived off option available or not i have no idea, and i am happy with my credit limit they have given me in this card, they provide good offers in maximum products.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Dec 13, 2018
    • SBI Cards Credit Card
      "Not satisfied with the service"
      0.5 1.0/5 "Really Bad"
      I had taken this card almost four years back and the services which they had provided has not been that great. There has not been any facility of an EMI option, which is the basic option. The credit limit with the card has been fine and there has been an annual charges of 1000.
      Was this review helpful? 0
      , mumbai
      Reviewed on Dec 13, 2018
    • Bank Bazaar Credit Card
      "Best service"
      0.5 5.0/5 "Blown Away!"
      I have been using bank bazaar service for first time, there service is too good, there customer service keep on following up with my application and they help me in getting the card , and i came to know about bank bazaar service through on line, and i have been using mobile application it is easy to access.
      Was this review helpful? 0
      , bangalore
      Reviewed on Dec 13, 2018
    • SBI Cards Credit Card
      "Good service"
      0.5 4.0/5 "Great!"
      I am using this card for the last eight years and the services which they had been providing so far had been good. There has been annual fee with this card and i had been using the card for all sort of purposes like shopping. They had also given me with a good credit limit with the card as well.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Dec 13, 2018
    • IndusInd Bank Credit Card
      "Good card to use"
      0.5 4.5/5 "Excellent!"
      There was no processing fee on the Indusind card, there is no specific reason to select this credit card. In fact I am fine with this card, they gave me good credit limit, But I have not started using this card because I already holding four to five cards.
      Was this review helpful? 0
      , new delhi
      Reviewed on Dec 13, 2018
    • HDFC Bank Credit Card
      "Good service"
      0.5 4.0/5 "Great!"
      I am using this card for the last seven years and the services which they had been providing so far has been quite good. The credit limit with the card has been satisfactory and there has also been some good features with this card as well. It has been a life time free card as well.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Dec 13, 2018
    • Bank Bazaar Credit Card
      "Best service"
      0.5 5.0/5 "Blown Away!"
      Bank bazaar service is too good, they have help me in getting right bank credit card, there support team is good,they keep on follow up with me,i came to know bank bazaar service through on line, like i was checking for financial products ,and i have applied for bank bazaar service for first time.
      Was this review helpful? 0
      , lucknow
      Reviewed on Dec 13, 2018
    • HDFC Bank Credit Card
      "Best card"
      0.5 5.0/5 "Blown Away!"
      I have applied for HDFC credit card recently, they have charged me annual fee in this card, but there is waived off option available in this card like if i spend certain amount then my annual fee will get waived off and i am happy with my credit limit they have given me in this card, there overall service is good.
      Was this review helpful? 0
      , lucknow
      Reviewed on Dec 13, 2018
    • Citibank Credit Card
      "Good service"
      0.5 4.0/5 "Great!"
      I had been using this card from the year of 2010, the services which they had provided so far has been good. There has been some good benefits which comes with this card and i am happy with the credit limit which they had given with this card. There has been some annual charges with this card as well.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Dec 13, 2018
    • IndusInd Bank Credit Card
      "Very Good Service"
      0.5 4.0/5 "Great!"
      I had chosen to go with this card since there has been good options available with this card. The process in getting this card has been smooth and i got the card on the right time. The credit limit with the card is satisfied to some extend where they had given me with 1,00,000. There has also been some annual charges with this card as well.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Dec 13, 2018
    • IndusInd Bank Credit Card
      "Average Service"
      0.5 3.5/5 "Pretty good"
      The process in getting this card has taken more time than usual and has been delayed. The documentation has also taken more time. They had given me with a credit limit of 50,000 which has been less and it has been a normal card. I had done almost two to three transactions using this card.
      Was this review helpful? 0
      , mumbai
      Reviewed on Dec 13, 2018
    • IndusInd Bank Credit Card
      "Good Credit Card"
      0.5 5.0/5 "Blown Away!"
      I got three to four calls for the verification on my credit card process it was very disappointed to me. Anyway they have dispatched my Indusind bank within15 days. I got the life time free credit card is great, with better due date which suitable for me.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Dec 13, 2018
    • IndusInd Bank Credit Card
      "Simple card to use"
      0.5 5.0/5 "Blown Away!"
      Because of the life time free option and there is a very good rewards points i have selected INDUSIND BANK PLATINUM AURA EDGE CREDIT CARD. I have got a credit limit of Rs. 5 lakhs and I'm okay with it. Frequently i used the card for online shopping and there is a discount of 5to7%. I've received the card on time.
      Was this review helpful? 0
      , gurgaon
      Reviewed on Dec 13, 2018
    • Bank Bazaar Credit Card
      "Satisfactory "
      0.5 4.0/5 "Great!"
      I have been using Bank Bazaar portal for around four years, the information good. Even when I approached for any queries , their executive's responsiveness are good. The mobile application is very good to compare all the kinds of the credit card in the market.
      Was this review helpful? 0
      , chennai
      Reviewed on Dec 13, 2018
    • SBI Cards Credit Card
      "Good for Shopping with SBI"
      0.5 3.5/5 "Pretty good"
      SBI is more convenient to use, the credit limit is not satisfactory I would like to enhanced the credit limit. The cash back is good on the purchase at online and offline shoppings . I am very satisfactory will be card whatever they have offered.
      Was this review helpful? 0
      , chennai
      Reviewed on Dec 13, 2018
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