Credit Card – An Overview

1. Credit Card – An Overview A credit card is an imperative component of electronic commerce and internet commerce. These cards are an ideal alternative to cash and cheque. Credit cards allow individuals to borrow money from their banks in order to make their purchases. There is a fixed grace period where that individual has to pay back the borrowed money. Failing to do so leads to high interest on the percentage of money that individual owes from the bank. Carrying a wad of cash is no longer requisite with availability of credit cards. Steps for Credit Card Processing: For majority of entrepreneurs, accepting credit cards for their business is proving to be beneficial and it is a simple process. The credit card processing has been simplified in a few steps: Making a Purchase An individual seeks a product he desires to have and decides to purchase it. To pay for that product, he uses a credit card via phone, email and payment gateways. Performing a Transaction By entering complete transaction details, the individual swipes the card via a secure card terminal.

2. Data Transmission The next step is transmitting the data for approval when secure payment gateway, POS system or the terminal is linked to the network of processing. Approval or Decline After the transmission process is completed, the card issuer has the flexibility to approve or decline it based on various factors including availability of funds of cardholder, card validity, etc. Authorization Response An authorization response is received by the merchant and processor after approval of the transaction. Transaction Completion Once everything is done successfully, the transaction is considered to be completed. Batch Closure Submission With a batch closure, the payment process is completed by the merchant. Whatever the transactions processed on a particular day are closed out. The funds are collected from the card issuers by the processor's bank. Depositing Funds The funds are deposited to the business account of the merchant by processor's bank. The entire process takes approximate 2 days.

3. Credit Card Fees: Annual Fee Most of the credit card organizations charge no joining fee, while there is an annual fee for a specific period i.e. 1 year which the credit card holder has to pay. The fee completely depends on the type of card provided to the individual. Interest or Finance Costs When the outstanding amount is not repaid prior to the due date expiry, an interest rate is levied by the organization. 2.5 to 4 is the average percentage which goes up to 30% or more depending on the time period. Late Payment Fee In case of late payment, the credit card holder has to pay a late fee over and above the charged interest rate. Different credit card companies charge different payment fee. Outstation Cheque Fee If the credit card holder has issued an outstation cheque for the payment purpose, he has to pay an outstation cheque fee which is a fixed percentage of cheque value subjected to the lowest amount. Service Tax Credit card expenses are associated with a service tax levied on transaction's total value. This includes interest, fees and additional charges. Revolving Credit If the cardholder revolves the credit in a way by paying minimal amount by due date without making any new purchases, the interest charges are applied on balance amount as well as on fresh purchases in the next billing cycle. Credit Limit Credit limit is usually the total amount on which there is availability of credit on each billing cycle. Also referred as the one-time expense, it is a lump sum fee payable when the credit card is taken. Many of the cards come with shopping vouchers of the

4. equivalent amount. How one can apply: Applying for a credit card is no longer arduous these days. Just filling up a form is primarily required. 18 is the minimum age to apply. An individual must have a job so that he will be able to pay after purchases. It takes less time for an online application to get approved. Contrary to this, requests on email take 7-10 business days. Imperative components of a credit card application: Personal Details Personal details include name, phone number, address, email id, DOB and social security number. Depending upon case to case, an individual has to submit details of the previous address. Card Features Plenty of cards encompass a statement displaying what rewards and aspects are associated with it. Financial Details Financial details are the comprehensive information about nature of work and annual income. These details are to notify Credit Card Company the details and location of work. Additional Information Folks with secondary cards have to provide additional information such as name, address and contact details specifically when the user allows any of his family members to use the card. Terms and Disclaimers This is the most important thing to consider as the user has to agree to all the terms of using the credit card. For online applications, a link is given on the page while for email applications, it is on the back side or scroll down list where one virtually signs the application.