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Credit Card Basics

Mar 24, 2008
A credit card is a small plastic card that has emerged as the most powerful and popular system of payment. It is issued to users through banks or other credit card organizations. In the credit card system, the issuer lends the amount of money to the user that he or she can pay for his/her purchases.

A credit card makes it possible for account users to calculate their balance. This calculation is at the cost of interest that will be charged to the users by the system. Basically, all the credit cards are of the same size and shape which is defined by the ISO 7810 standard. The standard size of the credit card is ID-1 size and is generally 85.60 x 53.98 mm.

If you observe the credit cards carefully, you will see some common structures of numbering on them. All the credit cards have the similar numbering scheme and similar type of internal structure. The numbers in the beginning are called the Bank Identification Number. This sequence of number in the beginning identifies the bank to which the number belongs. The remaining nine digits represent your personal account number and the last digit is the validity check code.

Along with the numbering scheme, credit cards also display the issue and the expiry dates of the card, security codes and extra codes like issue numbers. It is not necessary that all the credit cards will have the same set of codes or use the same number of digits.

Now let us have a look on how the credit card works?

When the credit provider approves the account of the user, he is issued a credit card. This credit card allows the user to make purchases upto a certain defined credit limit. After making the purchase, the credit card user has to pay to the card issuer. This is done by signing a receipt having a record of the details of the card that indicate the amount to be paid.

The merchant can check out whether the credit card of the user is valid or not by an electronic verification system. It verifies if the user has adequate amount to make the purchases. This verification is made by a credit card payment terminal that has a communication link to the merchant's bank. The information from the card is gotten from a chip or a magnetic stripe on the card.

There are many other verification systems to check the validity of the users account and accept the payment that is used by the eCommerce Merchants. For such types of verification system, the card holder is required to give additional information like the address of the card holder or the security code that is printed at the backside of the card.

There are different types of credit cards like the MasterCard, VISA, Gold, HSBC, etc. there is immense competition in the industry of credit cards nowadays. Hence, the providers of the credit cards offer many schemes like gift certificates, frequent flyer points, cash back facility, rewarding systems, etc for attracting new customers to their program.
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