What is a Credit Card and how does it work ?

What is a Credit Card and how does it work?  

We all know credit cards, we have seen attractive ads in TV or YouTube. However, do you exactly know what is a credit card ? and how does it work ? and it's privileges. In this article let's dive in Deep.

What is a Credit Card?

Credit card is a payment card given to cardholders of a bank or financial institution, here the cardholder borrow money from the financial institution to make payment for his/her purchase of good and services across the merchants POS (point of sale). Every cardholder will be having a pre-approved limit of credit amount to their account which they can use in an emergency, shortage of funds, or getting reward points for their purchases.

Every credit card transaction will be having a transaction fee.

How does a Credit Card work? How do Credit Card payments work?

The customer swipes the credit card at the POS (Point of sale) device of the merchant, the devices send the card information to payment networks Like Visa or Mastercard then it is routed to the concerned bank/financial institution who has issued this card. The Bank/financial institution approves the transaction or declines it depending on the available amount in the bank account of the cardholder. If the amount is not sufficient or the password is incorrect, the bank sends back the signal to payment networks. The Payment networks send the same signal to the final to POS (Point of Sale) device making payment successful or failure.

Once the transaction is successful, the issuing bank/financial institution reimburses the amount to payment networks then Payment networks deduct its processing fee for each transaction. The whole process is completed in a matter of seconds.

Finally, the cardholder will be sent a monthly credit card bill which includes all the details of the transaction he/she has made with applicable interest rates, which the cardholder needs to pay back within a certain time period.

Best credit cards in USA : 

1. Chase Freedom Unlimited®
2. Chase Sapphire Preferred® Card
3. Blue Cash Everyday® Card from American Express
4. Citi Rewards+℠ Card
5. American Express Cash Magnet® Card

Best credit cards in Canada :

1. American Express Cobalt Card
2. Scotiabank Gold American Express
3. TD First Class Travel Visa Infinite Card
4. Scotia Momentum Visa Infinite
5. Tangerine Money-Back Credit Card

Best credit cards in Australia :

1. Latitude 28 Degrees Global Platinum Mastercard
2. Qantas American Express Discovery
3. Qantas American Express Ultimate
4. Latitude Infinity Rewards Visa
5. Commonwealth Bank Low Fee

Best credit cards in UAE :

1. FAB Cashback Credit Card
2. Emirates Islamic Cashback Plus Credit Card
3. Citibank Citi Cashback Credit Card
4. Deem Titanium Cash Up Credit Card
5. Deem Platinum Cash Up Credit Card

Best Virtual Credit Card:

1. Privacy
2. US Unlocked
3. Bento
4. Netspend
5. American Express Go