In order to obtain a credit card, the consumer needs to fill-in an application form that is actually like an agreement between the supplier and the consumer. The supplier approves the application form and provides the consumer with a small piece of plastic (i.e. the credit card). This plastic (or credit card) contains electronically encoded security information in the form of a magnetic strip (which is generally located at the back of the credit card). This information is used for authorising payments whenever the consumer uses the credit card. The consumer can use the for shopping at merchant outlets or on the internet etc. Of course, this is subject to merchant’s capability to accept payments. Accepting the credit cards is, however, not enough. The merchant should be able to accept payments made through the provided by that organization (of which you hold the credit card) i.e. VISA, MasterCard etc. You can also use to withdraw cash from ATMs (automatic cash machines) – also known as cash machines or Day/Night machines.
There are eight main organisations and most of them operate in a lot of countries world wide. These are American Express, Citi, Diners Club, Discover, JCB, MasterCard and VISA. Master card and VISA are probably the most popular ones. Then there are suppliers or issuers who have tie-ups with these organisations and issue credit cards on their behalf e.g. you have various banks that issue VISA cards (like HSBC VISA card)
To make a payment using a credit card, the has to be either swiped into special processing machine (when shopping in person at shops) or the details of the have to be entered on the merchant’s website (when shopping online). The supplier sends across the bill for these transactions to the consumer who is then required to pay either the full amount or a partial (minimum) amount. If you pay in full, the supplier doesn’t charge any interest on the amount you owe, otherwise the pre-agreed interest rate is charged. If you don’t pay even the minimum, you might land up with a late fee too. Moreover, the supplier generally puts a limit on the maximum amount you can spend per month using your credit card.
