Credit CardsWhen credit card purchases are made, the credit card user agrees to pay the credit card issuer. The cardholder indicates his/her consent to pay, by signing a receipt with a record of the credit card details and indicating the amount to be paid or by entering a Personal Identification Number (PIN). Also, many merchants now accept verbal authorizations by telephone and electronic authorization using the Internet, known as a Card/Cardholder Not Present transaction. Electronic verification systems allow merchants to verify that the credit card is valid and that the credit card customer has sufficient credit to cover the purchase in a few seconds, allowing the verification to happen at the exact time of purchase. The verification is performed using a credit card payment terminal or Point of Sale system with a communications link to the merchant's acquiring bank. Data from the card is obtained from a magnetic stripe or chip on the card; the latter system is in the United Kingdom and Ireland commonly known as Chip and PIN, but is more technically an EMV card. Other variations of verification systems are used by eCommerce merchants to determine if the user's account is valid and able to accept the charge. These will typically involve the cardholder providing additional information, such as the security code printed on the back of the credit card, or the address of the cardholder. Each month, the credit card user is sent a statement indicating the credit card purchases undertaken with the card, any outstanding fees, and the total amount owed. After receiving the statement, the cardholder may dispute any charges that he or she thinks are incorrect. Otherwise, the credit card holder must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher amount up to the entire amount owed. The credit provider charges interest on the amount owed (typically at a much higher rate than most other forms of debt). Some financial institutions can arrange for automatic payments to be deducted from the user's bank accounts, thus avoiding late payment altogether as long as the cardholder has sufficient funds. |
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