Introduction to Credit Cards

Only available on StudyMode
  • Download(s) : 66
  • Published : May 9, 2013
Open Document
Text Preview
The credit card refers to a plastic card assigned to a card holder provided with a credit limit and such limit can be utilized towards purchasing goods and services on credit terms.

The credit cards enable the card holders to pay for purchases made over a period of time and to carry the balance from one billing cycle to the next. The payment for these purchases in general becomes due after a free credit period allowed for the card during the course of which no interest or finance charge is imposed. Interest is charged on the unpaid balance after the payment is due. The card holders may pay the entire amount due and save on the interest that would otherwise be charged.

The following are the parties in credit card scheme:
Cardholders: They are the persons who are authorized to use credit cards for the payment of goods and services; •Card issuers: The institutions including banks which issue credit cards; •Merchants: entitles which agree to accept credit cards for payment of goods and services; •Merchant acquirers – Banks/NBFCs which enter into agreements with merchants for the purpose of processing their credit card transactions; and •Credit card associations: organizations that license card issuers to issue credit cards under their trademark; e.g. Visa and Mastercard and provide settlement services for their members (i.e. Card issuers and merchant acquirers)

Types of credit cards: Credit cards can be broadly categorized into two categories a) General purpose cards issued under the trademark of credit card associations (VISA and Mastercard) and accepted by many merchants and b) private label cards which are accepted by specific retailers (e.g. Departmental stores)

Credit card business by banks:

In some countries, banks are allowed to undertake credit card business either departmentally or through a subsidiary company set up for the purpose. They can also undertake domestic credit card business by entering into tie up arrangement with one of...
tracking img