Having a credit card has always been the best payment tool that the financial industry has created. Nothing gets to beat the credit card despite of advancement in technology. “Why is that” you might say. Well, credit card is vastly being accepted by most merchants all over the world. It is even being preferred as the payment mode by some merchants over cash.
Credit cards offer convenience and even security especially when you go out of the country or even just away from your home city. It provides a way of payment that even money can’t do. Examples of these would be paying through online purchases. Even with the other modes of payment that is being placed in the market because of technology, it is just helping the credit card become stronger.
How Credit Card Works
Credit cards actually are given by a credit card issue to a credit card holder. This piece of card contains a magnetic strip that has the holder’s information to make a purchase. Once a holder makes his decision to buy, the merchant will swipe the card on a point of sale (POS) machine that will capture the holder’s information. This information together with the details of the purchase will be sent to the servers of the credit card issuer and will grant an automatic “loan” to pay the merchant. Once the issuer’s system approves of the sale, the merchant is deemed paid by the issuer and the holder acquiring a loan from the issuer due to the purchase.
Other than a purchase of products, subscriptions, or services, credit cards can be used to borrow cash via cash advance option. This allows the holder to use cash instead of the card especially in places where a credit card is not accepted.
Using Your Credit Card
Always remember that every time your credit card is used, you accumulate a small portion of your credit and recorded as a loan. This loan is due and payable to the issuer for every use. Like any other loan, you must be aware that an interest payment needs to be paid for the use of the issuers money. This interest may vary from each credit card issuer.