A credit card is a system of payments issued to users of the system. Credit cards are issued after an account has been approved by the credit provider, after which card holders can use it to make purchases at merchants taking the card. An electronic ratification system allows merchants to check that the card is legitimate and the credit card user has sufficient credit to cover the purchase in a few miliseconds , allowing the verification to happen at time of purchase. The verification is performed using a credit card payment terminal or level of Sale system with a communications link to the merchant’s acquiring bank.
Each month, the credit card user is sent a statement indicating the purchases made with the card, any outstanding fees, and the total amount they owe . Credit cards allow small short-term loans to be quickly made to a customer who needs not calculate a balance remaining before every transaction , provided the total charges do not exceed the maximum credit line for the card. Credit cards are accepted throughout the world , and are available with a large variety of credit limits, repayment scheme, and other perks . In recent times, credit card portfolios have been very fruitful for card companies , largely due to the booming economy of the late nineties.
However, in the case of credit cards, such high returns go hand in hand with risk, since the business is essentially one of making unguaranteed loans, and thus dependent on borrowers not to default in large numbers. The design of the credit card itself has become a major merchandising point in recent years. The value of the card to the issuer is often related to the customer’s usage of the card, or to the customer’s financial worth.
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