How Credit Cards Work
There are two aspects of how a credit card
works there is the basic functions of a credit card and
also the ways it offers financial aid. Learning this basic
information about a credit card will help you when you decide
to apply for your own credit card or if you wish to learn
more about credit cards.
When
you go to your favorite mall or shopping store and finally
reach the check out, the clerk will ask you how would you
like to pay, you will say with credit card. He will then
swipe it and the process will begin. The machine will read
the credit cards information from that black stripe located
on the back of the card. The machine will then contact your
credit card company’s computers, which will then contact
the bank that gave you your credit card. This is to verify
that the credit card account exists and that the card is
not stolen or have any red flags. Also it will make sure
that you won’t be going over your limit and the funds
are available for you to access. That whole process from
the time your card is swiped takes place in only a matter
of seconds and ends with you signing the receipt.
Now the more important part of what a credit
card is needed or used for is for its financial aid and
the ability to purchase big-ticket items at any time if
needed. People who get credit cards will use them each in
many different ways some keep it for emergences such as
sudden car repairs, house hold appliances that brake down,
travel costs like plane tickets and so on.
A credit card works by letting you make charges
and purchases as long as you don’t go over your limit
and you get a set time to pay it back usually you make monthly
payments to keep your balance low. If you make a purchase
for $100 the credit card company will take a certain % some
times 2% or more. If you’re wondering how the credit
card companies make their money its through the high interest
that they have usually u can see 10% - 29% interest so spending
a lot of money can be fine as long as you pay it off quickly.
Making charges during the week and paying it off on payday
is a great way to keep up on your credit card payments and
not find your self battling with the interest to get it
down. Also credit cards offer rewards such as air miles
that you will receive on each charge to the card you make
for this option it can cost $50 a year also the card itself
has a fee of $XX per year this can vary from company to
company.