Concept Of Credit Cards Finance Essay
Credit cards are a form of substitute for direct payment, issued by an organization (as banks or credit
institutions) to the consumer to borrow money to pay for the sale. This form of payment is made based
on reputation. Cardholders do not need to pay cash immediately upon purchase. Instead, the bank will
advance money to the seller and the card holder will pay back to the bank account transactions. Credit
cards allow customers deferred payment amount in the account. Cardholders do not have to pay the
full balance on the monthly transaction statement. However, the cardholder must pay the minimum
payment by the due date indicated on the statement.
- The symbol of the card issuer
- A chip on the card (EMV chip)
- 3D Stereogram
- ID card number (16 digits)
- The symbol of the cards
- The period of validity of the card
3. How it works:
- Credit cards are issued after the service provider browsers accept credit card account, after which
cardholders can use it to make purchases at the point of sale acceptance
- When shopping, you need to commit to pay for the card issuer. Cardholder demonstrates this
commitment by signing up the details of the card bill with the money, or by entering a personal code
(PIN). Also many outlets accepted way to verify by phone or internet verification for the transaction is
called a gold card or gold card holder.
- Cardholders can also withdraw cash from your credit card account (cash advance) if you want.
- They use many electronic system to verify in a few seconds, the validity of the card as well as check
the credit limit of the card is enough to pay for purchases. The verification is done by a card reader
connected to the bank's acquisition sellers.
- Every month, the cardholder receives a statement in which transactions made by card, the fees and
the total amount owed. After receiving the statement, the cardholder has the right to reject a complaint
transaction which they say is not true. If no complaint before the due date, the cardholder must pay a
predetermined minimum, or more, or pay off debt. Service providers will be calculated on the debt
(usually with high interest rate than most other forms of debt). Many financial institutions can arrange
for automatic payment, cutting funds from the cardholder's bank account (if you have enough money) to
avoid overdue debt.
4. Classification of credit card:
Classification: There are two types: international credit cards, Domestic credit cards
- Credit cards are international cards issued by international card organizations: Visa, MasterCard
- Domestic Credit Cards are cards issued by banks for domestic use within
- Cardholder must ensure their ability to pay, there are two popular form of guaranteed payment as a
deposit and no deposit.
+ The form of collateral, the customer must open a payment account to ensure 110% credit card
required or more (the amount in the account to ensure payment will be entitled to interest) mortgage or
savings or freeze some money in the customer's payment account at the bank card provider, to ensure
+ With no form of collateral, the customer must provide proof of income for the bank as a copy of the
labor contract, certificate, certificate of salary ... Some credit cards:
- Charge Card - also known as department store cards, including all credit cards issued by retail
companies as: Sears, JC Penney, Macy's, Target, K-Mart, etc., cards This restriction allows users to
only use the company's purchase card. For example: Sears only at Sears stores, other customers to
the store to buy, can not pay with a Sears card.
- Gasoline Card - or gas card as: Texaco, Shell, BP (British Petroleum), this type is similar to
Department Store Card, customers used to refuel at the gas station and purchase by tree of brands
that sell gasoline.
For example: you hold the Shell card can only refuel and buy gifts at Shell only
- American Express:
+ Regular American Express Card is usually dark green. If you do not have good credit and low income
they ask, they will give this kind. Credit line is not limited to, depending on the amount of money you
have in the bank. This type you have to pay an annual fee highly (around $ 79USD/nam). Invoices are
sent to you each month and pay off the first time. For example: in the last month you spend $ 500, to
pay off $ 500
+ American Express Gold Card: The fact that you have to earn more than $ 30,000 USD / year. Use as
well as above.
+ American Express Platinum: Unlike two types above, this category only for those customers
preferences, the specified amount is to spend up to $ 100,000 that do not require customers to have
the money in your bank account. Bill still has to pay as Regular American Express Card and American
Express Gold Card.
5. The effect of credit card:
5.1. For users:
Credit Cards is a modern means of payment may be used to pay for goods and services cash payment
over the counter at banks or at automated teller machines is very convenient. Using credit cards is
much safer than other forms of payment such as cash, check ... When the card is lost wallet card is
also difficult to use. On the other hand international credit cards can be used worldwide, so it is very
convenient for the user trip or international travel. And cards can help cardholders can use the credit
provided by the bank, as well as make up looks civilized and polite to customers when payment.
5.2. For establishments accept cards:
The application allows the issuing bank cards offer new services to customers, the optimal means to
attract new customers and increase revenue from the bank card fees. On the other hand this is a kind
of modern consumer credit, contributing to the diversification of the bank's business model, the bank's
expansion across the globe.
5.3. For the issuing bank:
Commission charge when billing agent for the issuing bank. On the one hand thanks to the payment
intermediary card payment bank should keep customers as retail merchants. If they do not do this,
retail traders will move their accounts to the issuing bank or other banks.
5.4. For society:
The cards reduce the need to hold cash, reduced cash flow, resulting in reduced shipping costs and
release the money. Use the card to solve the situation inconvenient to use cash as unhygienic, unsafe
and inconvenient ... In general, payment cards also promote business development at a faster pace by
encouraging consumers personal income strata of the population stable.
6. Advantages of credit cards:
- Convenient: small and compact, can be paid easily everywhere (in Singapore have about 82
thousand points and store card accepted)
- Flexible spending: Not as ATM cards, credit cards allow consumers may purchase or withdraw cash
without having to spend any money on account, because the bank will advance to it by the term credit
ranges from 10-100 million, depending on the needs and income of the cardholder. Therefore, when
you love or need an item, but the cash is not available or not sufficient funds in the account to purchase
with a credit card, you simply pay by card, take the item home and return 30-45 days (depending on the
bank) will not be charged interest.
- Global Accepted: Credit Card issued by reputable banks to accept global payments, including
payments for actual transactions or on a network. If you need cash, you can also use your credit card
to withdraw everywhere.
- Simplify spending: Every month, you will receive a declaration, including card transactions, fees and
the total amount owed. After receiving the declaration, you have the right to complain about a number
of transactions that you are not right. Before the due date, you must pay a predetermined minimum (in
Vietnam about 10% of the debt), or pay off the debt (usually with interest rates higher than bank
interest rates) and can automatically cut off the money from your bank account (if you have enough
money) to pay debt payment and will report back to you.
- Safety: When cash is lost, you will lose. But with the card, if lost, you just need to tell your bank to
block your card.
- The added value: To encourage the use of cards, many banks offer incentive programs as positive
points, associated with the popular brand, the shopping center to offer discounts to use their card, gift
card when registering.
- Use the special payment: With a credit card, you can purchase online sales on the Website accept
payment by credit card, book hotels, airline tickets online .. . while cash can not do this.
7. Disadvantages of credit card
- Credit cards are "potential risk" that insolvency for many people and
also many other instability problems arise. Most of those who are at risk of default is young, they use
credit cards to spend a lavish way of life every day without attention to the fact that they have much
money in the account. This is a social burden for the government to subsidize these people fairly large
- Credit cards are the target of today's high-tech crime crime increasing credit card counterfeiting,
requires the authorities need to take measures to prevent.
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