UNDERSTANDING HOW CREDIT CARDS REALLY WORK.
Commonly referred to as “plastics”, credit cards are now quickly replacing cash as the most preferred method of payment by customers. Credit cards are commonly used for electronic transactions, and swiped easily on a credit card reader for verification. These type of cards are issued by banks both local and international, and works like an electronic or digital money since you get to charge the items you have purchased on it, then pay the said amount later on to your bank.
Credit cards look much like the same as a debit card, but works in an entirely different manner.
The one thing that these cards both have is the black magnetic strip usually located at the back. This black stripe carries all the account holder’s important information such as account number, address, zip code, name, account balance and many more. Should the magstripe at the back sustain some form of damage, it would be best to have the card replaced before attempting to charge anything to it.
Once you use your card to pay for items you intend to purchase, you are asked to swipe the card to an electronic terminal so the information contained in it can be read efficiently. To those who are unfamiliar with these electronic devices, these are commonly known as credit card readers.
These card readers are used in order to gain access to the information contained in the black strip, which is then sent to the bank’s computer to check if it is still an existing or active account and if it has enough funds to cover the amount to be charged. Should the verification process be successful, then the amount to be charged is taken out of the account and a confirmation message is then sent back to the originating machine (of which, in this case, would be the card reader), all within a minute or two.
Cashless mode of payment is the norm now, as more and more consumers are joining the trend by paying with their credit cards instead of bringing cash along with them. This is further strengthened by the fact that more and more businesses are also accepting credit card payments much like the same way they do with cash. Plus, with the recent boom in e-commerce, consumers have brought the act of shopping to the internet already and paying for their purchases with their cards – and such practice is expected to continue to rise.
Used wisely and carefully, credit cards can be a great tool in building your credit as well having something to rely on in case of emergencies.
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