Credit Card

Credit Card #

tags

Fintech, Payment Card

A credit card works by letting you borrow money from the credit card issuer to buy goods and services.

You then pay the amount you’ve borrowed back either in full, or in monthly installments. If you don’t repay in full, you’ll also be paying interest.

You’re able to spend up to a certain amount on the credit card. This amount is your credit limit. Every month your credit card issuer will send you a statement that shows all your transactions.

Your repayment options include a minimum payment amount or a full payment, and as applicable, options for a fixed payment.

Why use a credit card? #

• Spread the cost of large or expensive purchases
• Build your credit rating Having no credit historycredit history Click to view credit records and credit agreements page means that banks are unable to assess how well you can manage debt.
• Prepare for emergencies

Paying back minimum amount or more #

You can pay more than the minimum payment due and this will minimize the amount of interest you have to pay in the longer term.

What is interest? #

Credit card interest is the amount you’re charged if you don’t pay off your credit card balance in full after receiving your statement each month. The interest will be calculated as a percentage of the amount you owe.

The consequences of not paying the minimum amount due #

If you pay less than the minimum amount due on your credit cards, unfortunately your card issuer will still count that payment as a missed payment.

As a result, this could trigger all sorts of consequences including a late payment fee. You could also see your credit score decline if you fall at least 30 days behind on making a payment for the required minimum amount. And, in some cases, your card issuer could freeze your card if you fall far behind. ref

references #

HSBC bank

Clearing Credit Card before leaving country #

Why it is important to clear credit cards debit before leaving Country

How credit card companies work? #

The broad term “credit card companies” includes two kinds of enterprises: issuers and networks.

Issuers #

• Issuers are Banks and credit unions that issue credit cards, such as Chase, Citi, Synchrony or PenFed Credit Union.

• When you use a credit card, you’re borrowing money from the issuer.

• Retail credit cards that bear the name of a store, gas company or other merchant are typically issued by a bank under contract with that retailer. Hence these are often referred to as “co-branded” credit cards.

Networks #

• Networks are companies that process credit card transactions.

• The major networks in the U.S. are Visa, Mastercard, American Express and Discover. American Express and Discover are both networks and issuers.

• Networks make money by charging fee to Issuers based on gross dollar volume of activity.

How money moves? #

• When you use a credit card, money moves electronically through many hands, from the issuer, through the network, to the merchant’s bank.

• The network also makes sure that the transaction is attributed to the proper cardholder — you — so that your issuer can bill you.

How Credit Card companies, Issuers and Networks, make money? #

nerdwallet

Issuers #

Interest #

• Major revenue source

• Credit cards charge interest on any balances that you don’t pay by the due date each month. When you carry a balance from month to month, interest is accrued on a daily basis, based on what’s called the Daily Periodic Rate (DPR). ref

• Interest fees charged by the issuer when you carry a balance on your card past your due date.

Fees charged #

to card holders by Issuer

• Annual fees
• Cash advance fees
• Balance transfer fees
• Late fees

Transaction fees or Interchange or #

Paid by merchants to Issuer(banks)

• 1-3% of the transactions
• These fees are set by payment networks and vary based on the volume and value of transactions.

Networks #

ref

Assessment fees #

• Assessment fees are typically a small percentage of the transaction amount.

• 0.13% and 0.15% of each transaction

• varies wrt network and type of transaction (credit or debit)

Credit card processors #

Terminal devices that does the transactions

Processor fees #