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 small square-shaped cards that contain electronic information being read by a credit card reader for verifying transactions. 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.
Debit cards and credit cards look so much alike that sometimes, you need to remember which one is which because the way they are used are totally different from each other.
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. These devices are called 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.
Unlike before wherein cash was the most preferred mode of payment, today you seldom see people doing that anymore, and instead are more comfortable whipping out their charge cards from their wallets. Businesses also know that they need to innovate and go with the trend by providing customers a means to pay using their charge cards, and not just sticking to cash all the time. Credit cards give consumers the ability to pay for their purchases even through online shopping, especially nowadays that businesses and companies have put up their own e-commerce websites to cater to a wider clientele.
Credit cards are a great tool in building a good credit history as well as something that you can count on in case of emergencies, though care should be taken so that it will only be used wisely and in an appropriate manner.