Credit Card Applications
When applying for a credit card it is important
you understand the concept and mechanics of how
they work. This financial form of plastic provides
a revolving, unsecured line of credit to the cardholder.
With it you can settle an account in full and
without having to pay interest within a given
period from the billing date. You could also choose
to pay off a part of the loan and carry the balance
forward with interest, subject to the overall
credit limit imposed on your card.
When making a credit card transaction there are
five parties that are involved to make a successful
payment. They are:
1. The customer
2. The “issuing bank” that issues
the card and the advanced line of credit
3. The merchant
4. The “acquiring bank” that handles
the merchant's receipts
5. The “network” (e.g. American Express,
Visa, MasterCard) which is a co-operative venture
between the affiliated card issuers and which
links the issuing and acquiring banks
and co-ordinates the exchange of information and
the flow of funds.
By swiping the customer's card through the merchant's
point of sale terminal, the information stored
on the magnetic strip or chip is transmitted to
the acquiring bank in encrypted form. The merchant's
ID, the card number, the expiry date, the credit
limit and the remaining credit is then checked
by the acquirer.
The acquiring bank connects to the bank that has
issued the credit card via the network's computer.
The issuing bank transmits the account information
and later transfers the funds to the acquiring
bank. The cardholder's account is then debited
by the issuing bank and the balance of credit
available is reduced.
The network charges the issuing banks to cover
its costs. The acquiring banks charge the merchants
a percentage of each transaction and pay interchange
fees to the issuing banks. The issuing banks charge
cardholders interest on unpaid balances, and sometimes
an annual fee.
Cardholders do not have to concern themselves
with security issues. They are in fact protected
from credit card fraud by the issuers' undertakings
to absorb the costs. However, these risks are
passed on to consumers via interest rates and
other charges.
Credit card security is built on the encryption
of data in transit, using pairs of public and
private keys. However, in the absence of some
form of electronic ID there is no certainty that
the card user is the lawful cardholder. This is
clearly a flaw in the system but countermeasures
have been put in place to try and eliminate any
attempt of fraudulent activity.
To ensure the authenticity of the cardholder’s
identity there are two separate systems in place
to address such concerns:
1. A personal password system for online transactions
recently launched by VISA and MasterCard
known as “Verified for Visa” and “SecureCode”
respectively
2. New PIN-activated “smart” cards
We recommend Loans
UK if you're in need of a loan at the best
rates possible.
|
