Vital info on Credit Cards

Credit card information processing can be extremely confusing and difficult to understand.

The Basics

There is some basic information for each credit account. This information should be filed in a safe place for future reference.

Credit card billing information - the mailing address for the credit company
Credit card account information - the account number, credit limit and interest rate
Stolen credit card information - whom to call and what to do if your information is stolen
Secured credit card information - the amount and date of your deposit

How does a credit card work?

A credit card account is an agreement between the account holder and a credit card company. The credit card company grants the cardholder access to a line of credit with a specific credit limit. The cardholder is able to use the credit card to pay for goods and services as long the total purchases stays within the credit limit. The merchant is able to obtain my credit card information from the magnetic strip on the back of the credit card which Ii use while making the purchase.

What's the difference between a secured and unsecured card?

Credit cards that are secured with collateral are considered secured credit cards. When opening a secured card, the cardholder must deposit funds into an account with the issuing bank. Usually, the credit limit will match the amount of the deposit. Nearly all secured cards have high fees and as a result,. These include an application fee, program fees, a fee for an additional card, and participation fees. Before you apply check to see whether or not the creditor will return the processing or application fee if you are not approved.An unsecured card has no collateral. The credit limit is determined after a creditor examines an applicant's credit score and income. Unsecured credit cards offer lower interest, require no collateral and usually do not charge excessive fees like secured cards. Some high risk unsecured credit cards do carry extra fees. Many unsecured cards also offer some type of rewards or cash back programs. An unsecured credit card is more desirable and beneficial than a secured credit card.

What should I know about credit cards before I apply?

There are a few terms that you should know before obtaining a credit card.

Credit score:
Credit Limit:
Interest Rate:
Finance Charges:

A finance charge is the amount of interest incurred on the account.

How are credit cards processed?

Credit card information processing is done in large part, using the computers and the information contained on the magnetic strip on your credit card. All major credit card accounts contain 16 unique digits. This is how the credit card company maintains their files and recognizes you as their customer. Additionally, there is a 3 digit security code embedded on the back of the credit card. This card is used to verify a cardholder's identity while making online or telephone transactions. There are 5 steps in the credit card processing procedure.

The cardholder presents the credit card to the merchant. The merchant scans the cards and submits the transaction to their acquirer.
The acquirer authorizes the transaction and submits the cost of the purchase, after deducting a small fee.
The acquirer submits the information to the bank that issued the credit card through the credit card system.
The issuing bank submits payment for the transaction, after deducting a small fee, to the acquirer through the credit card settlement system.
The cardholder receives a bill for the transaction and remits payment to the issuing bank.

Are there any statistics available for credit cards?

Credit card statistics are available and can be found on numerous websites. Below are some statistics found at the myFICO.com:

The average consumer has approximately 13 accounts listed on their credit reports.
77% of the American population has never had dues in credit account for more than 90 days.
Approximately 15% of the population has credit card balances in excess of $10,000.
79% of credit reports contained errors including inaccurate credit card billing information.

Credit card processing information should be safely guarded to prevent fraud and identity theft. Keeping up to date with your credit report and being credit smart can help reduce the risk. It is not a big task . You will get the nag of it as soon as you start using it regularly.

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