How Credit Cards Work

You can use your credit card to buy items online or can be used in a local shop. With a credit card you can withdraw cash out a cash point but only up to your credit limit. If you choose to purchase goods with your credit card then the procedure below would take place:

1. Sales assistant swipes credit card
2. Prints a sales voucher
3. Confirms if the transaction has gone through or failed

However the credit card can be inputted in the system manually using the card details on the face of the credit card. If items are over a certain value, you may have to answer security questions to authorise the transaction.

Using your credit card online or by telephone

You can use your credit card to buy products online or by using your telephone. Information such as the credit card number, valid from date, expiry date and the back 3 digits will need to be provided in order for the transaction to be successful. With this facility you can buy goods immediately.

If you use your credit card to buy goods and services via the internet or telephone then the chances are that your details could be passed onto a third party for fraudulent use. Having said that, many websites that do provide credit cards have very good security installed on their servers.

Withdrawing Cash with a Credit Card

If you choose to withdraw cash out a cash point, you will have to enter a PIN number, which is a form of security and only the card holder him self should have this information. You will be charged an interest rate from the date of withdrawal and a service charge may occur. Interest charged when using a cash point is much more than standard transactions.

Your Credit Limit

When applying for a credit card you will be given a set credit limit, transactions over the credit limit will fail, and if you keep to your credit limit, the transactions will be successful.

How card issuers work out the interest rate

Credit card interest is calculated from the statement date or when the transaction was made.

Credit cards which does not charge you in advance when you use the card may be beneficial if you choose not to pay your outstanding balance each month however the interest rate on the credit card must be low.

Credit cards which charge you interest from the statement date only necessitate the interest if you do not pay off the balance in full. Physically, it means you have up to 56-60 days interest free credit, the transaction could be up to 31 days before the statement and the credit card issuers give you additional time, normally 25 days to complete any remaining payments.