What Happens When I Use My Credit Card?
- To make a purchase with a credit card, you or the cashier swipes the magnetic strip of the card through a card reader. This is important because the magnetic strip on your card contains all the necessary information to complete your transaction. Generally, your name, credit limit, account number and the date of your card's expiration are available to merchants when you make a purchase. Upon acceptance, you may have to sign a receipt granting final authorization to charge your credit card for the amount of the purchase.
- Once the store approves the purchase and you sign the receipt, they deposit receipts with their bank. Depositing credit card sales receipts works much like depositing a check. The amount of your receipt is credited to the store's bank account along with other credit card receipts, cash and checks. The store may then use the deposits for additional transactions.
- Upon receiving your credit card receipt from the store, the store's bank sends a message to the credit card company of your purchase. The credit card sends the store's bank the money to cover the amount of your purchase. In turn, the credit card company charges your credit card account through the bank that issued you your credit card.
- Paying your credit card bill is the last transaction involved in credit card use.Checking credit card statment image by Elzbieta Sekowska from Fotolia.com
When you receive your credit card bill, you will notice that your statement contains information relating to the purchase you made. Credit card statements may include the date, amount and merchant where you made your purchase. Once you receive your bill, you have the option of making the minimum payment, paying your balance in full or another amount in between. - The banks that issue credit cards may charge cardholders several fees connected to transactions. For instance, the bank that issues the credit card generally charges interest on purchases and cash advances charged against the credit limit. In addition, some banks also charge an annual fee for having a particular card. Common fees on credit cards also include late payment fees, fees for cash advances or for going over your credit limit. In addition, credit card companies charge stores a fee for each credit card transaction. Credit card companies may also charge the bank that issues the card a fee for doing business with the credit card company.
