credit card

Compare Credit Cards

Are you contemplating which credit card to go for? Stuck in the maze of a myriad credit cards and attractive offers? Not sure which one to choose and how to choose them? Then you should visit CompareCards.com. This is one site where you may choose any crdit card from a CITI, Bank of America to a Providian Credit Card.

The site is neatly structured with a unique and very simple 3 step - research, compare and apply process. Here you may compare creidt cards by category, credit quality, issuer or brand. Of the many options available you may compare at most 6 cards at a single point in time. The comparison gives you vital information about the grace period, annual fee, the intro period and most importantly the perks perquisites the card offers you.

To compare all available credit cards in one go, click here. You may also check out an interesting feature where you can build your own credit card! Once you have chosen the card that suits your financial and emotional needs alike, all that you have to do is apply for the card online, sit back and relax!

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Thursday, October 9th, 2008 Finance No Comments

How Credit Cards Work ?

A Credit card is a mode of payment with a magnetic strip on a plastic card, where the user is charged for a transaction at a later point in time. When you pay a merchant with your credit card the following is the process that happens.

The stake holders in any transaction involving a credit card are - you, the merchant, the credit card issuer, a facilitator like VISA/MasterCard and the bank of the merchant (acquirer). Lets assume that the merchant has swiped your card, wanting a payment of $100. The information on your card is sent to the acquirer, then VISA/MasterCard, then to the issuer bank. The issuer bank checks your credit limit and addresses other issues like reported loss/theft of the card. Based on the above, retracing the same network path, the payment is accepted or denied. Lets say that your card does have at least $100 credit limit and has not been reported stolen. The acquirer pays the merchant $98.10 (this is why smaller shops accepting credit cards ask you to pay the 1.9% difference). Both the acquirer and the issuer bank pay VISA/MasterCard a commission for enabling the transaction. The issuer bank pays the acquirer $98.60 (a discount of 1.4%). Then the issuer bank debits $100 from the issuer’s account. In case of a 5% cash back offer in place, only $95 is debited from your account.

Banks’ income from credit cards does not stop with these meager commissions and margins. Heavy penalty by way of interest charges will levied in case you do not pay up on time. Interest rates could be as high as 37%. Suppose your outstanding is $100 and you had not paid $1 within your free credit period, interest will be charged at the rate prescribed by the bank for the whole $100, calculated on a day to day basis! Thus banks make use of the power of compounding!!

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