Credit card services include facilitating transactions between cardholders and merchants

Yes, one of the primary functions of credit card services is to facilitate transactions between cardholders and merchants. Here’s how this process generally works:

Cardholder Makes a Purchase: When a cardholder wants to make a purchase from a merchant, they present their credit card as a payment method.

Merchant Authorization: The merchant’s point-of-sale (POS) terminal or online payment gateway contacts the cardholder’s credit card issuer for authorization. This involves verifying if the card is valid, checking if the card has enough available credit or funds to cover the transaction, and ensuring there are no fraud alerts or holds on the card.

Authorization Approval: If the transaction is approved, the credit card issuer sends an authorization code to the merchant. This indicates that the transaction can proceed.

Cardholder Signature or PIN: Depending on the type of credit card and the transaction, the cardholder may be required to sign a receipt or enter a Personal Identification Number (PIN) to verify their identity.

Transaction Processing: The transaction details are processed electronically, and the purchase amount is transferred from the cardholder’s credit card account to the merchant’s account.

Merchant Settlement: At the end of each business day or a designated settlement period, the merchant collects all approved transactions and submits them to their acquiring bank (merchant’s bank) for payment.

Payment to Merchant: The acquiring bank pays the merchant for the approved transactions, usually minus a processing fee.

Cardholder’s Statement: The credit card issuer compiles all the cardholder’s transactions for the billing cycle and sends them a monthly statement. The statement includes a list of transactions, their respective amounts, the total balance, and the payment due date.

Cardholder Payment: The cardholder is responsible for paying the balance indicated on the credit card statement by the due date. They can choose to pay the full balance or a minimum payment amount. Interest may be charged on any remaining balance if not paid in full.

Ongoing Transactions: Cardholders can continue to use their credit card for various transactions, and the cycle repeats for each billing period.

This process of facilitating transactions between cardholders and merchants is the core function of credit card services. It provides convenience to consumers by allowing them to make purchases without carrying cash, and it benefits merchants by offering a secure and efficient method for accepting payments. However, it’s important for cardholders to use credit cards responsibly to manage their credit and avoid accumulating excessive debt.