subject: Billing Process Of Credit Cards [print this page] Billing Process Of Credit Cards Billing Process Of Credit Cards
We are living in the world of plastic money. This small plastic card called the credit card is the outcome of sophisticated banking process which needs to be understood by every user of the card. We find every person carrying this cute little convenient plastic card in their wallets. Its such a convenient form of payment that gives you the authorization to buy goods and services up to a specified limit.
The credit card processing is something which many of the users don't understand. Here is a brief explanation of the credit card processing and the charges involved in this process.Every credit card has a limit called the credit limit which is based on factors like the customers credibility and likewise. This is the limit up to which you are allowed to purchase products during your billing cycle. Every time you purchase a product and swipe the card the amount will be charged to your card. The credit limit is the amount up to which you can charge without any penalty. Your limit decreases with the every increase in your charge. This is a simple formula which can be understood as follows: If you have a limit of Rs.20,000 and you purchase for Rs.10,000 then your limit decreases to Rs.10,000.
Billing cycle can range from 29 to 31days. At the end of every billing cycle a statement of transaction will be sent to you. This will give you a clear picture about all the purchases made by you, their charges, any fees or other payments made by you. To the opening balance, if any carried forward from the previous billing cycle, all the purchases and other charges will be added and all the payments made by you will be subtracted.. If in your previous billing cycle you have not paid the full amount then a finance charge will be applied on you. The calculation of this charge is done through many methods like average daily balance, adjusted daily balance, daily balance, cycle ending balance, previous months balance or double billing cycle method. Here its noteworthy to mention that as per the new credit card rules, double billing cycle method cannot be used anymore after june 30th 2010.So, to avoid any kind of finance charge its better to pay the full balance within your stipulated grace period.
It's also worthy to understand other terms related to credit cards processing. Credit card comes with some minimum payment requirements and late fees. Every card holder will be required to pay the specified minimum amount within the due date or else late fees will be charged on them. This minimum payment is nothing but a percentage of the balance in your credit card. Late fees will be charged in 2 cases 1) When payment is made less than the minimum payment amount 2) You make the payment after the due date. So make sure that all the payments are done before the due date. Any payment made by you will be subtracted from the balance and thus your credit limit will increase.
Understanding this sophisticated banking process of credit card processing may take years but knowing the basic concepts will help you in a better use of this convenient card.
