How Do Credit Cards Work?

The video tutorial explains the concept and history of credit cards, highlighting their evolution from physical membership cards to modern electronic cards. It details the technological advancements like magnetic stripes and chip cards, and the impact of internet shopping on credit card usage. The tutorial also covers how credit card transactions work, including authorization, capture, and settlement processes. It concludes with an explanation of billing, interest charges, and fees, emphasizing that credit cards represent credit owed to banks, not actual money.

What was one of the earliest forms of credit cards used by merchants in the 1800s?

• Chip-type cards

• Physical membership cards with keyholes

• Electronic cards with magnetic stripes

• Virtual cards for online shopping

Which company introduced the first actual credit card in the late 1950s?

• Discover

• Bank of America

• American Express

• Mastercard

What technological feature was adopted in credit cards to enhance security?

• Magnetic stripe

• Hologram

• Barcode

• QR code

What is the first step in the credit card transaction process?

• Settlement

• Capture

• Billing

• Authorization

How do banks earn money from credit card transactions?

• By charging a flat fee for each transaction

• By offering cashback rewards

• Through interest charges and late payment fees

• By selling cardholder data