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 transaction process, including authorization, capture, and settlement, and discusses the billing cycle, interest rates, and fees. The tutorial emphasizes that credit cards represent borrowed money and not actual cash, urging users to be mindful of interest charges.

What was the primary purpose of the early card system devised by merchants in the 1800s?

• To electronically monitor spending

• To serve as a physical membership card

• To provide a digital payment method

• To replace cash transactions entirely

Which technological feature was adopted to enhance credit card security?

• Barcode

• Hologram

• QR code

• Magnetic stripe

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

• Authorization

• Capture

• Settlement

• Billing

How do banks earn money from credit card transactions?

• By charging a flat fee per transaction

• Through interest and late payment fees

• By selling cardholder data

• Through government subsidies

What should cardholders remember about credit cards?

• They are a form of investment

• They represent credit owed to a bank

• They do not incur any interest

• They are equivalent to cash