Issues The Card?

Q: Can anybody advise where credit card 'credit' comes from? Does it come from the funds that the issuing bank has deposited ? What is the relationship between the credit card company and the bank that issues the card?

A: Question: Can anybody advise where credit card 'credit' comes from? Does it come from the funds that the issuing bank has deposited ? Answer: It comes from the banks capital, which is made up of bank deposits and equity. There is no shortage of capital at the moment. The amounnt of money going into superanuation is huge, go we are awash with capital so to speak. Question: What is the relationship between the credit card company and the bank that issues the card? Answer: It licences the use of the cards from Visa/Mastercard, etc. -The bank promises to pay the merchant based on the bank's credit rating i.e. perceived ability to do so. the merchant waits for his money the consumer gets his goods now.The bank charges a fee from the merchant usually 1-4% of the gross amount for guaranteeing the amount to the merchant and for doing all the acounting/posting /chasing up errors/complaints etc. Eventually the bank takes the money from your account if autodeducting or waits till you deposit funds itno the bankcard account from some other account or wages .If you are slow to pay they start charging you interest as the bank has then paid for you and must get interest on that loan. Because your personal credit rating is not high it reserves the right to charge you a high level of interest plus a charge to start the loan usually one month's interest on top.Even if your credit rating is high they don't reduce your interest rate (but often just increase the maximum amount you can charge to your account.) The bank has funds coming and going all the time enough to cover its daya to day operations-if it does not it borrows from other banks at the interbank overnight lending rate.eventually the banks are all squared as the transactions are completed. You can increase your credit rating ( e.g. applying for a line of credit,using collateral as cover for the loan) and get a line of credit at much lower rate of interest. Never have outstanding credit card debt. if you buy goods commercially you have till the end of the month or so to pay the invoice.Normal business practice. the banks get a fee for guaranteeing the amount to the merchant.if the consumer defaults

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