Capital One is a banking institution that revolutionized the credit card industry with data and technology. They are currently the sixth-largest bank committed to bringing humanity, integrity, and transparency to the banking sector. Capital One caters to its customers’ needs through various credit cards that serve different purposes, including personal, business, secured, and trading.
How do Capital One credit cards work?
Check out to article below to understand how Capital One credit card works:
First, it is essential to understand what a credit card is. Credit cards are revolving credit account that allows users to spend and pay the money they are borrowing while the account is open and operational. Before a person starts using a credit card, the lending banks sets a limit for the card, which the user cannot exceed. The amount deducted is from the credit limit when a purchase is made using the credit card, and the credit limit goes back up again when the user makes the payment.
Elements involved while using a credit card
Let’s discuss the elements involved while using a credit card:
- Bank: Banks issue credit cards to the users, making them cardholders.
- Merchant: A merchant is a business or a business owner to which the cardholders make payments.
- Payment network: A payment network is a network through which cards connect to businesses worldwide. Examples of payment networks can include Visa, MasterCard, and UPI.
- Acquiring bank: The acquiring bank is responsible for the merchant’s transactions and connects the credit card purchase between the cardholder, payments networks, payment network, and the merchant.
Now that we are aware of the different elements involved while making purchases using our credit cards, now let’s check what happens after you swipe your card to make a payment:
- Payments are initiated when the cardholder swipes, taps, or inserts his/her card.
- After the payment is initiated, the card-reading device sends the account information to the acquiring bank.
- The acquiring bank then uses a payment network to acquire authorization from the card issuer.
- The card issuer approves the payment and sends the money through the same payment network to the merchant.
Different types of credit cards
1. Student credit cards
Student credit cards are made specifically for students starting with accounts and finances. These credit cards are also known as the ‘starter credit card.’ Banks that issue such cards do not charge annual fees from cardholders and provide various offers. Using student credit cards can help to build a good credit score when used responsibly. Note that student credit cards are easy to issue and do not require much paperwork.
2. Travel credit cards
Travel credit cards are a perfect choice for people who travel regularly. Using travel credit cards helps to benefit from various rewards and travel-related purchases. Many travel credit cards are co-branded, which means they collaborate with a particular hotel line or airline, and booking these same hotel lines and airlines will help you earn rewards, points, and huge discounts. These rewards and issues can be redeemed for further travel-related purchases.
3. Secured credit cards
Secured credit cards require collateral or some cash to secure a similar amount of credit. This is one of the quickest ways to get your credit card approved. However, cardholders get their deposit back after they use their secured credit card responsibly or when to wish to close their account.
4. Cash-back credit cards
Cash-back credit cards allow cardholders to earn credits and cash back on everyday purchases like groceries, gas, entertainment, or dining. After successful purchases, cardholders earn a certain percentage of the amount back in their account, and these credit points can be further used depending on the card issuer’s preference.
Advantages of using credit cards
Credit cards are convenient to carry around, allowing easy and smooth payments with a swipe. These cards are of much help while traveling and can be easily used in foreign countries without worrying about currency. Technological advancements allow phones to link with credit cards, which makes payments even easier by tapping.
Most card-issuing banks offer various cashback, rewards, and discounts upon purchases. These credits can be further used for other purchases, which is one of the significant advantages of using credit cards.
3. Build credit score
A building credit score is one of the best advantages of using a credit card, as having a good credit score can help to obtain loans, credit cards, and a better interest rate on loans and mortgages. One must make that he/she uses his credit card responsibly.
4. Easy EMIs
If cardholder plans to make a significant investment, credit cards make it easy to pay back through EMIs by putting it on the credit card. EMIs are a much more convenient way to pay back by not putting any pressure on your bank balance or fixed deposits.
How to use your credit cards safely?
You must be aware of numerous frauds, like phishing, card theft, cloning of cards, and often criminals taking over the accounts taking place nowadays. If you fall prey to any of these frauds, the first step you are required to take is to block your account by contacting your card-issuing bank as soon as possible, followed by a police complaint. As the number of crimes is increasing daily, it is necessary to follow safety guidelines to protect your card from such crimes. Follow these steps to ensure the safety of your credit cards and bank accounts:
1. Pin codes
Make sure to update your pin codes regularly and keep a check on your account through internet banking and the bank’s app on your phone.
Do not store your credentials in your browsers while making payments online. Also, remember not to share your account number and other vital banking details with people.
3. Protect your devices
Many people are gravitating towards digital wallets; if you are one of them, do not forget to protect your device by locking it with a passcode and fingerprint.
4. Strong passwords
To ensure safety, it is equally important to make your phone safe through solid passwords, fingerprint locks, and face recognition. Avoid using dates of important events like dates or anniversaries for your passwords.
We hope that the above article helped the readers understand how Capital One credit cards work, along with some information regarding the advantages and safety of credit cards. Stay tuned for more such content!
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Featured Img Src: Capital One Credit Cards, Bank, and Loans – Personal and Business.