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2.7 How credit cards work when making purchases
A credit card allows the owner to make purchases from merchants who accept that type of card.
Data relating to the cardholder’s credit card account is stored on the account holder’s card in the magnetic stripe on the back of the card and in the chip on the front of the card.
When making a purchase, the credit card owner agrees to pay back the card issuer. This consent to pay used to be indicated when the cardholder signed a receipt which contained the card details and information relating to the amount paid. The signature system was recently replaced with the Chip and PIN system. This requires cardholders to enter a Personal Identification Number (PIN) to authorise the transaction.
Cardholders can also use their credit cards to make purchases online and over the telephone using a Card Not Present (CNP) transaction. Merchants will need other information when carrying out a CNP purchase, including the address which receives the card statements and the security code printed on the top right of the magnetic stripe on the back of the card.
Once the merchant has the card, or the information they need from the credit card to go carry out the transaction, the merchant needs to verify the transaction.
To do this the card or the card information is entered into a credit card payment terminal which has a communication link to the merchant’s acquiring bank. This will check to see that the card is valid and that the customer has enough left on the credit card to cover the purchase.
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Please ensure that you fully read the terms & conditions of any product or policy before you decide to proceed and are fully aware of the total costs and the benefits and any exclusions or limitations applicable to the product or plan.
Please note that the product links will take you direct to the Issuer or Insurer's site direct and we cannot be held responsible for the information which they provide within their own sites. On some comparison tables we use a star rating which rates products by visitor popularity.