When a purchase is made using a credit card, cardholder (an individual) agrees to pay the card issuer (a financial institution).

Within a few seconds, electronic verification systems allow merchants to verify that the card is valid, and that the credit card customer has sufficient credit to cover the purchase. The verification is performed a number of ways, depending on how, and who, is accepting the credit card as payment.

Each month, the credit card holder is sent a financial statement indicating the purchases undertaken with the credit card, any outstanding fees, interest, and the total amount owed. After receiving the statement, the credit card holder may dispute any charges that he or she thinks are incorrect. Otherwise, the credit card holder must pay at least a minimum proportion of the total bill before a due date. If payment is not made in time, fees and additional interest may be added to the total balance owed. The credit card issuer charges interest on the balance owed if the balance is not paid in full.


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