What are credit purchases?
Posted: Mon Jan 06, 2025 8:31 am
Credit purchases are a transition in which the buyer acquires a product or service, but does not pay in cash, but rather does so through a credit product (it can be a credit card, line of credit or financing) issued by a financial institution or business with the capacity to do so.
Each buyer signs an agreement with a financial institution that provides this type of service, which can be anything from a traditional bank to a fintech, and agrees to pay this amount under the agreed terms. It can be for a fixed period (fortnights or months) or a specific date, as is the case with credit cards, with or without interest.
Once the customer makes a purchase with one of these credit products, the financial institution delivers the full funds to the merchant, which does not have to wait for the customer to settle the total amount of their purchase.
Although credit purchases were once strongly phone database associated with bank cards, there are now different digital payment solutions that allow credit purchases to be made without a card. We will discuss some of these later.
How do credit purchases work?
In general, the credit purchase process works as follows in an online store:
Previously, the user has signed or has an agreement with a financial institution (bank or fintech) that allows them to make credit purchases with or without a card.
This customer enters an online store, chooses the items he or she wants, adds the products to the checkout and verifies that the store accepts the payment method that allows him or her to make purchases on credit .
The visitor registers his/her contact and financial details on a payment gateway to proceed with the transaction. This information is sent to the financial institution for validation and acceptance.
Once the purchase is authorized, the payment gateway is notified and confirmed to the store and the customer.
The financial institution issues the purchase amount from its own funds to the payment gateway, which will subsequently deposit these resources into the bank account of the store owner.
Each buyer signs an agreement with a financial institution that provides this type of service, which can be anything from a traditional bank to a fintech, and agrees to pay this amount under the agreed terms. It can be for a fixed period (fortnights or months) or a specific date, as is the case with credit cards, with or without interest.
Once the customer makes a purchase with one of these credit products, the financial institution delivers the full funds to the merchant, which does not have to wait for the customer to settle the total amount of their purchase.
Although credit purchases were once strongly phone database associated with bank cards, there are now different digital payment solutions that allow credit purchases to be made without a card. We will discuss some of these later.
How do credit purchases work?
In general, the credit purchase process works as follows in an online store:
Previously, the user has signed or has an agreement with a financial institution (bank or fintech) that allows them to make credit purchases with or without a card.
This customer enters an online store, chooses the items he or she wants, adds the products to the checkout and verifies that the store accepts the payment method that allows him or her to make purchases on credit .
The visitor registers his/her contact and financial details on a payment gateway to proceed with the transaction. This information is sent to the financial institution for validation and acceptance.
Once the purchase is authorized, the payment gateway is notified and confirmed to the store and the customer.
The financial institution issues the purchase amount from its own funds to the payment gateway, which will subsequently deposit these resources into the bank account of the store owner.