When customers make purchases with a national credit card, the retailer

When customers make purchases with a national credit card, the retailer

a. is responsible for maintaining customer accounts.
b. is not involved in the collection process.
c. absorbs any losses from uncollectible accounts.
d. receives cash equal to the full price of the merchandise sold from the credit card company.

The correct answer and explanation is :

The correct answer is b. is not involved in the collection process.

When customers make purchases using a national credit card (such as Visa, MasterCard, or American Express), the retailer typically does not handle the collection process directly. Instead, the retailer receives payment from the credit card company or bank that issued the card, and it is the responsibility of the card issuer to manage the account, collect payments, and handle any potential delinquencies or defaults.

Here’s an explanation for why option b is correct, and why the other options are not:

1. a. The retailer is responsible for maintaining customer accounts.

• This statement is incorrect. Retailers do not maintain customer accounts when customers use national credit cards. The credit card issuer (such as a bank or financial institution) is responsible for maintaining the accounts of cardholders, including tracking balances, interest, and payments.

1. b. The retailer is not involved in the collection process.

• This is correct. When a customer uses a national credit card, the credit card company (the issuer) takes on the responsibility for collecting payment from the customer. Retailers receive immediate payment or a guaranteed form of payment from the credit card issuer, and they are not involved in the process of chasing or collecting money from the customer. The retailer’s relationship with the cardholder is limited to the transaction itself.

1. c. The retailer absorbs any losses from uncollectible accounts.

• This statement is incorrect. The retailer does not absorb losses from uncollectible accounts in the case of credit card purchases. When a customer purchases with a credit card, the retailer is paid immediately by the card issuer, and it is the credit card company that assumes the risk of unpaid debt from the cardholder, not the retailer.

1. d. The retailer receives cash equal to the full price of the merchandise sold from the credit card company.

• While the retailer does receive payment from the credit card company, this payment is typically slightly less than the full price of the merchandise. Credit card companies charge retailers a fee (usually a percentage of the transaction) for processing the payment, so the retailer receives a reduced amount, not the full price.

In conclusion, option b is the correct choice because the retailer does not get involved in the customer’s payment collection process; instead, it receives payment upfront from the credit card issuer, and the issuer takes care of the collections.