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.
Explanation:
When customers make purchases with a national credit card (such as Visa, MasterCard, or American Express), the retailer is not directly responsible for maintaining customer accounts or collecting payments. The credit card company handles the financial transaction between the customer and the retailer, ensuring the customer’s account is charged and payments are made.
Here’s how the process works:
- Retailer’s Role: When a customer uses a national credit card to make a purchase, the retailer processes the transaction using the credit card network. The retailer then receives the payment from the credit card company, minus any transaction fees (often a small percentage of the sale amount).
- Credit Card Company’s Role: The credit card company acts as the intermediary. They maintain customer accounts, monitor payment history, and handle the collection of payments. If the customer defaults on their payment, it is the credit card company’s responsibility, not the retailer’s, to manage collections or deal with uncollectible debts.
- Absorbing Losses: Retailers do not absorb the losses from uncollectible accounts. Instead, the credit card company assumes the financial risk associated with credit purchases. If a customer does not pay their bill, the credit card company may take actions like reporting the debt to a collection agency or charging off the amount, but the retailer has already received payment for the goods sold.
- Cash Payment: The retailer does not receive cash equal to the full price of the merchandise. Instead, they receive the payment from the credit card company, typically minus a processing fee. The credit card company assumes the risk of collecting the money from the customer.
Thus, the retailer’s involvement in the credit card transaction is limited to processing the sale and receiving payment from the credit card company, not managing the customer’s credit account or handling any associated collections.