What is a credit draft transaction specifically used for?

A credit draft transaction is specifically used for situations where a merchant needs to complete a transaction that involves a direct withdrawal from a credit cardholder's account after the cardholder has made a purchase. In the context of refunds, this type of transaction typically occurs when a merchant issues a refund to the cardholder's account for a previous purchase, such as a food stamp purchase.

The function of a credit draft in this situation is to effectively reverse the original purchase transaction or to credit the cardholder’s account for the specified amount. This ensures that the consumer receives their funds back into their account, allowing them to manage their finances appropriately.

This particular utility makes it clear that option C is aligned with the purpose of credit draft transactions, emphasizing their role in facilitating refunds rather than performing other actions like authenticating new users, granting loans, or increasing credit limits, which are not the primary applications of a credit draft transaction.