A credit card is a payment card issued by a bank or financial services company that allows cardholders to borrow funds with which to pay for goods and services. Here are some key features of credit cards:
-
Borrowing: Credit cards allow you to borrow money from a bank or financial services company to buy things, whether thats a burger and fries or a round-trip ticket to France. Each month, you get a statement from the credit card company listing your purchases, and thats when you pay the money back. You can pay all at once, or pay just a portion and carry the rest of the balance to the next month. If you carry a balance, youll have to pay interest — a percentage of the money you owe — on top of what you borrowed.
-
Credit Limit: Issuers customarily preset borrowing limits based on an individual’s credit rating.
-
Interest: Credit cards charge interest on the money spent. The interest rate varies depending on the card and the issuer, but it can be quite high.
-
Types of Credit Cards: There are different types of credit cards, including secured credit cards, retail credit cards, and rewards credit cards.
Credit cards are different from debit cards, which allow you to use your own money to make purchases. Credit cards also differ from charge cards, which require the balance to be repaid in full each month or at the end of each statement cycle. Alternatives to credit cards include debit cards, mobile payments, digital wallets, cryptocurrencies, pay-by-hand, bank transfers, and buy now, pay later.
