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:
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Interest: Credit cards charge interest on the money spent, and issuers customarily preset borrowing limits based on an individual’s credit rating.
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Revolving line of credit: A regular credit card allows consumers to build a continuing balance of debt, subject to interest being charged, while a charge card requires the balance to be repaid in full each month or at the end of each statement cycle.
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Alternatives: Credit cards differ from debit cards, which can be used like currency by the owner of the card. Alternatives to credit cards include debit cards, mobile payments, digital wallets, cryptocurrencies, pay-by-hand, bank transfers, and buy now, pay later.
Credit cards offer a line of credit that can be used to make purchases, balance transfers, and cash advances, requiring that you pay back the loan amount in the future. If the full balance for purchases is not paid off, interest charges will be applied. Secured credit cards are a type of credit card where the cardholder secures the card with a security deposit. Such cards offer limited lines of credit that are equal in value to the security deposits, which are often refunded after cardholders demonstrate repeated and responsible card usage over time.
