What does credit card mean?
A small rectangular shaped card that is issued to a cardholder for the use of purchasing goods using a credit account, the card holding information on a magnetic strip. In order to be issued with a credit card, you will need to satisfy certain criteria from the bank or other financial organization such as passing credit checks.
Credits cards are accepted in millions of ATMs and stores around the globe and are a convenient and hassle-free way of making purchases abroad as well as online. Each credit card issued is unique and non-transferable and each cardholder will be asked to sign a credit card agreement at the time of issuing.
Credit cards are issued to consumers by financial institutions, typically banks, and allows a cardholder or their designee to borrow money for purchases and pay it back at a later date with interest. Credit cards also include a line of credit that allows the cardholder to borrow money in the form of a cash advance. Borrowing limits are usually preset by the issuing financial institution and the credit limit may differ from the cash advance limit.
It’s well known that credit cards have substantially higher interest rates when compared with other forms of consumer credit. Many credit cards will offer a grace period in which no interest is charged if the goods charged are paid for by the end of the billing cycle (or within a given number of days, typically 20). Credit cards still remain one of the most popular forms of payment for consumer goods and services, and nearly every merchant or service provider will accept credit cards for payment.
Most major credit cards are affiliated with Visa, Mastercard, American Express or Discover and are issued by banks or credit unions. Additionally, many credit cards also offer incentives for using that card ranging from airline miles to hotel points to cash back. This can increase consumer interest in using a specific reward card.
Another type of credit card is the store credit card, which is intended specifically to increase customer loyalty. Typically offered by major retailers such as Sears or JC Penney, this type of credit card is often easier to qualify for, but can only be used at the retailer who issues the card. However, that loyalty can pay off when the retailer offers special sales and discounts to their cardholders.
Consumers who have problems with their credit and can’t qualify for a typical credit card might opt for a secured credit card. This type of credit card requires a deposit be made and the total line on credit extended is then usually the amount of the deposit, but it could be less or more, depending on the terms of the card. Secured cards allow consumers to rebuild their credit and eliminate the need to carry cash. Secured credit cards will report to the major credit bureaus. One downside is that secured credit cards often charge high annual fees.