Credit card - What is a credit card?
A credit card is a plastic card issued by a financial institution and allows its owner to option to borrow money from the issuer for purchases
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Credit cards are plastic cards (in standard wallet size) that contain a short strip of magnetic tape and/or a data chip containing information that will tell a credit card reading device who the owner of the credit card is, their account number, etc.
This allows credit card holders to pay for merchandise or services with credit instead of using cash or writing a cheque.
Where you can get a credit card
Major credit cards are issued by banks or other large financial companies. There are typically a large variety of types offered to suit your needs. However, there are many options for credit cards today.
Many large stores or chains now offer their own credit cards, often providing discounts or rewards to customers. It can be easier to be approved for this type of credit card, however, these cards might be limited in use at only select retailers.
Credit cards = short term financing
Applicants for credit cards are considered based on their financial situation and their ‘credit score’ which means their history of paying back previous loans, both from using a credit card and from other types of loans.
Using a credit card
Each credit card account has a maximum limit of funds that can be charged within a certain period and in total.
Owners of credit cards have the ability to borrow a certain amount of money from the credit card issuer, to be paid back within 30 days without interest.
Most credit card issuers charge interest for loans taken longer than 30 days to repay. Missed deadlines for payments, as well as failing to pay off credit card debts will negatively impact a credit score.
Why use a credit card?
Credit cards are generally a slightly controversial topic, as they can easily lead to debt if payments are unable to be covered within a required amount of time.
However, in many places, establishing a good credit history can provide a basis for approval for future loans.
Aside from that, their ease of use eliminates the need for cash, making both in-person and online purchases simple and fast.