What is a credit card

A credit card is a document of plastic or metal material issued by a bank or specialized institution in the name of a person who can use it to make purchases without having to pay in cash. Use of a credit card simplifies the purchasing process and gives the user a high level of purchasing power. Credits cards have a limit on them; depending on the bank, the person’s credit and the user’s fiscal responsibility. The monetary limit allows the user to spend a certain amount at any given time. Some cards have a fixed fee while others have fluctuating fees and interest rates.

Types of Cards

There are different types of credit cards including:

The classic cards such as Visa, Mastercard, American Express and Discover
Revolving cards
Points or Reward cards
Commercial cards for business owners
Prepaid or secured cards where the user has to put money on the card to be able to use it
Gold and Platinum cards where the user is awarded a higher credit limit.

This card is usually owned by a business person or an individual with great credit

Partial or Full Pay Back

Having a credit card is like getting a short term loan where it has to be partially or fully paid back within a month. American Express cards, for example, have a mandatory ‘full pay back’ policy. Once you use the card for any purchase; no matter the amount, you have to pay it all at the end of the month or billing cycle. With other credit cards, you pay a minimum amount each month. It is preferable that you pay more than the minimum to reduce the balance and increase your credit score. Credit cards are usually issued by a store, bank, other financial institutions or service provider.