What is credit card?


Credit card is electronic payment card which is also called bank card. Credit cards are usually applied with specific and individual credit limit which is meant for unpredicted and urgent non-cash transactions which are connected with purchase of products or services. Credit card payments can be performed through POS (point of sale) terminals and the Internet. Also ATMs can be used, if it is necessary to withdraw cash or transfer it to the bank account.

Credit card, as can be understood by the expression, was the first type of loan in banking industry, however, as it is known, nowadays a lot of various loans are available, not only credit cards. In addition, today lenders are not only banks, but also private companies which are known as non-bank companies. Despite the fact that there are a lot of different loans, for the present credit cards are service of banking sector. It is possible that after several years similar credit cards will be offered by private creditors as well – it is only a matter of time and competition.

Credit cards, as mentioned before, have specific credit limit which is applied, basing on client’s individual needs and wants. As various information sources tell, credit limit may reach several thousands which, agree, is a large amount of money. Credit limit operates in parallel with personal means, therefore, if personal means are spent, it is possible to pay with means of credit limit.

Credit limit is usually meant for unplanned spend, but, of course, it can be spent in any other situation as well. If a person knows its money spending habits, for example, it often succumbs to fad and spends money for unnecessary things, credit card is a good solution. If the credit card is formed with the purpose that at some future date there can be the need for additional money, necessity for credit card has to be thought over. Annual fee of credit card is quite high, and, if the person does not use credit limit within year, it overpays for service which had not been used. If person’s necessity for urgent loan is so negligible and in a probability level, it is more advantageous to form a debit card and, if required, to borrow, for example, a fast loan.

As one might guess, credit limit has to be repaid. Depending on the type of credit card credit limit has to be repaid with interests or without them. There is no need to pay interests if you have an interest-free credit card, if you repay spent credit limit timely which is usually till next month’s 15th date. If interests have to be paid, they are usually from 20% to 40% from the spent amount of money. It should be mentioned, that there is no need to inform a creditor, if the credit limit is spent or it is repaid, because credit card owners have specific credit limit which is impossible to overdrawn, as well as elastic and individual repayment graphic.
Credit cards are created, basing on internationally united standards of ISO quality system, therefore, it is possible to make payments with credit cards anywhere in the world. For the same reason the majority of credit cards have the function of discount cards which operates in various countries for different products and services.