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.