A credit card is a small card made of plastic which is issued by financial institutions (generally banks) for making payments directly through the bank accounts. It is a type of plastic money which allow the cardholder to pay money through it instead of cash and cheques.
How does it work?
As the name suggests credit cards work just like we are taking credit from issuer to pay someone else which we will have to return to the issuer with the charges for the facility. There is a limit to which cardholder may pay using the card. So, the amount in the cardholder’s account does not decide the amount of expenditure that can be made using the credit card but the card limit does so. There is also chances that card limit is below the available balance in that case also the cardholder can only pay up to the card limit only even though he has more balance in the account. If the cardholder pays more than the card limit it will be treated as overdraft and charges will be applicable for that.
The popularity of credit card in modern days
Cards, credit card or debit card, has become a very popular method of payment these days. They help cardholders to pay easily, conveniently, safely and comfortably and acts as an alternative of cash, therefore, reducing chances of theft and problem of carrying. They have become an inevitable part of an individual’s life.
There are various companies that actually works behind the scene to provide an active card and see what cards work properly. Examples of such companies are Visa, MasterCard, etcetera
Credit card vs debit card
Plastic cards are of two types, that is, debit card and credit card. Debit card, as the name suggests, helps in payments by debiting the account of cardholder whereas credit card provides credit for payment which the issuer collects from the cardholder later on. In the debit card, the cardholder may spend only up to the limit of the available balance in the account whereas in the credit card this limit is set up separately irrespective of the available balance.