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What is a credit card?

What is a credit card?

Simply put, a credit card is just a small piece of plastic that fits easily in your wallet. Well, it’s not “just a piece of plastic”; it’s a very powerful piece of plastic that can be thought of as a compressed form of cash. We can define a credit card as a credit system that allows consumers to borrow money temporarily from a bank or financial institution and use it to make payments to a merchant.

In order to obtain a credit card, the consumer needs to fill out an application form, which is actually like an agreement between the credit card provider and the credit card consumer. The credit card provider approves the application and provides the consumer with a small piece of plastic (i.e., a credit card). This plastic (or credit card) contains electronically encoded security information in the form of a magnetic stripe (typically located on the back of the credit card). When the consumer uses the credit card, this information is used to authorize payment. The consumer can use the credit card to make purchases at a merchant store or on the Internet, for example. Of course, this depends on the merchant’s ability to accept credit card payments. However, accepting credit cards is not enough. The merchant should be able to accept credit card payments offered through that credit card organization (the credit card you have), i.e. VISA, MasterCard, etc. You can also use your credit card to withdraw cash at an ATM (automated teller machine) – also known as a cash machine or day/night machine.

There are eight major credit card organizations, most of which have a presence in many countries around the world. They are American Express, Citi, Diners Club, Discover, JCB, MasterCard and VISA. mastercard and VISA are probably the most popular. There are also credit card providers or issuers that have relationships with these organizations and issue credit cards on their behalf, for example, you have various banks that issue VISA cards (such as HSBC VISA cards).

To pay with a credit card, the card must be swiped into a special credit card processor (when shopping in person at a store) or the credit card details must be entered on the merchant’s website (when shopping online). The credit card provider sends the bill for these transactions to the consumer, who then has to pay the full amount or a partial (minimum) amount. If you pay in full, the credit card provider will not charge any interest on the amount you owe, otherwise a pre-agreed interest rate will be charged. If you don’t even pay the minimum amount, you may be charged a late fee as well. In addition, the credit card provider will generally place a limit on the maximum amount you can spend with your credit card each month.