What are Credit Cards?

What are credit cards, and how are credit cards used?

What are Credit Cards?

What are credit cards? Are they, as described in the dictionary, a piece of plastic with a strip of information on the back that has been issued by a bank, department store or other business to allow an individual to purchase items on credit. Credit cards were originally issued by individual stores or businesses, balance payable monthly, and called “charge cards.” Most credit cards are issued with a limit and the user must pay back the amount borrowed within a time limit at pre-determined payment amounts with interest.

What are credit cards? They are cards that can be used over and over to borrow money or buy items without paying for them.

What are credit cards? They can be said to be tiny plastic versions of a letter of credit. A credit card can be presented at a bank and the consumer can withdraw a requested amount of cash even though he/she does not have an account in that particular bank.

What are credit cards? They are a type of revolving charge account. If the consumer or borrower does not pay the total due each month, a fee is assessed. This increases the balance due and interest is charged on the total amount.

One answer to the question, what is a credit card, is that it is an instrument of the Devil. In the 70’s, when credit cards became more prominent, Christian Fundamentalists were denouncing credit cards as evidence that the Antichrist had arrived and was behind the issuance of credit cards. They insisted that each person who used credit cards was being used as an instrument of Satan. Credit cards were considered equal to the “mark of the beast” and even televangelists were telling people they should steer clear of their use. Today, with mounting debts in every level of individual finances, there may be a lot of people who agree with this definition of a credit card.

What are credit cards? They are bank credit instruments. A person gets a credit card from a bank and agrees to pay back any money owed on it plus the interest and fees charged. Any item can be used as a bank credit instrument. Consider the check, this is also a credit instrument. It is used in the place of money.

What are credit cards? A credit card is a form of currency. Although the item is made of plastic and has a strip of information across the back to be read by the various computers and terminals through which it is swiped, it is the same as having the money in your hand. As currency, a person can have instant gratification. Any item within the credit card limit can be purchased as if the person had just handed the cashier the cash.

What are credit cards? A credit card is an instrument of debt. When a consumer uses a credit card he/she is actually borrowing that particular amount of money to be potentially repaid at an interest rate predetermined by the bank that was the issuer.

If you want to know what a credit card is, look at the application for one. You will see that it is nothing but a loan agreement. There is a lot of information crammed into the tiny space on the credit card application. There will be information that identifies the application as a loan document. It contains an interest rate that is adjustable according to how payments have been made or balances have been paid off. There is a section regarding the available balance and what happens if the consumer exceeds this balance. Repayment terms are listed. The difference with a credit card agreement and a consumer loan agreement is that the credit card agreement is open ended with regard to repayment. The repayment only ends when the total balance has been paid off and that can be infinity.

Some credit cards allow you to pay for items or draw cash against a bank balance. This is called a “secured credit card”. The consumer can only spend as much as he/she has backing up the credit card in the bank. This type of credit card is usually issued to people who have suffered a bankruptcy, have bad credit, are trying to rebuild their credit, or need to begin a credit history. If you pay it back on time you can eventually get a non-secured credit card.

So, what are credit cards? A credit card is a payment card. It can be issued to a consumer as a form of payment or currency. A revolving line of credit is formed and the consumer can use it to pay for items, goods, services or as currency. A credit card is not a charge card. A charge card must have its balance paid monthly. American Express is an example of a charge card. It does not have a limit but the consumer who uses it must pay the balance each month to allow for continued charges and use. A credit card is not a cash card which can be used exactly like currency and is backed by the consumers own bank account.

What are credit cards? A credit card is acceptance, convenience, instant gratification, a status symbol, extra money, and debt. It is an agreement to repay by the month any amount of money that is accumulated on the account as well as the interest accrued and any fees added to the account. It is protection for your purchases against damage, theft, or false advertisement. A credit card is a type of payment that allows a consumer to purchase online at websites without having to grant access a bank draft from a personal account. A credit card is an item that assures a consumer that he/she will not be held responsible for items that he/she did not purchase if it has been fraudulently added to his/her account. Handled in the correct manner, a credit card is a manner in which to manage bills and purchases. Handled in the wrong manner, it is a trip to debt. What are credit cards? It can be almost anything you can think of.

Monica Kowollik

Owner / Director at CreditFast.com
Monica has covered credit card and personal finance news for over 15 years. From an early age, she developed an interest instilled by her parents, who immigrated to the United States, of financial literacy and saving money.
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