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 A credit card is a plastic card that is issued to an individual by a financial institution that extends a line of credit to an individual. These cards have a magnetic strip on them that stores information on the account of the cardholder. When making a purchase the card will be ‘swiped’ through a credit card machine for approval for the transaction. The card also has a card number and details on it that can be used in online and telephone transactions. The card number and name on the card identifies the holder to the credit card company and when information is verified then a purchase is given an approval code.
A credit card is assigned a spending limit for the holder. This is the limit of the card. The cardholder can then spend up to that limit on the card. The credit card company will issue a statement to the cardholder every month, which details the transactions that month, the balance on the card and the minimum payment due. The cardholder can then either pay the full balance off in one payment, which will negate them from accruing any interest charges. They can also choose instead to make a minimum payment, which then pays off the balance over time. Paying this way will mean that the credit card company will add a set interest charge to the account balance.
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