What's what in finances: Credit card What's what in finances: Credit card

What's what in finances: Credit card

A credit card is a thin rectangular slab of plastic or metal issued by a financial company, that lets cardholders borrow funds with which to pay for goods and services. It uses a magnetic strip, a microchip and an embossed number

A card entitling the owner to use funds from the issuing company up to a certain limit. The holder of a credit card may use it to buy a good or service. When one does this, the issuing company effectively gives the cardholder a loan for the amount of the good or service, which the holder is expected to repay. Most credit cards have variable and relatively high-interest rates on these loans. Credit cards also have a limit, which may be raised or lowered depending on the creditworthiness of the cardholder.

Most analysts recommend treating a credit card as a short-term loan, as allowing the interest to compound for too long may result in dire financial straits.

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