what is a credit card 
a credit card is a thin rectangular piece of plastic or metal issued by a bank or financial services company that allows cardholders to borrow funds with which to pay for goods and services with merchants that accept cards for payment credit cards impose the condition that cardholders pay back the borrowed money plus any applicable interest as well as any additional agreed upon charges either in full by the billing date or over time in addition to the standard credit line the credit card issuer may also grant a separate cash line of credit loc to cardholders enabling them to borrow money in the form of cash advances that can be accessed through bank tellers atms or credit card convenience checks such cash advances typically have different terms such as no grace period and higher interest rates compared with those transactions that access the main credit line issuers customarily preset borrowing limits based on an individual s credit rating a vast majority of businesses let the customer make purchases with credit cards which remain one of today s most popular payment methodologies for buying consumer goods and services investopedia ellen lindnerunderstanding credit cardscredit cards typically charge a higher annual percentage rate apr vs other forms of consumer loans interest charges on any unpaid balances charged to the card are typically imposed approximately one month after a purchase is made except in cases where there is a 0 apr introductory offer in place for an initial period of time after account opening unless previous unpaid balances had been carried forward from a previous month in which case there is no grace period granted for new charges by law credit card issuers must offer a grace period of at least 21 days before interest on purchases can begin to accrue 1 that s why paying off balances before the grace period expires is a good practice when possible it is also important to understand whether your issuer accrues interest daily or monthly as the former translates into higher interest charges for as long as the balance is not paid this is especially important to know if you re looking to transfer your credit card balance to a card with a lower interest rate mistakenly switching from a monthly accrual card to a daily one may potentially nullify the savings from a lower rate individuals with poor credit histories often seek secured credit cards which require cash deposits that afford them commensurate lines of credit types of credit cardsmost major credit cards which include visa mastercard discover and american express are issued by banks credit unions or other financial institutions many credit cards attract customers by offering incentives such as airline miles hotel room rentals gift certificates to major retailers and cash back on purchases these types of credit cards are generally referred to as rewards credit cards to generate customer loyalty many national retailers issue branded versions of credit cards with the store s name emblazoned on the face of the cards although it s typically easier for consumers to qualify for a store credit card than for a major credit card store cards may be used only to make purchases from the issuing retailers which may offer cardholders perks such as special discounts promotional notices or special sales some large retailers also offer co branded major visa or mastercard credit cards that can be used anywhere not just in retailer stores secured credit cards are a type of credit card where the cardholder secures the card with a security deposit such cards offer limited lines of credit that are equal in value to the security deposits which are often refunded after cardholders demonstrate repeated and responsible card usage over time these cards are frequently sought by individuals with limited or poor credit histories similar to a secured credit card a prepaid debit card is a type of secured payment card where the available funds match the money that someone already has parked in a linked bank account by contrast unsecured credit cards do not require security deposits or collateral these cards tend to offer higher lines of credit and lower interest rates vs secured cards sabrina jiang investopedia 2020building credit history with credit cards