Credit card

Credit card is a type of card that allows purchase of items without cash. Credit cards tend to be small plastic cards with a unique number attached to a bank account. Most are magnetic stripe cards. Many have an EMV chip for use by card readers. Paying with a credit card means borrowing the money in an unsecured loan which must be repaid in a specified time.

If the bill is left unpaid for some time, the customer will have to pay interest for the amount that is left unpaid.Users failing to repay in time may have to pay much more. Payment using a credit card is one of the most common methods of electronic payment. A debit card similarly allows paying without cash, but it pays with money in the user's bank account.

Features
Each card has a unique number. Using this number, plus other details on the card, such as the validity date, or a code, the client can buy goods or services. The issuer of the card automatically transfers the money to the seller. The person using the card gets a credit. The customer has a certain amount of time to pay the credit card bill.

Additional features of credit cards may include rewards points, cashback, travel rewards, and purchase protection. Many credit cards also offer fraud protection and the ability to dispute charges. Modern credit cards can be used for contactless payments using NFC technology. Some cards allow users to manage their spending and make payments via mobile apps.

Interest and fees
Credit cards typically charge interest on unpaid balances. Interest is calculated based on the annual percentage rate (APR), which varies by issuer and user credit history.Explanation of interest rates, fees, and calculations Late payments, exceeding the credit limit, or cash advances may result in additional fees. Some credit cards offer a grace period during which no interest is charged if the balance is paid in full each month.

Credit limit
Each credit card has a credit limit, which is the maximum amount that can be borrowed at one time.Learn more about credit limits on Investopedia The limit is determined by factors such as income, credit history, and spending patterns. Exceeding the credit limit can result in fees and may negatively affect the user's credit score.

Usage
Credit cards are widely accepted worldwide, both in physical stores and online. They provide convenience and security for transactions. Responsible use of a credit card can help build a positive credit score, which is important for obtaining loans, mortgages, and other forms of credit.

Calculating interest and minimum payments
Credit card holders can estimate the interest they will pay on unpaid balances and determine minimum monthly payments using online calculators. These tools generally require information such as the outstanding balance, annual percentage rate (APR), and desired monthly payment. By entering these values, users can see how long it will take to pay off their balance and how much interest will accrue over time. Such calculators can help in planning payments and avoiding excessive interest charges.Free Credit Card Calculator and Interest Estimator

Related pages
 Debit card
 Bank
 Credit score

References

Category:Money
Category:Economics