Additional Resources

  1. Economics Of Credit Cards [law.gmu.edu]
  2. The Economics Of Credit Cards [law.gmu.edu]
  3. Who Gains And Who Loses From Credit Card Payments? [citeseerx.ist.psu.edu]
  4. The Antitrust Economics Of Credit Card Networks [faculty.chicagobooth.edu]
  5. The Economics Of Payment Cards [sites.bu.edu]
  6. Credit Card Market: Economic Benefits And Industry Trends [webarchive.library.unt.edu]

Definition

A credit card is a payment card issued to users as a method of payment. It allows the cardholder to pay for goods and services based on the holder's promise to pay for them. The issuer of the card creates a revolving account and grants a line of credit to the cardholder, from which the cardholder can borrow money for payment to a merchant or as a cash advance.

Credit Cards

By definition, credit cards are released by financial companies that allow the customer or holder with the choice of borrowing funds, at the point of sale. The plastic card charges interest and is usually used for financing in the short term. Most financial centers charge interest one month after the purchase of a good or service is made. Usually, as per the credit score/rating of the client, a limit is set.

Most stores allow swiping a credit card as form of payment. Since these cards are widely accepted, they have become the most popular form of payment amongst the masses.

Types of Credit Cards:

Credit Cards — Major

These are issued by credit unions or through financial institutions such as the bank. They are likely Visa, MasterCard, American Express, etc. Most of them carry features and incentives that make them more attractive in comparison to other cards. For example, rewards on shopping for certain amounts and reaching a specific point.

Some major cards are available in the form of zero interest cards that can help borrowers reduce their debts on cards that charge high interest rates.

Credit Cards — Store

A store credit card is issued to increase customer loyalty. To get a store credit card is much easier than availing major credit cards as discussed above. In most cases, the store credit card can only be used to buy products and services from the specific store that issued you the card. To lure in customers, the stores offer great discounts, gifts and freebies.

Secured Cards

This is great for customers that have damaged credit. A secured card is useful in making online payments which reduces the need to carry any cash. However, to avail this card the applicant needs to deposit some money, which is usually in hundreds of dollars. This amount also acts as the credit limit initially. Furthermore, secured cards report to authorized agencies about payments and purchase activities which further help the cardholder to remove bad credit history.

Credit card interest rates at times can cost an individual more than personal loans. It is important for credit card holders to act smart and use the card in moderation.

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