Credit Card
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Credit Card is not just a status representation. It is a handy financial product for common expenses.

Credit Card

A credit card is a helpful financial means that enables cardholders to make purchases on credit. From paying service bills to online shopping, buying apartment appliances, groceries, and much more, a credit card helps you cover all your expenses easily. Credit cards impose the condition that cardholders pay back the borrowed money, plus interest, as well as any additional agreed-upon charges.

The credit company provider may also grant a line of credit (LOC) to cardholders, enabling them to borrow money in the form of cash advances. Issuers customarily pre-set 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.

Credit is a measure of a person’s ability to pay back her debt on time, which is described in a credit history compiled by a credit bureau and expressed by a three-digit number called a credit score. The more credit a person has, the more purchases she can make using the credit because she is more trusted by lenders and banks. Frequently, credit is issued in the form of a line of credit, a stated amount that gets depleted by purchases each month and replenished by payments toward it.

A credit card is the most common way to access a line of credit. Usually issued by a bank or financial services company, credit cards allow account holders to make purchases on credit without having to put up cash at the point of sale. Instead, the charges accrue as a balance that must be paid off on a monthly billing cycle, giving the buyer more time to get the cash together. The amount of a credit card line of credit, usually called a credit limit, is determined by the card holder’s credit score and income.

When the credit card holder pays her statement balance off in full each month, she can expect her credit score to go up. She’ll be more likely to qualify for better loans at higher amounts and be approved for activities that require good credit, such as renting an apartment. Additionally, almost all credit cards come with some kind of rewards program in which account holders earn points per every dollar spent, which can be redeemed for cash back, frequent-flyer miles, or goods and services. Such rewards may even be amplified if the credit card is co-issued by a bank and a retailer, in what’s called a co-branded card: points earned may be worth more when used at the retailer who issued the card.

If the account holder fails to pay on time, the unpaid balance may start to accrue interest. Because credit cards are essentially unsecured loans — meaning that no collateral backs up the debt if the account holder defaults on what she owes — the interest rate charged to delinquent accounts is much higher than other types of loans, like mortgages. Not only will the balance and interest have to be paid off, but late payments could lower the account holder’s credit score.

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