What is a Credit Card?

Credit cards are a form of lending offered by banks and financial companies to provide customers the option of purchasing goods and services on credit as an alternative to paying for those goods or services by cash.  It can be thought of as a recurring short-term loan that is provided by the bank (or financial institution) to the customer to help him or her make a purchase without having to pay for that at the time of making the purchase.  A credit card basically provides you with a line of credit with the bank or financial institution issuing the credit card.

While there are several benefits of using a credit card, the primary benefit is that the customer can make a purchase without using cash and repay the amount after a period of time, also known as the “credit-free” period which is usually anywhere between 30 and 60 days.  

For this service provided to customers, banks and financial institutions charge a certain % of interest and/or fees.  However, credit cards can also be used in a manner that does not incur any interest charges.

While the most popular form of a credit card is a plastic card issued to the customer, there are also instances where the credit card issued is only a number which the customer can use for making online purchases.