What is a credit card?

A credit card is a financial tool that allows the cardholder to borrow funds from a financial institution up to a certain limit in order to make purchases or pay for goods and services. The cardholder is required to pay back the borrowed amount, along with any applicable interest and fees, within a specified period of time. Credit cards typically come with a predetermined credit limit, which is the maximum amount of money that the cardholder can borrow. The credit limit is determined by the card issuer based on the cardholder's credit history, income, and other factors. When a purchase is made using a credit card, the cardholder is essentially taking out a short-term loan from the card issuer. The cardholder then has the option to pay off the borrowed amount in full by the due date or make a minimum payment and carry the remaining balance forward, subject to interest charges. Credit cards also offer various benefits such as rewards programs, cash back incentives, travel perks, and purchase protection. Additionally, credit cards can be used for online and in-person transactions, making them a convenient and widely accepted form of payment. It's important for cardholders to use credit cards responsibly and to manage their balances and payments in order to avoid accumulating excessive debt and damaging their credit score.