What is a Credit Card

A credit card is a plastic card, which is used by a person as a mode of payment. The word credit shows that the card enables the holder of the card to get a credit from the bank, which issues the card. The credit is availed by the holder as and when he wants. He uses it to make purchases up to the limit, which the card allows him.

In order to get the card, the person should apply in the bank for the card. The bank will ask him to open an account in the bank if he does not have one already. After the bank account is opened, the bank will ask for collateral to be produced for the card to be issued. The amount of credit that the person can avail at a given point of time will be determined by the value of the collateral produced by the account holder.

The cardholder should pay the payment of the credit thus taken in the following months. It is different from the payment of a charge card. In the charge card, the credit, which is taken by the cardholder, should be paid in the following month in full. However, the credit card holder does not have to make the payment in full and can break it up to the amount, which he can pay. However, the bank charges interest to the amount of money, which is not repaid by him for the remaining months until he pays the amount.

A credit card is nothing but a form of small borrowings. The history of credit cards dates back to the decade of 1920s in the country of United States of America. Today, many countries have reached the heights of credit card usage but there are still many countries that are cash oriented. The latter are the developing and the under developed countries. However, these countries too are being fast accustomed to the usage of credit cards. On the other hand, a few countries do not follow the system due to the need for a good banking system. Japan is one country, which does not have the use of credit cards with an exception of the large high-end merchants.

The benefit with the usage is to the cardholders. They do not have the risk of carrying huge amount of money wherever they go. The cards are secured with a PIN number, which will prevent any theft from a stealing of the cards.

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