Credit Cards Allows You to Make Purchases

Posted on January 28, 2021 by Guy Atkinson

A credit card, also called a charge card, is a plastic payment card issued to consumers to enable the consumer to pay to a retailer for certain goods and services on a monthly or annual basis depending on the agreement between the credit card issuer and the merchant. A credit card is not considered as a valid form of credit in most jurisdictions. Some countries have introduced laws that allow credit card companies to charge interest on credit and debit payments. However, credit cards are still widely used and accepted everywhere.

Credit cards work through a network of financial institutions like banks that provide both secured and unsecured credit cards. A credit card company can issue a variety of cards with varying restrictions. There are debit cards, which cannot be used to make purchases unless the balance is paid upfront; credit cards, which allow you to make purchases up to a preset limit on your credit card, where you can later pay for the purchases if you choose; and pre-paid cards, which have specific spending limits set by the credit card company. You can also get a type of cards called gas cards that are exclusively for gas purchases. They work exactly like debit cards, except that you will have a specified limit on your purchases.

Credit cards give convenience to consumers who have access to lots of money. It gives consumers more power over their own finances. In return, credit card issuers reap a profit from these convenient facilities provided by banks. The rules and regulations govern the way the credit card company can charge interest. In general, the fees charged on debit cards are much lower than those on credit cards.

People who need to borrow large sums of money, like business owners and students, generally do not have the option of borrowing from friends or relatives. A credit card is ideal for such borrowers as it gives them a guarantee that they will be paid back. Moreover, you will not have to face the hassle of depositing the money in an escrow account as you would with a personal check. Credit cards issued by banks are also beneficial to employers who want to ensure that employees’ payrolls are deposited on time, and there are also many other reasons why you need a credit card for your business in order to help manage your finances.

Prepaid cards are very convenient as you can just load it with cash when you shop. You can also use it to make purchases without keeping a tab on its balance. The only drawback of using pre-loaded cards is that there is usually no grace period between loading and spending the cash you have loaded. In this case, you have to either pay back the balance before the end of your grace period or face higher interest rates.

Debit cards offer a convenient way to borrow money. However, its main disadvantage is that you pay the interest every time you make a purchase. This may take away the advantage you get from using prepaid cards. Also, paying higher interest rates for purchases can add up to more than you have borrowed. If you want to limit the amount of money you borrow, you can opt for a debit card that limits the amount you can borrow.

Credit cards, on the other hand, offer a credit limit which is determined by the bank. Its maximum credit limit differs from bank to bank. With a credit card, you can have as much money you want to spend but you are not required to pay interest on it. The only drawback of credit cards is that it has a limitation to how much you can borrow. If you want to have a large amount of cash to make purchases, it is advisable to borrow money from your bank or other financial institutions. Another disadvantage could be while making purchases through a non-secure gateway with your credit card. Such situations can result in your sensitive card data being leaked or stolen, which is not what you want to happen. To avoid that, ensure that your merchant’s payment options are PCI compliant (for more information on PCI compliance, check here), which can be considered as a security standard for a merchant to process credit cards.

The advantages and disadvantages of using credit cards have to be weighed carefully so that you can determine which of these cards are best suited for your needs. Also, it is important that you know how much you can afford to spend because the interest you are paying on purchases may add up to more than the amount of money you have in your account. This also applies if the purchases you make are large ones.

Tip of the Day

Time management for Finance Professionals

time management


I’ve just re-read Richard Denny’s fantastic book ‘Selling to Win’, in which he mentions a time management technique that I learnt many, many years ago from an old boss of mine.


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