Credit Card
A revolving line of credit issued by a bank that allows purchases up to a set limit.
What is Credit Card?
A credit card is a payment card that gives cardholders access to a revolving line of credit, allowing purchases up to a credit limit set by the issuer. Balances paid in full each month during the grace period incur no interest. Unpaid balances carry over and accrue interest, typically at rates of 20–30% APR for consumer cards. Credit cards may offer rewards (cash back, points, miles), purchase protections, and travel benefits. Responsible use — paying the full balance monthly — builds credit history at no cost; carrying balances is expensive.
Example
A cardholder with a $5,000 balance at 24% APR who pays only the minimum ($100/month) will take over 7 years to pay it off and will pay approximately $3,700 in total interest — nearly doubling the original amount owed.