What Is a Credit Card?

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Many people make payment online with credit cards but only a few people really understand what it is. Indeed, it is much more than the plastic credit. A credit card is very similar to money borrowed from a source which is to be repaid at a stipulated time. Failure to repay the money will attract some penalty However, unlike certain types of loans, money given out in credit card is not secured. Thus, credit cards are issued to borrowers that have the ability to repay the loan. Issuers are very careful in issuing the card because of lack of security. It is the spending habit of the borrower as shown in his or her credit report that helps lender to determine the risk involved. It is therefore difficult for lenders to issue credit cards to people with no credit history or people with poor credit history.

Credit cards are not only issued by banks. They can also be issued by credit unions and other financial institutions. Some of the popular credit card issuers are JPM Chase, American Express, USAA FSB, Bank of America, US Bank, Wells Fargo and others. Some popular credit card companies like Visa and MasterCard are like agents that eases the process. But they also play other roles like determining the terms of transaction. But they don’t issue cards or the credit.