What Is a Credit Card?

A credit card is a payment instrument issued by financial institutions, typically in the form of a thin rectangular plastic or metal card, which enables users to borrow money to purchase goods and services from merchants who accept card payments. Cardholders must repay the borrowed amount along with any applicable interest and other fees either in full by the billing date or over a period of time.

In addition to the standard credit line, credit card issuers may also provide a separate cash line of credit, allowing cardholders to obtain cash advances through bank tellers, ATMs, or convenience checks. However, cash advances usually have different terms, such as higher interest rates and no grace period, compared to transactions made through the primary credit line. The borrowing limit on a credit card is generally determined by the cardholder’s credit score.

Credit cards are widely accepted by businesses as a preferred payment method for consumer goods and services.