Credit cards are usable at store locations that accept credit payments and online merchants, states Forbes. People can also use credit cards for things like mortgage payments, rent and utilities.Continue Reading
Credit cards are a type of financial account that uses a bank's money to pay for the customer's purchase, states Forbes. By appearance, credit cards are usually a rectangular piece of plastic or alloy with the owner's name and account number on the card. All credit cards possess a magnetic strip, and some have a radio-frequency identification chip.
Purchasing an item in-person or online requires the merchant to authorize the credit card payment with the bank, states Forbes. Once the payment is authorized, the purchase fees are added to the cardholder's account. Merchants must pay a credit card fee by accepting credit payments as part of the bank's revenue. The cardholder must pay at least the minimum required payment each month until the balance is completely paid. Most of the time, credit companies charge interest rates each month.
The disadvantages to credit cards include financial consequences from missed payments and spending too much money, according to Forbes. Missed or incomplete payments result in bad credit and accumulating interest rates. Individuals often spend more than they can afford as credit companies only authorize purchases based on credit limits, not bank statements.Learn more about Credit & Lending