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Credit Cards and Charge Accounts

A credit card is a standard-size plastic token with a magnetic stripe that holds a machine readable code.  Credit cards are convenient substitute for cash or check.  It lets the consumer buy goods and services without having to carry cash or a checkbook.  Credit card holders draw on a credit limit approved by the card-issuer such as a bank, store, or service provider.  The cardholders may pay annual service charges.  Normally, cardholders must pay for credit card purchases within 30 days of purchase to avoid interest and/or penalties.

Credit cards are mostly used for accounts on which a consumer is required to make regular payments, but do not have to pay the whole amount that s/he owes every month.  These accounts are known as “revolving accounts.”  For most revolving accounts, the consumer agrees not to go over the credit limit which has been set by the creditor.  If s/he goes over the credit limit, s/he may be required to pay an over-limit fee.

Inside Credit Cards and Charge Accounts