KORANLIPOS – Credit cards have become one of the most popular cashless payment methods worldwide. In addition to offering convenience, they provide various benefits, such as cashback, reward points, shopping discounts, travel perks, and installment payment options.
However, many people still do not fully understand how credit cards work. Some mistakenly believe that a credit card provides extra money to spend freely. In reality, every purchase made with a credit card is a loan from the issuing bank or financial institution that must be repaid according to the billing schedule.
Understanding how credit cards work is essential for managing personal finances wisely, avoiding unnecessary interest charges, and preventing debt problems.
What Is a Credit Card?
A credit card is a payment tool issued by a bank or financial institution that allows cardholders to borrow money for purchases. Each cardholder is assigned a credit limit, which is the maximum amount they are allowed to spend.
How Does a Credit Card Work?
A credit card transaction generally involves three parties: the cardholder, the merchant, and the card issuer.
Here’s how the process works.
