Credit Card

A bank-issued payment card that entitles the holder to a line of credit for purchase of goods or services throughout the World.

Customers of credit cards – known as ‘cardholders’ - can use the card to purchase online, over the phone or at point of sale.

The security system, Chip and PIN, is required in the UK for the latter.

Cardholders are required to pay either all monies outstanding, or any other sum subject always to a specified minimum amount every month and, unless paying in full, are charged interest on the outstanding balance. Those who pay off the full balance every month are known as ‘Full payers’ and those that don’t are called ‘Extended Credit Takers’. Full Payers are rarely profitable for credit card issuers, but Extended Credit Takers are significantly more profitable due to the interest income stream afforded to the credit card issuer.

Paying the minimum amount each month will mean that it will take longer to pay off the balance. Late payments will be reported to the credit reference agencies and can result in adverse credit on your credit report. You will be allocated a credit limit, which if exceeded will result in further charges.

When applying for a credit card you will be subjected to a credit search in accordance with the Consumer Credit Act 1974, which will form the basis of whether your application is accepted or declined.

The largest issuer of credit cards in the World is Barclaycard.

Most credit cards are affiliated with either Visa or MasterCard payment systems.

See also Additional Cardholder

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