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What is Credit Card and its Types

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What is Credit Card

A credit card is defined as a “document of plastic material issued by a bank or specialized institution in the name of a person, who may use it to make purchases without having to pay in cash and may also carry the payment of the products to future times “. This type of card has a magnetic stripe to hinder fraud and facilitate its use.

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Credit cards usually have a money limit that allows the person to buy or consume services and goods until they reach that amount previously established (in which case, the card is disabled). However, the credit card issuer charges the merchant a percentage for this service and in some cases a fixed annual fee to the holder.

The most primitive forms of credit cards were those that began to spread among some US companies in the 1920s. These cards were for internal use in such companies and served to accredit salaries and perform other simple operations, although not they were still directed towards the consumer. However, the first universal credit card, which was accepted in many establishments, was issued by Diner’s Club in 1950.

Types of Credit Cards

There are different formulas of payment and access to this type of credit, which means that there are also different types of cards, as we will see below:

  1. Classic credit card:

  2. It is the most common, Visa, Mastercard or American Express. With them, all borrowed money is returned after one month (sometimes two) from the time of purchase; In case there is no balance, interest will be charged as part of the loan. His credit usually ranges between 600 and 1,200 euros per month.

    1. Gold and platinum cards:

    They work just like conventional credit cards, only, in this case, the line of credit is much larger and usually have a series of additional services. In theory, they are aimed at so-called VIP clients or who make very frequent use of their card.

    1. Revolving cards:

    They start from the basis of a loan for which the owner will pay a fixed amount per month instead of having to pay everything at once the time of liquidation arrives. Their biggest drawback lies in the high interest they charge for these loans.

    1. Point cards:

    They offer additional advantages like points programs to get free trips, save on gasoline, discounts in stores.

    1. Virtual credit cards:

    Their operation is similar to traditional prepaid cards (must be charged with money who want to have) and the main difference is that there is no in this case support physical (plastic) for the card. They are used to trade on the Internet through companies such as PayPal and other online payment methods.

    1. Commercial card: 

    It is those issued by establishments and not by banks; they are also called purchase cards or customer card. Through these cards, the debt of the goods and services purchased is charged to a user’s bank account in a single predetermined period, usually monthly, with zero cost financing.

    1. Of companies card:

    They are the ones destined to cover business expenses like trips and representation of the firm, means of transport, etc.