Banking : Credit Cards

A credit card looks like a debit card and can be used in exactly the same way. When you pay for an item with a debit card the cost of the item is immediately taken out of your bank account. Therefore you can only purchase items that you have enough money to pay for.

When you pay for an item with a credit card you do not have to pay for it immediately. Instead the bank that issued the credit card pays for the item. Every month you receive a bill listing the items that you have purchased that month using your card. You do not have to pay for the items until you receive the bill. This means that it is possible to purchase items before you have enough money to pay for them.

When you receive a credit card bill you can pay it straight away and just pay the cost of the items that you have purchased. Alternatively, you can choose to pay a smaller amount and pay the rest later. If you choose to do this then you will have to pay extra money called Interest to the bank as well as the cost of the items.

GCSE ICT Companion 04 - (C) P Meakin 2004