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A credit card system is a type of retail transaction settlement and credit system. A lender issues a small plastic card (credit card)to a consumer who will then use the card to purchase whatever they wish. A credit card is different from a debit card in that the credit card issuer lends the consumer money rather than the consumer already having the money in an account and it then being removed from that account. It is also different from a charge card (though this name is sometimes used by the public to describe credit cards), that require the balance to be paid in full each month. Interest is charged on the credit card balance if the consumer does not repay the full balance on the card each month.
Credit cards are issued by banks or credit providers especially set up to provide this sort of finance, such as American Express. A card issuer gives a consumer (the cardholder) a card or account number that can be used with various payees to make payments and borrow money from the issuer simultaneously. The bank pays the payee and then charges interest over the time the money remains borrowed. A pre-established credit limit will be placed on the credit card, a user will not be able to spend over this pre determined amount. Should a user try to spend more than the cards limit, the credit card will be refused when trying to make payment.
When choosing a credit card you should look at the APR for each card, the APR is the Annual Percentage Rate at which interest is charged. The higher the APR the higer the interest charged, the higer the payments will work out to be.
When a purchase is made, the credit card user agrees to pay the card issuer.