What is a Credit Card?

A small, thin, rectangular piece of plastic or metal issued by a bank or other financial institution that grants cardholders an instant short-term loan to make purchases and other transactions with merchants that accept payment in this form. In exchange for this convenience, merchants pay the card issuer a transaction fee, while the cardholder may or may not pay an annual fee for the credit card. If the card has a grace period, the cardholder pays interest on purchases made with the card if the outstanding balance is not paid in full each month. If there is no grace period, a cardholder pays interest on every purchase made with the card.