Credit card

Debt Term

Very common in the US, small plastic credit cards with magnetic stripes on the back are issued by financing companies to enable consumers and businesses to purchase items immediately and essentially take out an instant loan for that purchase.

Credit cards have a maximum credit limit, and interest rates vary widely based on a person’s or business’ credit score and other factors including repayment history.

Credit cards are a type of unsecured debt, which is one reason interest rates can be very high. Some cards also charge fees.

Repayment schedules can be long for credit cards, leading to low monthly payments but also high compound interest rates over time. There are many examples of consumers and businesses who have put too many purchases on credit cards, not repaid them fast enough and ended up with unrepayable debt leading to bankruptcy.

Don Gooding

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