A credit card is a system of payment where the issuer (the bank) lends money to the consumer (the customer) to pay the merchant for the goods bought from him. What happens here is that the consumer or buyer purchases good from a merchant and pays him through this card. The merchant receives the money from the card issuer (the bank). Now buyer has to pay this amount to the bank and not to the merchant.

What does the bank gain from this? Accordingly to a large scale or small scale merchant, a charge of 1-6% on every transaction is levied on them by the bank before they can start accepting the credit card payments. One very important issue in credit cards is the security. Currently the security offered by the credit card system is so low that they often lead to fraud payments especially on the internet.

Nowadays credit cards are the most common mode payment system used. A simple reason for this is, one doesn’t have to carry huge amounts of cash in pocket while shopping. Another reason would be that since there is no cash in your pocket, your chances of getting robbed are that much lesser. But at the same one must use the credit cards very carefully or else one could end up in the dept trap.