GLOSSARY

Credit card

What is a credit card?

A credit card is a payment card that enables users to make purchases or withdraw cash using borrowed funds, rather than money from their own bank account. Unlike a debit card which instantly deducts the transaction amount from a linked account, a credit card allows users to borrow up to a set limit and repay it later, usually with interest.

Typically used for larger or business-related expenses, credit cards offer the flexibility to spend beyond what’s available in cash. However, this comes with the potential for higher fees and debt. Credit cards also provide perks such as rewards programs, purchase protection and fraud prevention features.

How does a credit card work?

Credit cards operate through payment networks such as Mastercard, VISA or American Express, and are identified by a unique 12-16 digit card number, expiration date and CVV/CVC security code.

When a purchase is made, the credit card issuer lends the funds on behalf of the cardholder, who later repays the amount, often with interest if not paid in full. Additionally, they may offer features such as rewards points, cashback and fraud protection.

What to consider when using a credit card abroad

The main benefit of using a credit card while traveling abroad is the convenience of payment. Even without holding the local currency, transactions and currency conversions are handled instantly, enabling cardholders to make purchases smoothly as the conversion occurs automatically in the background.

Credit card: Good to know for SMEs

Credit cards typically carry some of the highest interest rates globally, making it essential for both individuals and businesses to carefully monitor and manage their use. This is especially crucial for SMEs that issue multiple credit cards to employees. In contrast, debit cards do not incur debt, generally making them a more cost-effective option in most situations.

Business debit card vs. credit card: Which one to use

As your business grows internationally, choosing between a business debit card and a credit card becomes important. While both have pros and cons, the amnis multi-currency debit card offers the benefits of a credit card without the associated risks, enhancing flexibility and reducing financial risks.

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Explore related topics

Cashback

Cashback is a financial reward where a percentage of the money spent or deposited is returned to the customer. It is commonly offered by credit cards, banks, retailers and online platforms to incentivise spending, saving or specific financial behaviors. Cashback can reduce overall costs and increase savings, making it a popular benefit across various industries.

Debit card

A debit card is a payment card that enables users to make purchases or withdraw cash directly from their bank account, such as a checking or savings account. Unlike a credit card, which relies on borrowed funds, a debit card immediately deducts money from the user’s account when a transaction is made.

Interchange fee

An interchange fee is a charge paid between banks for processing credit or debit card transactions. When a customer uses a card to make a purchase, the merchant’s bank (known as the acquiring bank) pays a fee to the customer’s bank (the issuing bank). This fee covers costs such as transaction handling, fraud prevention, and maintaining security.

Mastercard

Mastercard is a global payment network that enables secure electronic transactions between consumers, businesses, and financial institutions. It partners with banks and financial institutions to issue branded credit, debit, and prepaid cards, allowing users to make purchases in stores, online, and abroad.

Prepaid card

A prepaid card is a payment card that is preloaded with a specific amount of money by the user or a third party. Unlike a debit or credit card, it is not directly linked to a bank account or a line of credit. Instead, users can only spend the amount of money that has been preloaded onto the card.

Prime rate

The prime rate is the interest rate that commercial banks charge their most creditworthy customers, often large corporations. From a currency perspective, it reflects the cost of borrowing in a particular currency and serves as a key indicator of monetary policy. Changes in a country’s prime rate can influence capital flows, foreign exchange rates, and the overall strength or weakness of that currency in global markets.

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About amnis

amnis offers a comprehensive platform for international banking, offering a range of tools in one place. Transfer money abroad, exchange currencies 24/7 and collect international money transfer with your own IBAN accounts supporting 20+ currencies. Founded in 2014 in Zurich, amnis is a regulated payment institution under the supervision of the Banking Supervision Section in Liechtenstein (FMA) within the EEA.

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