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.
Explore related topics
ACH, or Automated Clearing House, is a local payment route in the United States that facilitates electronic money transfers between banks. It requires a local bank account or the use of local payment providers. ACH payments enable financial institutions to transfer funds electronically, bypassing traditional card networks like Visa and Mastercard. It’s commonly used for direct deposits, bill payments and other bank-to-bank transfers within the United States.
An MT103 is a standardised payment message issued by the bank within the SWIFT network, serving as an official confirmation of a completed transfer. It includes all relevant payment details, such as the date, amount, currency, and information about the sender and recipient. The MT103 document thus provides a reliable basis for transactions requiring payment confirmation, such as deliveries or services.
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.