What is the purpose of a credit card?

A credit card primarily serves as a means to enable consumers to make purchases that can be paid off over time, often called installment-based payments. This flexibility allows users to buy goods and services immediately without needing to have the full payment amount available at that moment. When consumers use a credit card, they are effectively borrowing money from the credit card issuer, which they agree to repay, usually with interest, over a specified period.

This characteristic of credit cards distinguishes them from other financial tools, as they do not require immediate cash transactions, nor do they directly manage savings accounts or provide direct access to loans like personal loans or lines of credit. Instead, credit cards facilitate access to credit for immediate purchases, making them a popular choice for consumers who wish to manage cash flow or take advantage of rewards and benefits associated with credit card use.