Credit cards are used by a financial institution to give users access to a loan based on revolving credit. When a credit card is used, the account holder is borrowing money from the institution to mak...Credit cards are used by a financial institution to give users access to a loan based on revolving credit. When a credit card is used, the account holder is borrowing money from the institution to make a purchase. The maximum a user can borrow is set by the financial institution based on the credit worthiness of the account holder. Each billing period the account accrues interest for any remaining balance based on the average daily balance. The interest is compounded each each billing period.
