Credit Card: How It Works and How It Is Defined

What is a credit card?

In short

A credit card is a payment card that draws on a line of credit from the issuer, which the cardholder repays later. Regulation (EU) 2015/751 defines a credit card transaction as one debited to the payer, in full or in part, at a pre-agreed calendar month date, in line with a prearranged credit facility, with or without interest.

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Facts checked

13 October 2026

How a credit card works

The issuer sets a credit limit after assessing the applicant. Each purchase is authorised against the unused part of the limit, the merchant is paid through the scheme within days, and the issuer carries the debt until the cardholder repays.

A statement closes each billing cycle. A cardholder who pays the full balance by the due date typically pays no interest on purchases, and one who pays less carries the remainder forward at the card's interest rate.

How the rules classify a credit card

The classification decides pricing: the EU caps interchange on consumer credit cards at a different level from debit cards. In the Visa Core Rules of 18 April 2026, a credit card is a card linked to an open-ended credit account, revolving or not, and credit that is only incidental, such as an overdraft, does not make an account a credit account.

What issuing a credit card takes

A credit card is a lending product as well as a payment product. Beyond the issuing licence and the scheme membership that any card needs, the issuer needs permission to lend to consumers where the law requires one, funding for the balances, credit scoring, collections and provisions for losses.

That is why most new card programmes start with debit or prepaid cards, which spend money the customer already holds.

Credit card, debit card or charge card?

Debit card: Takes the money from the cardholder's own account, at once or within days. No credit line is involved.
Charge card: Gives credit until the statement date, when the whole balance is due. There is no option to carry a balance forward.
Prepaid card: Spends a balance loaded in advance. In Regulation (EU) 2015/751, a prepaid card is a payment instrument on which electronic money is stored.

Where a credit card shows up in a platform

Modules that do the work

Platforms that need it

Guides that go deeper

How to launch a business account with expense cards for SMEsThe account, the cards and the controls around them: what a business account with expense cards needs, from licensed partners and KYB to SCA and the interchange rules for commercial cards.

Where it is written

The laws and standards this page's facts come from.

General information, not legal advice: what applies to you depends on your services and your market.