Credit Card: What Is It and How Does It Work?

The commonly used debit card allows individuals to make payments using their own funds. A credit card also enables transactions, but the payments are made using the bank's money, not the client’s. Let’s try to explain in simple terms what a credit card is and how it differs from other cards. 

What is a Credit Card?

A credit card (often referred to as a "credit card") is a payment card that holds the bank’s money. When a client makes a purchase, they are borrowing funds from the bank, meaning they have to pay them back. Additionally, as with a standard loan, interest is charged on the borrowed funds. However, most banks today offer clients a grace period, during which the borrowed funds can be used with minimal or even no interest.

You can use your credit card wherever bank card payments are accepted: supermarkets, restaurants, cafes, online stores, gas stations, and more.

In most cases, you can withdraw cash from a credit card: this can be done via an ATM or at the bank counter.

How Does a Credit Card Work?

When you apply for a credit card, a bank representative will issue you a card. Externally, it does not differ from a debit card: the standard information is printed on the plastic card— a 16-digit unique number, expiration date, and the holder’s name, although the card might not be personalized.

The credit card already contains funds—the amount is limited by the bank's credit limit. This limit is the maximum amount the bank is willing to lend to the client. It is usually set individually, considering the user’s income level, credit history, and number of transactions. Typically, the higher the income, the larger the loan amount the bank can offer the client. For example, the credit limit on the #kartakarta card from Bank CenterCredit reaches 7 million tenge.

You make a purchase and pay with the card. By using the credit limit to pay for purchases now, you can repay the spent amount later. This is very convenient for urgent expenses. Generally, you need to repay the used credit limit or make a minimum payment within a month: some banks have a fixed date for payments, while others only specify a time frame (for example, 20-25 days after the payment). You can top up the account in any convenient way— for example, by transferring from one card to another, cash through an ATM, bank counter, or Astana Plat terminals (Kassa 24), Qiwi, RPS Asia (Yurta).

Note that early repayment is often allowed without penalties.

Many credit products offer a grace period (also known as a preferential or interest-free period). For example, the #kartakarta card has a grace period of 55 days: this means that during this period, no interest is charged— when making purchases, you only need to repay the used credit limit amount. In other words, if you repay the bank before the end of this period, there will be no overpayment for using credit funds. The grace period helps reduce the financial burden while making all the necessary purchases.

How Does a Credit Card Differ from a Debit Card?

The main difference between these banking products is to whom the money belongs: with a debit card, payments are made with the client’s own funds, whereas, with a credit card, the bank’s money is used.

However, there are other features:

• Often, a credit card is also an installment card. In this case, the client can use the bank’s installment plan— make a lump-sum purchase from the bank’s partners and repay it within 3-12 months by a certain date in equal installments. The difference is that a credit card provides a revolving limit that can be used for any purpose, including abroad, and repaid gradually without fixed dates.
• A credit card also allows you to use funds until you receive your salary, enabling the client to manage borrowed money up to a predetermined credit limit.
• Cashback (i.e., a return of a portion of the funds for a purchase) is usually higher. For example, on the #kartakarta card, it reaches 10% on purchases from partners and in three favorite categories— they change every month (they are very conveniently selected in the mobile application of the bank bcc.kz).
• Additionally, the cardholder can use a large number of services for free, including SMS notifications about incoming and outgoing transactions.
• Generally, the issuance and maintenance of the card are free.

How to Determine if a Card is Credit or Debit? Many banks label credit cards with the word "Credit"— in this case, identification is straightforward. If there is no such label on the card, the easiest and quickest way to determine its type is to go to the bank’s mobile app or website. Select the product of interest and study the information about it.

What Are the Benefits of Credit Cards?

Credit products provide benefits through:

• Grace period. If you repay the money to the bank before it ends, you won’t overpay. This is the optimal solution for urgent large purchases.
• Cashback. The return of funds can be in cash or bonuses. Money can be spent as you wish, and bonuses are usually directed towards specific products.
• Discounts and gifts. These can be various bonuses from the bank’s partners— for example, discounts on insurance when traveling abroad.

How to Close a Credit Card?

To close a credit card, you need to repay the used credit limit and any debt on it (if there is any). To clarify the amount of the debt, you can call the bank’s call center or check the data in the mobile application or internet banking.

The next step is to visit a bank branch where you need to write an application to close the card and the card account to which the card is linked. It is also advisable to obtain a certificate of no debt. This document proves that your debt to the bank has been repaid and the account closed.

The final step is to hand over the card to the bank employee and destroy it in the client’s presence.

In most banks, the option to close the credit card and the account to which it is linked is available online— via the mobile app or internet banking system.

A credit card is an optimal tool in situations where you urgently need money. It allows you not only to make the necessary purchases but also to gain benefits— for example, to receive cashback or use borrowed funds without overpayment during the grace period. In addition, such a card is quickly issued and requires a minimum of documents.


This article has been translated from its original language using neural network-based translation technology.