Question

Which of the following is true regarding you make a purchase with a credit card?

Group of answer choices A credit card has the function of a medium of exchange even though it is not money.

You can afford to buy things that otherwise you cannot afford to pay for all at once if you don’t have the cash.

You take out a short-term loan that must be repaid-with interest.

All of the above.

Answer 1

Credit card can be used to make purchase of goods and services.

However, it does not directly act as meduim of exchange as payment is being made by the bank issuing the credit card to the seller while buyer pays back amount owed to bank at later date.

So, its an interest free short term loan if the amount is paid back with in the prescribed time frame.

The one advantage of the credit card is that it empowers a person to make a purchase of an item for which he or she is not able to pay at once in full amount in cash.

Thus,

The correct answer is the option (B) [You can afford to buy things that otherwise you cannot afford to pay for all at once if you do not have the cash].