How does a credit card actually work?
Plastic Money Loop
How does a credit card actually work?
You slide a little plastic rectangle through a machine, tap it against a reader, or type its numbers into a website — and suddenly, you own something you couldn't afford five seconds ago. No cash leaves your pocket. The store is happy. You walk out with new shoes. What just happened?
Here's the trick: you didn't actually pay for those shoes yet. The credit card company paid for them. When you swiped, the store sent a message to your card company — let's call them MegaBank — saying "This person wants to buy $80 shoes." MegaBank looked at your account, said "Sure, we trust them," and sent $80 to the store instantly. The store got paid. You got shoes. MegaBank got a promise from you.
