Which payment method involves borrowing funds from a bank to be repaid later?

Which payment method involves borrowing funds from a bank to be repaid later?

• A. Debit Card
• B. Cash
• C. Cheque
• D. Credit Card

Answer: (D)

Borrowing funds to repay later defines credit. A credit card lets you borrow up to a limit from the card issuer to pay for purchases, and you’re billed later. You can pay the full balance to avoid interest, or carry a balance and pay interest on what you owe. This is different from a debit card, which draws funds directly from your bank account at the time of purchase; cash is immediate payment with no credit extended; and a cheque instructs your bank to transfer funds from your account, not to borrow money for later repayment. So the method that involves borrowing from a bank to be repaid later is the credit card.

Borrowing funds to repay later defines credit. A credit card lets you borrow up to a limit from the card issuer to pay for purchases, and you’re billed later. You can pay the full balance to avoid interest, or carry a balance and pay interest on what you owe. This is different from a debit card, which draws funds directly from your bank account at the time of purchase; cash is immediate payment with no credit extended; and a cheque instructs your bank to transfer funds from your account, not to borrow money for later repayment. So the method that involves borrowing from a bank to be repaid later is the credit card.