Is Credit Card An Asset Or A Liability? What Is Its Treatment And Uses

A credit card is a piece of plastic that banks or financial institutions issue to account holders for making purchases on credit (without balance) and repaying the credit amount later date with specified interest value or withdrawing the money.

Is Credit Card An Asset Or A Liability

A credit card is a piece of plastic that helps someone in buying something on credit or without a balance. It is not an asset itself but the outstanding balance on the credit card is considered a liability that has to pay within the deadline otherwise it will impact the credit score.

The credit score is the trust of the financial institutions on the credit cardholder. The more the credit score the more the chance there of getting a loan at a low interest rate or effort. Above 720 credit score is considered an excellent score while below 580 is considered a poor credit score.

A credit card is an arrangement between the cardholder and a financial institution that issue a credit card for getting a credit balance or borrowing or withdrawing money.

The benefits such as travel rewards, cashback, or other rewards can be assumed as an asset if it is accumulated and can be used in upcoming times.

In conclusion, a credit card is not an asset nor a liability but it is a medium that allows someone to take some extra balance for making a purchase or making a withdrawal. When someone uses a credit card that has a nill balance, it will show an outstanding balance that represents a liability.

Credit Card FAQs

Is credit card an asset, liability, or expense?

A credit card is not an asset, liability, or expense, it is a piece of plastic that allows a cardholder to use some extra balance for making a purchase on which he/she has to pay interest. The outstanding balance on the credit card is a liability.

What type of account is a credit card?

A credit card is a financial tool issued by financial institutions to the cardholder that can be used in an urgent condition when a cardholder’s balance becomes nill or a cardholder want to make a withdrawal.

Is credit card balance an asset?

The outstanding balance on the credit card represents a liability.

Is credit card debt an asset?

A credit debt is not an asset, it is an obligation that has to be paid with the interest.

Is a credit card a financial asset?

A credit card is a financial tool, not a financial asset.

Is a credit card a liquid asset?

A credit card is a plastic card that can be used to make a purchase instantly using the credit balance but it is not a liquid asset.

Is credit card an asset for a bank?

Yes, a credit card outstanding balance is treated as an asset in the bank’s financial statements.

Does credit card depreciate?

Credit card is not depreciated as other physical assets are depreciated and lose their value over their useful life.