DEFINITION of 'Credit Card Funding'

The ability to electronically fund a new account, business, or other venture by using a credit card. Credit card funding allows an individual or business to use a readily available source of funds, though the funds are being borrowed and thus, carry an interest rate.

BREAKING DOWN 'Credit Card Funding'

Small businesses may find it difficult to obtain the start up capital to purchase inventory, make a rent deposit, or any other functions that require cash. If the business owner does not have savings on hand and is unable to acquire a loan, credit card funding may be an option. This is especially the case when a minimum amount of funding is required in order to keep an account open.

Investors are a group that also use their credit cards to place initial funds in an account. This is often a more popular option in Forex accounts, though regulations may restrict or ban the use of credit cards to fund accounts involved with more high-risk investments, such as derivatives and currencies.

Some institutions that accept some forms of electronic funding may not accept credit card funding, but may accept funding via debit card. This is because the funds from a debit card will only be transferred if they are present in the cardholders account, meaning that the cardholder is not depositing borrowed funds that require him or her to pay interest. For risky ventures, such as investing and speculation, the use of credit cards is restricted or banned because the cardholder may lose the deposited funds and be unable to pay back.

Credit card holders should review their card agreement to determine whether the card company considers credit card funding to be a cash advance. Companies often charge different interest rates on borrowed funds depending on the type of transaction, with purchase rates typically being lower than the interest charged on balance transfers and cash advances.

RELATED TERMS
  1. Secured Credit Card

    A type of credit card that is backed by a savings account used ...
  2. Debit Card

    An electronic card issued by a bank which allows bank clients ...
  3. Credit Card Balance

    The amount of charges, or lack thereof, owed to the credit card ...
  4. Standard Floor Limit

    The amount of money that can be charged in a transaction before ...
  5. Authorized Transaction

    A credit card purchase for which the merchant has received approval ...
  6. Plain Vanilla Card

    A basic credit card with no special features or perks and no ...
Related Articles
  1. Personal Finance

    Credit, Debit and Charge: Sizing Up The Cards in Your Wallet

    Not all plastic is equal! Learn the difference between the three kinds, and how each can affect your finances.
  2. Small Business

    How to Use Small Business Credit Cards

    A business credit card can be a convenient way to increase your company's purchasing power, but must be carefully managed.
  3. Personal Finance

    Credit vs. Debit Cards: Which Is Better?

    Be strategic about the card you choose! Learn more about which is better for you: credit cards or debit cards.
  4. Personal Finance

    Purchases You Should Always Make With A Credit Card

    Credit cards aren't always bad possessions to have. There are certain perks associated with using credit cards as we make routine or irregular purchases.
  5. Personal Finance

    Should You Use Credit Cards To Fund Your Business?

    We give you 4 reasons to consider using a credit card instead of a business loan to fund your business, and how to be smart about it.
  6. Personal Finance

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
  7. Personal Finance

    How Credit Cards Affect Your Credit Rating

    The average American household has four cards, but does that mean more is better?
  8. Personal Finance

    Understanding Credit Cards

    Credit cards are a type of unsecured personal loan between the credit card issuer and the credit card holder.
  9. Personal Finance

    Credit Card or Cash?

    Credit cards are convenient to use, but not always the best choice. Here are 5 times you shouldn't pay with a credit card – and 5 times you should.
  10. Investing

    Investing In Credit Card Companies

    This investment requires keeping an eye on consumer indexes and the overall health of the economy.
Trading Center