What type of payment allows customers to borrow money up to a limit with interest from a financial institution?

The correct answer is that a credit card allows customers to borrow money up to a predetermined limit and is typically associated with interest charges on the outstanding balance. When individuals use a credit card, they are utilizing a line of credit provided by the card issuer, which they can repay over time or in full by the due date. If the balance is not paid in full, the remaining amount accrues interest, making it essential for users to manage their spending and repayment strategies effectively.

In contrast, a personal loan is generally a lump sum borrowed that is repaid in fixed installments, not revolving credit. A payday loan is another type of short-term borrowing, usually characterized by high fees and a requirement that it be repaid when the borrower receives their next paycheck, rather than a revolving line of credit. A debit card allows users to spend money that they already have in their bank accounts, without borrowing on credit. Each of these alternatives operates under different principles of borrowing and repayment compared to a credit card, distinguishing the latter as the option that involves borrowing up to a limit with interest charges.