Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

What is the primary function of a credit card?

1. To store cash securely

2. To provide a line of credit for purchases

3. To manage investments

4. To obtain loans directly

The correct answer is: To provide a line of credit for purchases

The primary function of a credit card is to provide a line of credit for purchases, which allows consumers to borrow money up to a certain limit in order to make purchases or access cash. This credit can be used for various expenses, such as shopping, dining, or travel, and it typically allows the cardholder to pay back the borrowed amount over time, often with interest if not paid in full by the due date. This function is fundamentally different from simply storing cash securely, as credit cards facilitate transactions without the immediate need for cash on hand. Additionally, credit cards are not designed to manage investments or obtain loans directly; they primarily serve the purpose of facilitating consumer credit. Understanding this core function is essential for grasping the role of credit in personal finance and the broader financial system.