Reviewed by Sep 30, 2020| Updated on
Credit card funding is the capacity to fund a new business, account, or a venture electronically via a credit card. Credit card funding permits an individual or a business to utilise the instantly available source of funds, i.e. the funds which are being borrowed and, thus, carry an interest rate.
It may get difficult for small companies to get their startup capital to make a rent deposit, buy inventory, or to run any tasks that need cash. If the business owner has no on-call savings and is unable to buy a loan, credit card financing may be an alternative. This is particularly the case when it takes a minimum amount of funding to keep an account open.
A few banks may approve the usage of credit card funding during the opening of a bank account. This might be done for the purpose of establishing a bank account to meet minimum balance requirements. It may also be a way for the credit card holder to meet minimum expenditure to earn a signup bonus or other incentives on their cards. In addition, this could be done to earn bonuses from both accounts at the same time.
Some of the institutions which accept such types of electronic funding may not accept credit card funding but may accept debit card funding. This is because the funds will only be transferred from a debit card if they are present in the cardholder's account, which ensures that the cardholder does not deposit borrowed funds that allow him or her to pay interest.
The credit card usage is restricted/banned for risky ventures, such as investment and speculation, because the cardholder may lose the deposited funds and be unable to pay back.