A credit card is simply a plastic card that allows you to access a credit limit that is determined by your credit card issuer. This credit card limit is like a loan that you are able to take part of when you need it. When you use your credit card to make a purchase using card payment systems then your available credit will go down by the same amount. You will then own the bank the amount that you spent. You are able to borrow more before paying back the initial purchase.
Once you have paid back what you owe on the credit card then the balance is available again. You are then able to spend and repay as much as you want as long as you adhere to the credit card issuer’s terms. These terms will be paying back the payments on time and not to use more than your limit. You will generally have a certain amount of time to pay back the money that you have borrowed before the issuer will start to charge interest. This is known as the grace period and is usually about 20 to 25 days. If you do not pay back the balance by the end of the grace period then a finance fee charge is added to your balance and is based on your balance and interest rate.
Credit cards will have an interest rate which is the yearly rate that you will pay for the borrowing of money on your credit card. The interest rate that is charged is usually based on the market interest rates, your credit history and the type of credit card that you have. You will get a lower interest rate if you have a good credit history. If you want to avoid paying interest then you need to pay off the outstanding balance before the end of the grace period. If you can’t pay the full, the issuer will need you to pay the minimum by the due date to avoid late penalty fee.
You will receive a billing statement each month that outlines the minimum payment, the due date and the transactions that you have made. You should review these to ensure it is all correct. So a credit card is a piece of plastic that measures 3 1/8 inch by 2 1/8 inch. There are 16 digits that are embossed on the front. Debit cards and check cards look the same, but the purchases are taken from the checking account.
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