What is a Credit Card?

A credit card is a card that lets you borrow money to pay for things, up to a set limit.

You pay it back later, and if you do not pay the full amount you owe by the due date, you may be charged interest.

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How a Credit Card Works

A credit card usually has:

• A credit limit (the max you can borrow)

• A monthly statement (a summary of what you spent)

• A payment due date (when you need to pay)

If you pay your statement balance in full by the due date, you usually avoid interest on purchases.

What Happens If You Do Not Pay It Off?

If you do not pay the full statement balance, the remaining amount becomes a carried balance, and interest can build up until it is paid.

Common Credit Card Fees

Not every card has these, but many do:

• Interest charges (if you carry a balance)

• Annual fees (some cards are $0)

• Cash advance fees (when you withdraw cash using the card)

• Late payment fees (if you miss the due date)

Is a Credit Card Good or Bad?

A credit card can be helpful if you:

• Pay on time

• Keep spending under control

• Avoid carrying a balance

It can be risky if you:

• Spend more than you can repay

• Only pay the minimum

• Use cash advances often