You may be very familiar with credit cards, perhaps you own one, or your parents do. Regardless of your familiarity, there are a few things we should be clear about credit cards before you get one or swipe in your next purchase.
1.How does a credit card work?
Credit cards are not “free money”, they are are tools that only allow you to pay for your purchases at a later date (hence: credit). As you swipe your credit card, or enter your card’s account number online, your bank is charged for whatever you purchased in the store or online. Banks credit the merchant accounts once sales slips are received. These charges are assembled and billed to you (the cardholder) at the end of each billing period. You, as the cardholder, can either pay the entire balance of their statement, or in monthly installments, a privilege for which you are charged with interest. Also, the bank determines a minimum amount of money you must pay with each statement, or else you will be charged with additional fees on top of interest.