Credit Card Basics: Complete Guide
How Credit Cards Work
A credit card allows you to borrow money from a bank to make purchases, with the promise to repay later. Each month you receive a statement showing your balance, minimum payment, and due date.
Key Terms
APR: Annual Percentage Rate — the interest rate on your balance. Credit Limit: The maximum amount you can borrow. Minimum Payment: The smallest amount you must pay each month to avoid late fees.
Building Credit
Using a credit card responsibly builds your credit score. Pay on time, keep balances low, and avoid applying for too many cards at once. A good score opens doors to better rates and higher limits.
Avoiding Debt
Always pay your statement balance in full to avoid interest charges. Treat your credit card like a debit card — only spend what you can afford to pay back immediately.