A credit card is a financial tool issued by banks or financial institutions, allowing individuals to borrow money up to a certain limit to make purchases or pay bills. Unlike debit cards, which draw funds directly from a checking account, credit cards let users borrow money with the promise to pay it back at a later date.

How Credit Cards Work

When you use a credit card, 카드깡 the card issuer pays the merchant on your behalf. You then repay the card issuer, either in full by the due date or over time. If you choose to pay over time, interest is charged on the unpaid balance. Credit cards come with a set credit limit, which is the maximum amount you can borrow at one time.

Types of Credit Cards

There are several types of credit cards designed for different needs:

• Standard Credit Cards: These are basic cards used for everyday purchases.
• Secured Credit Cards: For those with limited or poor credit history, a secured credit card requires a cash deposit as collateral.
• Business Credit Cards: Tailored for business expenses and often include tools for managing spending.

Credit Card Terms You Should Know

• Interest Rate (APR): The annual percentage rate charged on any balance not paid in full by the due date.
• Minimum Payment: The smallest amount you are required to pay each month to keep the account in good standing.
• Credit Limit: The maximum amount of money you can charge to the card.

Pros and Cons of Credit Cards

Pros:

• Convenience: Easily make purchases without carrying cash.
• Credit Building: Responsible use of a credit card can improve your credit score.

Cons:

• Debt Risk: Overspending or only making minimum payments can lead to high debt.
• Interest Charges: If you don’t pay off your balance in full each month, interest will accumulate, making purchases more expensive over time.

Conclusion

Credit cards are useful financial tools if used responsibly. By understanding how they work and managing them wisely, you can enjoy the benefits of having credit without falling into debt.