Understanding How Credit Cards Work

  • Credit cards are physical cards to make purchases, make payments, and sometimes withdraw money like a debit card, but the funds do not come directly from your bank checking account. You are not using your own money, but the credit card issuer’s money.
  • When you open a credit card account, the credit card issuer sets a credit limit. This credit limit is an amount of money the issuer allows you to use to make your purchases.
  • It is essential to understand an annual percentage rate is attached when issued a credit card. When you use the card or borrow money, the issuer charges you interest on that amount spent.