Credit cards are a financial tool that allows short-term borrowing. Specifically, a credit card is a thin, rectangular piece of plastic or metal issued by a bank or financial services company that allows cardholders to borrow funds to pay for goods and services with merchants that accept cards for payment.
The typical conditions imposed by credit cards are preset borrowing limits based on an individual’s credit rating and the stipulation that cardholders pay back the borrowed money, plus any applicable interest and any additional agreed-upon charges, in full either by the billing date or over time. Since you're charged interest on the amount you owe, it's important to pay off your credit card every month if possible.
Key Takeaways
Credit cards allow users to borrow funds for purchases and charge interest if balances are not paid in full.
Paying off credit card balances before the grace period ends helps avoid interest charges.
Credit cards can build a strong credit history, but users must maintain good habits like paying on time.
Secured credit cards require a deposit and are a good option for those building credit.
Becoming an authorized user on another's credit account can help establish a credit history.
