How Credit Works

How does a credit card work?

  • lets you borrow money from the bank that issued the card
  • the bank pays the vendor from whom you made the purchase and you pay back the finanicial institution , usually with interest
  • you make an agreement to pay back the money that is borrowed
  • if you pay the credit card bill in full each month, you are not charged interest. If you make a partial payment, you are charged interest.
  • if you do not pay on time, you are typically charged a late fee and your interest rate increases