What Is a Credit Card?

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A credit card lets you buy things with borrowed money. It can also help you build credit, which will make you a more appealing candidate for a loan.

Are credit cards different from debit cards?

Credit cards and debit cards may look similar, but there are some major differences.

When you pay with a debit card, the purchase amount is immediately deducted from your bank account.

When you pay with a credit card, you are borrowing money and paying for that item later. Then, at the end of each month, you’ll receive a statement from the bank or credit card issuer. This statement will outline all of the purchases you’ll be responsible for paying back.

You can either pay your entire credit card bill right away or cover a portion and let the balance go into the next month. Just know that if you hold a balance on your card, you’ll need to pay a percentage of the money you owe in the form of interest.

With debit cards, the money is not a loan. There is no interest, and you won’t be responsible for making payments (as long as you avoid overdrawing your account).

What are the benefits of credit cards?

You can use a credit card to buy groceries, cover your utility bill, or even purchase a flight to Hawaii. Here are some of the benefits of credit cards:

• Earn rewards on daily expenses.
• Enjoy strong federal protections from fraud.
• Improve your credit score.

The important thing is to make your minimum monthly payment on time and avoid falling into credit card debt.

Do you have to pay to use credit cards?

Many credit card issuers charge late payment and annual fees. Some of them don’t charge an annual fee the first year—and others don’t charge one at all.

All credit card issuers charge interest. However, you only have to pay interest when you don’t pay your credit bill in full each month.

Credit cards also include transaction fees each time you make a purchase. But these are charged to the merchant, not the consumer.

Learn more about credit cards

Please contact us with questions or for more information on credit cards.