Credit Card Basics
Learn the fundamentals of credit card use.
Frequently Asked Questions
How do credit cards work?
Credit cards allow you to make purchases up to a predetermined limit (credit limit). You have to pay back those purchases on your account's billing due date. If you do not pay off all your purchases, the credit card issuer will charge you interest on your remaining balance. Some cards offer 0% interest for a limited time, and others provide rewards for most purchases you make.
How do you choose the best credit card?
The right credit card for you depends on several factors, including your spending habits, what you want to use the card for, and which type of credit card your credit history allows you to get. Rewards and sign-up bonuses are other factors you should consider.
How do you get credit card rewards?
Credit cards often offer rewards for most purchases you make. Sometimes those rewards come in the form of a cash-back percentage of the purchases you make (e.g. 1.5%, or $1.50 for every $100 you spend), or miles or points you can earn for airline and hotel loyalty programs. Getting rewards is as simple as choosing a rewards card and using it to make purchases.
What kind of fees do credit cards have?
Most credit cards charge fees and interest rates. The most common fee is an annual fee, which is an annual charge that you pay for using the card. The most common interest rate is APR, or "annual percentage rate." This is the rate your issuer charges if you carry a balance on your card and, in some cases, if you make a late payment.
Co-branded credit cards are credit cards backed by a credit card network, card issuer, and a consumer brand such as Delta, Target, or Marriott.
Mastercard is one of four major U.S. processing networks, providing technology to facilitate electronic payments between consumers, businesses, and organizations.
The purchase annual percentage rate is the rate applied to a purchase balance to calculate the finance charge for the billing period, when it applies. When you charge a purchase to your credit card and carry the balance to the next billing cycle, for example, there will be a purchase APR applied to the unpaid portion of the balance.
Cash back is a bonus paid to credit cardholders who make qualifying credit card purchases.
A private label credit card is a type of credit card that's restricted to a specific retailer or brand.
Your credit limit is the maximum amount you can borrow using a credit card or line of credit.
Unsecured Credit Card
An unsecured credit card is the most common type of credit card. It doesn't require a security deposit for approval.
Credit card purchase protection acts as a type of insurance against theft and damage for purchases—as long as you made those purchases in the previous 90-120 days, using your credit card. This benefit doesn’t come standard on all cards, but it is more common than credit card return protection, which covers you in case a vendor won’t accept a purchase return.
Credit Card Disclosure
A credit card disclosure is a document that outlines all of the fees, costs, interest rates, and terms that a customer could experience while using the credit card. Institutions that offer credit cards are required by law to disclose this information.
An airline credit card is a type of travel rewards credit card that allows consumers to earn airline miles and other perks with a specific airline in exchange for making purchases.