Credit Card Basics

A basic understanding of credit cards is important for responsible use. Use these resources to learn key credit card terms, different card types, and how to pick the best card for you.

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.

Key Terms

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