How Do Credit Cards Work? Complete Guide
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What Is a Credit Card?
Understanding Credit Cards
Credit Card Interest
Credit Cards vs. Debit Cards
Credit History and Credit Score
Pros and Cons of Credit Cards
Tips to Make the Most of Your Credit Card
Pay Attention to Fees
Look for the Right Rewards for You
Make Sure You Can Fully Pay Off Your Balance Every Month
Common Credit Card Terms to Be Aware Of
APR stands for annual percentage rate, and is the way credit card interest is expressed. Your balance is the amount of money you owe on your credit card at any given time. The grace period is the stretch of time between the end of the billing cycle and the payment due date. If you pay off your balance in full during the grace period, you won’t be charged interest — but make sure your card offers one. Interest is the money you pay the card issuer for the privilege of borrowing funds, and it’s charged as a percentage of the amount you borrow. However, because credit card interest is compound, interest can also be charged on the interest you accrue, which is part of why it’s so easy to slip into credit card debt. The minimum payment is how much you must pay each month to avoid your credit card being marked delinquent by the issuer, which can lead to negative ramifications on your credit history and credit score.
The Takeaway
About the Author
Jamie Cattanach is a full-time freelance writer whose work has been featured at CNBC, Yahoo Finance, The Motley Fool, the Huffington Post and other outlets. At SoFi, she writes about investing, retirement, student loans and how to get your money right -- no matter what that means for you.
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