What are credit cards?

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    Jordan Moore
    Jordan Moore

    A credit card is a piece of plastic you can use to buy things without using cash or your debit card. Most stores accept credit cards and you just have to tap or swipe it to make a purchase.

    But it’s not free money. With each purchase you make on a credit card you’re borrowing money and will get a monthly bill you need to pay back. If you pay it all at once you’re all set, but if you don’t pay it back when they ask you’ll owe your credit card company interest. 

    The interest is basically a fee for going over your initial borrowing time. 

    People use credit cards for multiple reasons, like:

    Building their credit score: Paying your credit card on time consistently shows borrowers you’re a trustworthy borrower, and over time this good habit can help build your credit score. 

    Convenience: It’s usually easier to carry a card and swipe than to worry about having enough cash on hand. It also allows you to make purchases in between paychecks (when you might be low on cash).

    Safety: Credit cards usually have extra safety and fraud protections built in that debit and credit cards don’t have. Like, if your card gets stolen or lost you can report this and get a new one and freeze the account, but with cash or a debit card, this money is usually gone forever.

    Reward perks: Many credit cards give you a little something extra for using them, like cashback on certain purchases, access to airport lounges, and points for travel.

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StellarFinance, Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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