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how do credit cards work

A credit card is a financial product that allows you to borrow money from a lender to make purchases or withdraw cash. When you use a credit card, you are borrowing money from the credit card issuer, and you are required to pay back the borrowed amount, plus any interest or fees, at a later date.

Here’s how credit cards work:

  1. You apply for a credit card and are approved: To get a credit card, you will need to fill out an application and provide some personal and financial information, such as your name, address, employment history, and income. If your application is approved, the credit card issuer will send you a credit card with a credit limit, which is the maximum amount of money you can borrow.
  2. You make purchases or withdraw cash: Once you have a credit card, you can use it to make purchases at merchants that accept the card or to withdraw cash from an ATM. When you make a purchase, the merchant will charge your credit card and the amount will be added to your credit card balance.
  3. You receive a monthly statement: At the end of each billing period, the credit card issuer will send you a statement showing your credit card balance, any new charges or transactions, and any fees or interest charges.
  4. You make a payment: You are required to pay at least a minimum payment each month to the credit card issuer. The minimum payment is usually a percentage of your total balance, and it may include any fees or interest charges. If you pay more than the minimum payment, you will pay down your credit card balance faster and pay less in interest over the long run.


By using a credit card responsibly, you can build a strong credit history and financial stability. Just be sure to pay your bills on time and avoid overusing your credit card, as this can lead to financial problems.