Credit cards are a type of credit that you can use to buy things in place of cash. You can use a credit card instead of cash in most situations.
When you use a credit card, you're borrowing money from a bank or financial institution. You're expected to pay the money back in full. The institution you borrowed the money from charges you interest for borrowing their money.
Credit cards also allow you to build a credit history and establish a credit score. You can use a credit card responsibly and pay off your balances on time, and this will help your credit score.
How to get a Credit Card
To get a credit card, you typically need to be 18 years old, have a source of income, and have a valid government-issued ID. When you get a credit card, the bank or financial institution will check your credit history and determine your credit score.
You can apply for a credit card online by going to a bank or financial institution's website. You can also apply for a credit card at a bank or financial institution's branch and may be able to apply and receive a credit card on the same day.
Types of Credit Cards
There are a few different types of credit cards.
Visa and MasterCard
The most common type of credit cards are MasterCard and Visa credit cards. These credit cards are the most widely accepted and will work at most locations, such as stores and restaurants.
American Express is another type of credit card. These credit cards are very popular and accepted by many businesses and make for excellent travel credit cards.
Prepaid Credit Cards
A prepaid credit card is a credit card that you prepay money for, and you're only able to spend the money you prepay.
Prepaid credit cards can be good for parents and young people who wish to teach the importance of credit and financial responsibility. You can limit how much someone can spend, which is an excellent way to teach the importance of money.
Every credit card has a different interest rate, and some cards have more fees than others. You will want to make sure you understand what your credit card's interest rate and fees are before you apply.
Credit Card Fees
Credit cards often charge an annual fee, a late fee, a balance transfer fee, an interest rate, and a cash advance fee.
Credit Card Interest Rates
When you get a credit card, you must pay off your balance in full each month. If you don't pay your full balance, you will have to pay interest on the money you borrowed. The interest rate is typically a percentage of the balance.
Interest rates for credit cards depend on what type of credit card it is. For example, rewards credit cards usually have much higher interest rates than other credit cards. The interest rates also depend on what you use the card for, such as paying bills or making purchases.
Credit Card Balance Transfers
Credit cards have a short-term borrowing option, also known as a balance transfer, which allows a borrower to transfer a balance from one credit card to another. This option can be helpful for those who want to consolidate their credit card debt into one card with a lower interest rate.