What
is a Credit Card?
A credit card allows you to buy things even if you don’t have the money to
pay for it right away. The bank or company that gave you the card lets you
spend up to an agreed upon dollar amount. This amount is called your credit limit.
As you pay off what you’ve spent, more money is available to you up to your
credit limit amount. This means that if your credit limit is $2000 and you
use your credit card to pay for a new computer that costs $1500, you have
$500 dollars available to you. You must pay at least the
minimum payment
amount by the
due date, generally once every month. You will
pay a
finance charge
or interest on any amount you do not pay by the due date.
Types of Credit Cards
There are generally two types of credit cards:
secured
and unsecured.
Secured credit cards require that you deposit money into an account.
The amount of money you deposit is your credit limit. For example, if
you deposit $500 into your account, your credit limit is $500. With
unsecured credit cards, the bank or company that issued your card to
you trusts you to make payments on whatever you charge or spend using your
credit card.