A credit card is a financial tool that allows you to borrow money from a bank to make purchases, pay bills, or shop online. Unlike a debit card, which uses money from your bank account, a credit card provides a borrowing limit known as your credit limit. You can spend up to that limit and pay it back later.
Every month, the bank sends you a statement showing everything you purchased, how much you owe, and the minimum payment required. If you pay the full balance on time, you avoid interest. But if you only pay the minimum, the remaining balance accumulates interest based on the APR (Annual Percentage Rate).
Credit cards also help you build your credit score, which is extremely important in the USA and UK. A good credit score gives you access to cheaper loans, mortgages, better job opportunities, and higher credit limits. To build credit, you need to make payments on time and keep your utilization low (under 30%).
Most credit cards also offer rewards like cashback, points, or travel miles. For example, spending $1 may earn you 1–5 points depending on the category. These points can be redeemed for gift cards, travel bookings, or statement credit.
Credit cards provide strong security features like fraud protection, dispute rights, and virtual card numbers. This makes them safer for online shopping compared to debit cards.
In short, a credit card is more than just a payment tool—it is a financial asset that can help you build credit, earn rewards, and manage expenses efficiently.
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