What Is a Credit Card?

A credit card is a card associated with a revolving line of credit. These cards allow cardholders to make payments using borrowed funds. Most financial institutions, including banks, issue credit cards to eligible consumers.

The individual accounts associated with credit cards come with a maximum credit limit. However, in many cases, good payment whatsmind behavior can result in a limit increase. Either way, this limit is the total amount of revolving credit you can borrow to pay for goods and services.

Revolving credit, in turn, refers to an open-ended credit account. It means it doesn’t have an end date, so you can use the available funds so long as that account remains open.

Each time you use a credit card, your available credit decreases based on the cost of the charge you made. For example, suppose you bought a pair of shoes that cost $50 and charged it to your card. If your card’s available credit was $1,000 before the purchase, then it will go down to $950 after.

Conversely, your available credit goes up each time you make a credit card payment. So, if you pay back that $50 before it incurs interest, your available credit will go up by $50.

Therefore, you’ll always have credit cards funds to use as long as you pay back your previous charges.

What’s Good About Credit Cards?

Credit cards allow you to obtain goods and services doingbuzz now and pay for them later. In most cases, they let you extend one-time payments for about a month, depending on your due date. You may even have longer than a month if you use your credit card right after your statement closing date.

Your statement closing date, by the way, is the last day of your monthly billing cycle. It’s at the end of this day when your issuer calculates all the charges you made on your card and the fees you agreed to pay. It’s also during this date when your issuer computes your minimum amount due.

On the other hand, your payment due date is the last day you can pay for the minimum amount due or your entire balance. If you pay your total balance on or before this date, your credit card issuer won’t charge interest fees. The due date is usually 20 to 25 days from your statement closing date.

For instance, let’s say your statement due date is every 15th of the month and your due date is after 25 days. In this case, you have until the 10th of the following month to pay the minimum amount due or your total balance.

Moreover, if you buy something with your card on the 16th of the month, it won’t be due until after two billing cycles. So, for example, if you use damascuscollections your card on October 16th, the charge will only be due on December 10th.

In addition, most credit cards have a cash line of credit (LOC) that you can borrow. You can withdraw cash against your card’s cash LOC using standard ATMs.