How Do Credit Cards Work

What is?

A credit card is a form of plastic, metal, or digital purchasing power that offers a revolving line of credit.

Rewards system

Credit cards also offer rewards and benefits, such as redeemable points, cashback, or miles.

Credit limit

Credit cards have a credit limit and require at least a minimum payment on the balance each billing cycle.

Purchase option

The process of using a credit card involves the customer, issuer, merchant, acquiring bank, payment processor, and payment network.

Different type

Different types of credit cards include traditional, secured, cashback, co-branded, and travel credit cards.

Secured credit

Secured credit cards are for those building or improving their credit and require a security deposit as collateral.

Cashback credit

Cashback credit cards provide cashback on eligible purchases with potential annual caps on bonus cashback.

Co-branded credit

Co-branded credit cards offer additional perks at specific merchants, while travel credit cards offer points or miles for travel-related expenses.

Travel credit

Frequent travelers may benefit from premium travel credit cards with perks such as no foreign transaction fees and travel insurance.

Premium travel

Understanding the different types of credit cards and how they work can help individuals become responsible consumers.