{"id":4543,"date":"2022-03-08T08:02:06","date_gmt":"2022-03-08T16:02:06","guid":{"rendered":"https:\/\/www.nerdwallet.com\/ca\/?page_id=4543"},"modified":"2023-12-18T08:19:23","modified_gmt":"2023-12-18T16:19:23","slug":"what-is-credit-card","status":"publish","type":"page","link":"https:\/\/www.nerdwallet.com\/ca\/credit-cards\/what-is-credit-card","title":{"rendered":"What Is a Credit Card and Should You Get One?"},"content":{"rendered":"\n

A credit card is a payment tool issued by a bank or other financial institution that provides access to a revolving line of credit.<\/p>\n\n\n\n

You can use a credit card to purchase goods or services in person, over the phone, by mail or online, at any merchant that accepts credit card payments. At the end of each billing cycle, you must pay back what you borrowed or be charged interest on the balance. <\/p>\n\n\n\n

There are various types of credit cards<\/a> to choose from, with different credit limits, interest rates, eligibility requirements and perks. Learn more about what a credit card is and whether it\u2019s the right choice for you before you apply.<\/p>\n\n\n\n

How do credit cards work?<\/h2>\n\n\n\n

When you swipe or insert a credit card, you\u2019re essentially borrowing money from a financial institution to buy products and services. If you don\u2019t pay the money back by the end of the billing cycle \u2014 typically one month \u2014 you\u2019re charged interest on the credit card balance<\/a>. <\/p>\n\n\n\n

Credit card bills<\/h3>\n\n\n\n

Every billing cycle, you\u2019ll receive a credit card statement<\/a> that shows what you spent, how much you need to pay back and by when. Check your statements regularly to ensure the charges are correct, and to catch any potential fraudulent activity early. <\/p>\n\n\n\n

In general, credit cards have a minimum payment<\/a> due every billing cycle. This is a portion of the total balance, and must be paid to avoid damaging your credit score or paying an even higher interest rate. <\/p>\n\n\n\n

While paying just the minimum amount avoids certain credit card fees<\/a> and penalties, it\u2019s best to pay off the full balance if you can, to avoid being charged interest<\/a>, especially as credit card interest rates can be high (usually around 19.99%). <\/p>\n\n\n\n

ATMs<\/h3>\n\n\n\n

Using your credit card to withdraw money from an ATM is known as a cash advance<\/a>. However, cash advance interest rates are usually higher than your standard rate and start accumulating the moment you withdraw the money.  For these reasons, cash advances are not generally recommended unless it\u2019s an emergency. <\/p>\n\n\n\n

Credit limits<\/h3>\n\n\n\n

A card\u2019s credit limit is the amount of money you\u2019re allowed to borrow at one time. For example, if your card has a credit limit of $3,000 and you spend $2,000, you have $1,000 available to spend. If you pay back the $2,000, you\u2019ll have the full $3,000 available again. <\/p>\n\n\n\n

Credit card limits<\/a> vary among card companies and may be based on your credit score or credit history, or the security deposit provided, such as with secured credit cards<\/a>. <\/p>\n\n\n\n

Specific rules about cash advances, interest rates, late fees, billing statements and other important credit card policies can be found in the issuer\u2019s terms and conditions<\/a>. You should get a copy of these rules with your physical card, and be able to view them on the issuer\u2019s website.<\/p>\n\n\n\n

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Did you know…<\/h3>

Although credit cards have traditionally been physical items, digital versions, such as virtual credit cards<\/a>, also exist.<\/p><\/div>