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What is a credit card?

Learn the pros and cons of credit cards.

What is a credit card?

Credit cards are a type of payment card that lets you borrow money from a bank or credit card company. You can use that borrowed money to buy things at stores, restaurants, and other places that accept credit cards as payment.
When you use a credit card, you're basically making a promise to the bank or credit card company that you'll pay back the money you borrowed. They keep track of how much you owe, and you have to pay at least a little bit back each month.
The bank or credit card company also charges you interest, which is like a fee for borrowing the money. The longer you take to pay back the money, the more interest you'll have to pay.

Why do I need a credit card?

There are a few reasons why people might want or need a credit card. Here are a few:
  • It's a convenient way to pay for things without carrying around cash.
  • It can help you build credit, which is important if you want to take out a loan or mortgage in the future.
  • Some credit cards come with rewards or cash back, which means you can get a little bit of money back for every dollar you spend.
There are also reasons why people might not want or need a credit card:
  • It can be easy to overspend and get into debt when you don't have to pay for things right away.
  • If you don't pay your bill on time, your credit score can go down, which could make it harder to get a loan or mortgage in the future.
  • You'll have to pay interest, which means you'll end up paying more for things than if you just used cash.
Ultimately, it's up to each person to decide if they want or need a credit card. If you do decide to get one, it's important to use it responsibly so you don't get into too much debt.
Used responsibly, credit cards can be a valuable financial tool. Image credit: "Credit cards" on Flickr, CC BY 2.0.

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