A credit card is a rectangular piece of plastic or metal measuring 3.4 inches by 2.1 inches that contains a magnetic stripe as well as an EMV chip with the information needed to complete a purchase. Some new credit cards also have an RFID chip for contactless payments.
Physically, a credit card is the same size as a debit card, prepaid card, gift card or driver’s license. Credit cards work very differently, though.
Key Things to Know About Credit Cards
- Making a purchase with a credit card enables the user to securely borrow money as needed and then repay the card’s issuer after the fact.
- Using a credit card responsibly is the easiest way to build a good credit score.
- Other benefits for credit card users include the opportunity to earn rewards on purchases, the flexibility to pay off large purchases over time, or the chance to reduce the cost of existing debt through a balance transfer.
- Banks and credit unions offer credit cards because they are a good source of income from fees and interest charges.
- To qualify for a credit card account, an applicant must be at least 18 years old with enough income to afford monthly bill payments.
- There is no minimum age to get a credit card as an authorized user.
Overview of How Credit Cards Work
Credit cards require regular payments to keep the account open and in good standing. To that end, cardholders receive a credit card statement once a month detailing purchases and payments made during that billing cycle, and noting when the cardholder must make a payment on the account.
If you pay for your purchases within the window of the grace period on the account (typically between 21 and 25 days after the monthly statement is issued), you won’t have to pay more than you borrowed. If you carry your balance past that, however, you’ll generally have to pay the regular interest rate - or regular APR - on the amount you owe. Credit cards have higher regular APRs than most consumer loans, so it’s best to avoid carrying a balance.
Outside of interest charges, credit cards may come with fees. Late fees apply to nearly all credit cards when you don’t pay at least the minimum payment by the due date. Annual, monthly, and one-time fees may be charged just to have certain credit cards. The credit cards with the biggest benefits and perks - travel credits, free airport lounge memberships, and the highest rewards rates, to name a few - are usually the ones with annual fees.
WalletHub Answers is a free service that helps consumers access financial information. Information on WalletHub Answers is provided “as is” and should not be considered financial, legal or investment advice. WalletHub is not a financial advisor, law firm, “lawyer referral service,” or a substitute for a financial advisor, attorney, or law firm. You may want to hire a professional before making any decision. WalletHub does not endorse any particular contributors and cannot guarantee the quality or reliability of any information posted. The helpfulness of a financial advisor's answer is not indicative of future advisor performance.
WalletHub members have a wealth of knowledge to share, and we encourage everyone to do so while respecting our content guidelines
. Please keep in mind that editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. In addition, it is not a financial institution’s responsibility to ensure all posts and questions are answered.