How Do Credit Cards Work: A Guide for Beginners

Credit cards play a vital role in  building credit scores and creditworthiness. In addition, it earns you  redeemable points, cashback, or miles.

We all know how to swipe, tab, or dip the plastic money to pay for daily purchases, but how do credit cards work?

Knowing the credit card types and how  they function help you become a responsible consumer. It’ll help you understand their purpose, maximize benefits and avoid debts and  financial ruin.

A credit card is the purchasing power of  an individual, stored in plastic, metal, or digital card. It offers a  revolving line of credit for making purchases.

What Is a Credit Card?

What seems like a simple purchase decision when you pay using a credit card undergoes a complex process.

How Do Credit Cards Work?

It involves a customer, his/ her issuing  bank, Merchant, and the acquiring bank, along with a payment processor  and payment network.

How Do Credit Cards Work?

Besides big banks like Bank of America, Capital One, Citi, and Wells Fargo, many other banks and credit unions issue credit cards.

How Different Types of Credit Cards Work

Secured credit cards work like debit  cards, where your credit limit depends on your security deposit. The  security deposit acts as collateral for the credit.

How Do Secured Credit Cards Work?

Cashback credit cards provide cash back  on every qualifying purchase. The credit card issuer determines the  amount of cashback and qualifying purchases.

How Do Cashback Credit Cards Work?

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