A credit card is revolving credit in the form of a card. The card can be used to make purchases at stores that accept credit or to withdraw a cash advance from an ATM.

EXPLANATION

Normally, to obtain a credit card, one needs to apply to a financial institution and show a good credit history. This means that one needs to have kept a well-done budget and the responsibility to pay off debts in the past. At the end of the established term, the borrower typically has to pay a minimum balance and the remainder accrues interest until the following month, when the borrower will receive the account statement with the balance collected during that second month, plus the remainder of the first month, plus first month's interest.

The sum of all these factors is what can confuse the user, so you must be very responsible when using credit cards. The convenience of the credit card is that you do not need to carry cash in your wallet. Another convenience of a credit card is being able to spend multiple times without having to take out multiple loans.

RESULT

A credit card strengthens the financial freedom to spend more than what one has in the account. However, your own money is tied to the final amount and it is very important to make sure that you can pay at least the minimum balance at the end of the month. If you pay in full, you won't have to pay interest (your card may charge other service fees). If you pay only a part, you will have to pay interest. The portion you pay should be at least the minimum payment to ensure you don't fall behind. Delinquency usually carries more costs and can tarnish your credit history.

The security of your money will not depend on the ability to walk home with money in your pocket, but on whether you can meet the guarantee to pay the debt you have accumulated. The interest rates on a credit card represent a risk for those who do not have sufficient resources to assume the debt and its interest. That is why it is important to keep in mind what is the purpose of using the card and what its payment or lack thereof implies.