I have a small question about credit cards that I for some reason just dont get. I will give an example and maybe someone can clarify?
I want to buy something. I spend 100 dollars on it. I buy nothing else for the rest of the month.
Now, I keep hearing about “paying off” your credit card at the end of the month. So, I bought the thing for 100, it is added to my bill for the credit card. Am I paying 100 for the item AND 100 for my credit card since that’s how much I used on it that month? Or in total, getting the item and paying the card I’m spending 100? Sorry if this is confusing but it’s bugging me.
In: Economics
Credit cards have a budget on them, essentially a limited loan from a bank or CC company; when you pay $100 for an item you aren’t using *your* money at the time of purchase, you are using part of the limited loan. So at the end of the month, you must pay all or part (minimum payment) back to the lender (bank or CC company). If you *don’t* pay in full (get your balance back down to $0) you incur an interest charge for a percentage of the total amount of the loan you have used. Based on your usage, ability to pay on time (or lack of), amount of the total loan you’ve used, and a variety of other factors, a score of your credit is calculated.
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