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 are, essentially, loans.
When you charge that $100 to your card you are taking out a loan for $100 from whichever company issued you the card.
As far as paying $100 for the item and $100 for the card, absolutely not. You didn’t spend $100 on the item. You took out a loan for that item.
Whatever credit limit is on your card is not money you have to spend. It is the maximum loan you can take. Every time you swipe your credit card you are taking out a loan. Paying off your balance each month is paying back the loan.
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