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
The credit card is like borrowing money you don’t have. So when you buy something with it (say 100 dollars) it will use its money not yours. Of course you pay for that service so you will have to pay back the 100 dollars you borrowed and a fee for borrowing it.
This is called interest. Some cards charge more than others but it’s usually a percent on the amount borrowed. So if it’s 2% interest you will payback 102 dollars that month. The more you spend the more interest you pay and the longer you don’t pay your bill will get higher as your total owed is now 102 plus the 2% interest and so on.
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