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
In general you are only paying for the item itself. First you pay for it with your credit card, so the credit card company promises to pay the 100 dollar to the vendor. Then at the end of the month they send you a bill for 100 so they can pay the vendor. But they also give you the option to pay less, say the minimum is 10 dollar. If you only pay the 10 dollar then they will still pay the vendor 100 and will give you 90 dollar credit. But that means they add interest to those and even if you do not buy anything else with the credit card you get a bill for say 99 dollar the following month. The extra 9 dollar is the interest. In order to avoid the interest rates you need to pay off the credit card in full whenever the monthly credit card bill comes. Do not pay less then the full amount and especially not as low as the minimum.
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