How does credit work?
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A credit card works like a small loan that you can borrow from whenever you like to buy just about whatever you want. You use your card in a store or online, the bank buys you your stuff and you pay them back by a certain day of the month. Any money you still have owing at the end of each month will be charged interest.
You’re given a credit limit, the maximum total amount of money that you can borrow at any time. If you’re young and don’t have much history paying back debts, you’ll start with a small amount. Once you’ve proven that you’re responsible by paying the card back on time, you could be offered a higher limit.
If you leave a lot of that debt unpaid for a long time, it becomes almost impossible to pay back so it’s important to use credit responsibly.
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