How do Credit Cards Work?

When you use a credit card for any transaction, the merchant fee, on your behalf, is paid by the financial institution issuing you the card. You can make as many transactions as you want within your approved credit limit.

You get an account statement each month summarizing the transaction details of your card.
The statement also highlights the following:

  • Available credit and cash limit
  • Minimum payment due
  • Total payment due date
  • Interest and fees charged
  • Payment methods


However, keep in mind that you need to pay back the amount utilized from your card within a stipulated period to your issuer, which is generally 20 days. If you fail to do so, your issuer levies an interest that keeps on compounding until the due payment remains outstanding.

Additional Read: How Does a Credit Card Work?

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