How Do Credit Cards Work? APR, Interest and Fees Explained

Credit cards can be valuable additions to your wallet, as long as you know how to use them.

Credit card on color block background.
(Image credit: Getty Images)

Credit cards provide access to a revolving line of credit, allowing you to make purchases that can be paid off later. Similar to other loans, credit cards charge interest, typically expressed as an annual percentage rate, or APR. Because of this, if balances on your card aren’t paid off each month, you’ll be stuck paying interest charges that can add up over time. 

Therefore, using one of the best credit cards can act like a power tool; in capable hands, a card may offer flexibility and lucrative benefits, but when poorly managed, it can severely damage your finances.

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Erin Bendig
Personal Finance Writer

Erin pairs personal experience with research and is passionate about sharing personal finance advice with others. Previously, she was a freelancer focusing on the credit card side of finance, but has branched out since then to cover other aspects of personal finance. Erin is well-versed in traditional media with reporting, interviewing and research, as well as using graphic design and video and audio storytelling to share with her readers.