If you've never had a credit card before, you may wonder just how they work and what responsibilities you have as a cardholder.
Credit cards are essential if you're looking to build credit, and they're also a convenient way to pay for everyday purchases, earn rewards and more. However, it's essential to use them responsibly in order to avoid incurring interest charges, late fees and risk falling into debt. But if you understand how credit cards work, you can prevent any potential negative effects and reap the rewards of using a credit card.
Below, CNBC Select explains how credit cards work, so you can get the most value from using yours.
A credit card can be used to pay for new purchases by swiping, tapping or inserting your card into a payment terminal, or entering your account info online. You may also be able to use a mobile wallet, such as Apple Pay or Samsung Pay.
Once you make a purchase, it will show up as "pending" on your account balance. Purchases typically take a few days to post, at which time the purchase amount will be added to your total balance.
Every month, you'll receive a bill, which is comprised of all posted purchases for the past 27 to 30 days (depending on the length of your billing cycle). Your bill is due on the same date every month. You'll typically have a grace period, which is a minimum of 21 days from the end of a billing cycle, where you can pay off your balance interest-free. Any payments after the grace period will incur interest charges.
You have the option to make the minimum payment, often $25 or $35, or any other amount up to your total balance. We recommend always paying on time and in full to avoid interest and fees.
Familiarize yourself with these common credit card terms prior to using a credit card.
Credit cards are more than a convenient way to pay for purchases. Many card issuers provide added perks, such as rewards and special financing that make credit cards one of the most beneficial payment options.
Below, we list benefits that may be offered by your credit card. Review your cardholder agreement for the exact perks provided by your card.
Once you've decided to open a credit card, you can begin the search for the best credit card for your needs. We recommend checking your credit score first, so you know where you stand and what cards you might qualify for.
Once you know your credit score, you can shop around for the best credit card offers. There are cards for all types of needs, such as getting out of debt with a balance transfer card like the Citi Simplicity® Card, to earning travel rewards with the Chase Sapphire Preferred® or cash-back with the Citi® Double Cash Card.
When you've settled on the credit card you want to open, make sure to read the fine print so you're aware of any fees and important terms. After, you can submit an application and potentially receive a decision in as little as 60 seconds, though it may take longer.
Read more about how to get a credit card in five steps.
Information about the Citi Simplicity® Card, Citi® Double Cash Card and the Chase Sapphire Preferred® has been collected independently by CNBC and has not been reviewed or provided by the issuer of the cards prior to publication.