How does a credit card work?

Your credit card is issued by a bank, such as Bank of America®, Chase or Wells Fargo. The bank determines your interest rate, fees and rewards, so it’s important to find a bank that offers a card you like. Transactions are processed on a payment network, like Visa, Mastercard or American Express. This network determines where the card is accepted.

What is a rewards credit card?

A rewards credit card gives you a little something back with each purchase you make — usually cash back or travel points or airline miles. These cards are best for people who can pay their credit card bill in full each month. If you carry a balance from one month to the next, the interest you pay will eat up the value of your rewards.

What is a credit card balance?

The money that you owe the bank is the “balance.” Using the example above, your balance is PHP 3,000. However, what makes credit cards more advantageous than a regular loan is that your credit limit will revert to normal after you repay your balance.

What does a credit card issuer do?

The issuer is the bank that maintains your credit card account. It could be a huge bank like Chase, Capital One or Wells Fargo, or it could be your local bank or credit union. The issuer takes your credit card application and decides whether you qualify for the card. It sets your interest rate and charges any account fees.