How do credit cards work?

A credit card is a financial tool that allows you to borrow money from a bank or financial institution to make purchases, pay for services, or withdraw cash. When you use a credit card, you are essentially taking out a short-term loan. The issuer of the credit card charges interest on the amount borrowed if it is not paid in full by the due date each month. You can also choose to pay only part of the balance, which will carry over to the next month with added interest. Most credit cards offer a grace period, typically 21 to 25 days, during which no interest is charged on new purchases if the balance is paid in full.