What is a credit card?

What is a credit card?

Credit cards allow you to borrow money from a bank with the agreement that you will repay it by the due date of your bill or face interest charges.

The ability to buy now and pay later outperforms other payment methods such as debit cards and cash, which both require you to have the money available for payment at the time of purchase. Credit cards, in addition to providing greater payment flexibility, assist you in establishing a credit score, which allows you to qualify for other financial products such as loans and mortgages.

A credit card can also provide financial benefits, as cardholders can earn rewards on every purchase, which can then be redeemed for travel, statement credits, and other items. Some credit cards also provide interest-free periods for a limited time.

Credit cards are more secure than other payment methods because of laws such as the CARD Act and the Fair Credit Billing Act, which help regulate the industry and provide higher levels of protection against fraudulent purchases.

CNBC Select examines the benefits and drawbacks of credit cards, as well as how they work, common terms and card types, so you can start using credit cards to your advantage.