How do credit cards and loans work?

Credit cards and loans are financial tools that allow you to borrow money to make purchases or pay bills. They can be helpful in managing cash flow, making large purchases, or investing in opportunities that may not be possible otherwise.

With a credit card, you can make purchases using credit that is extended to you by the card issuer. You'll typically have a set credit limit, and you'll be required to make minimum monthly payments. If you carry a balance, you'll also pay interest on the amount you owe.

Loans work in a similar way, but typically involve borrowing a larger sum of money over a set period of time. This could be for a car, home, or other large purchase. You'll usually pay back the loan in regular installments over the term of the loan, and you'll pay interest on the amount borrowed.

When deciding to apply for credit or a loan, it's important to understand the terms and fees associated with them, as well as the impact on your credit score. Your credit score can affect your ability to obtain credit or loans and can also impact the interest rates and fees you'll pay.