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When you buy something using credit cards, you are buying an item now and paying for it later. In other words, someone else - a bank who issued the credit card - is paying for what you bought. Your responsibility is to pay that bank back for the credit you spend. The most common way to use credit, if you are a consumer, is with a credit card. Credit-cards are commonly used if a person wants to buy something and doesn't have the cash to pay for it, including emergencies. You can buy an item as long as it costs less than the credit line you have been given, which is how much credit you are allowed spend in a given month.

Immediate Gratification: By using a credit-card, you are having a bank pay for your purchase. You get the purchase right away, just like you would if you paid for it in cash, but you still owe money for what you bought plus interest. You are responsible to pay the full amount of your purchase back to the bank, plus a monthly fee called interest. In most cases interest is calculated every month based on a rate (called APR - the Annual Percentage Rate) that is predetermined to be fixed (always the same) or variable (could change from month to month). For example, if you buy a $100 microwave using your unsecured credit card, and the fixed APR that your unsecured credit card features is 18%, you will owe $18 of interest after one year if you never make any payments. However, most credit card companies require that you pay a minimum balance every month - usually around $25 - and will penalize you with fees or with higher interests rates if you do not comply.

Depending on your credit history or credit report - if and how you've used credit in the past - a credit company will give you more or less freedom to spend money using credit with your credit card. If you have never used credit, or have used credit and didn't follow the guidelines of the credit card company (i.e. didn't pay the minimum balance every month), you will not be eligible for the same cards that people who have used credit and followed the guidelines of their credit card company. If you are new to credit or had credit problems in the past, you have bad or fair credit. If you have used credit responsibly, you have good or perfect credit.

There are two major types of credit: secured and unsecured. Unsecured credit, which is what most credit cards are, is based on your promise and signature to repay the credit you have spent. These cards allow you the most freedom, and are given to those with perfect, good, and sometimes fair credit. Secured credit cards are like a savings account that extends your money, and is typically used by those who have bad or fair credit who are not eligible for the cards with good features. For example, if you deposit $500 in an account with a secured credit card company, you could get a $1000 credit line. If you spend money with your secured card but don't make your minimum payments, the bank or credit card company may take your $500 for themselves. Also in this category are debit and prepaid cards that are secured by your money. These cards can be obtained by those with anywhere from bad to perfect credit, because the money that is spent is not actually credit but a deposit that you make. Debit credit cards take money right out of your checking or savings account, and prepaid cards have a set spending limit based on how much money you add to them from your checking or savings account. Within the secured and unsecured types of credit are many different categories of credit cards.