How do credit card companies work?
Credit card services are unsecured lenders. When the companies approve you to utilize their credit cards it means that they allow you to lend their money and expect you to pay them over a certain time period, usually on a monthly basis. Any credit card transaction you make is a loan that you must repay under the specific terms of the agreement with that particular credit card issuer. The company charges interest on the amount you borrow if you choose to carry part of the balance from one month to another. If you purchase a washing machine, for example, they will charge interest on the value of the transaction until you repay the loan. But the company will not charge any interest if you pay your balance in full in the first billing cycle. A credit card business determines the interest rates charged to you by your credit history — your ability to repay a loan. If you make regular payments without defaulting on loans they will charge you less than others who have defaulted on their loan
