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Credit Card Definition and Facts

Last Updated: April 25, 2023
5 min read

Key Points About: Credit Card Definition

  1. Credit cards allow you to borrow money against a credit line.

  2. You usually have to provide information about your income when you apply for a credit card.

  3. Many credit cards offer rewards, like cash back or miles.

Many people have credit cards, but not everyone understands the definition of a credit card, and how a credit card is different from a debit card.

How do credit cards work?

A credit card allows you to borrow money from a credit card company. The amount of money a credit issuer will allow you to borrow (your credit limit) is based on your credit history and credit score. In exchange, you pay interest on any outstanding credit card debt you have at the end of each billing cycle. Most credit card issuers will report your credit history to credit bureaus, unlike debit cards or prepaid cards.

Did you know?

You can enjoy the convenience and flexibility of a regular credit card while working to build your credit history with a secured credit card.

Learn More

What’s the difference between credit cards and debit cards?

Credit cards are not the same as debit cards. A debit card pulls money directly from a connected bank account, like your checking account, while your credit card pulls money from your available credit.

Credit Card Facts and Questions

Whether applying for a credit card for the first time or wondering about terms used in your credit card agreement, learn these credit card facts to help you better understand credit cards.

How do I apply for a credit card?

The credit card application process is straightforward and only needs some basic information such as your name, Social Security number, address and income. Students will need the name and location of their school in addition to their Social Security number and home address.

How do I get a credit card if I have no credit history?

There are plenty of options on the market for people with limited credit history, like student cards and secured cards. Another option is that you can ask a friend or relative to add you as an authorized user on their card.

What are instant approval credit cards?

Instant approval means you’ll receive a quick answer to your application for a new credit card. Typically, only people with good to excellent credit scores get instant approval. Learn more about instant approval credit card offers.

What does it mean to be “pre-approved” for a credit card?

If you get a pre-approved credit card offer, that means that a credit card issuer checked with a credit bureau and saw that you meet its credit criteria. The card issuer pre-approved you as a quality candidate for its product. You’ll still need to apply to receive a new credit card, at which point you may still be accepted or denied based on your credit report.

How old do you have to be to get a credit card?

Eighteen is typically the minimum age where you can apply for your own credit card in the United States. However, if you’re under 18, someone can add you as an authorized user on their account.

How many credit cards should I have to help build credit?

There is no “right” number of credit accounts to build a solid credit history. There are many factors that make up a credit score (and every credit bureau has different ways of calculating your score), but late or missed payments, frequency of credit inquiries, and your credit utilization ratio are all major factors. When you’re starting out with credit, it can be safer to begin with just one card to ensure you can make payments consistently before adding more.

If you need more spending power, you can request a credit line increase, that way you can still keep your credit utilization ratio low while boosting the amount of available credit.

Why does your APR go up if you’re making payments on time?

There are a few reasons your Annual Percentage Rate (APR) can go up even if you’re up to date on all payments. These include a decrease in your credit score, the end of a card-related promotion, or a change in the prime rate if you have a variable-rate card.

What tools are available to help manage my Discover Card account?

You can manage your account at, where you can also securely and quickly view transactions and make bill payments. You can also stay up to date on your account through text or email reminders. 

Can I avoid fees on a credit card?

While every credit card has different terms, most credit card fees can be avoided if you:

  • Choose a card without an annual fee. Discover cards all have no annual fee.
  • Pay your bill in full and on time every month to avoid interest charges. Late fees can impact your pocketbook, and late or missed payments can also have a negative effect on your credit score.
  • Limit cash advances. Most credit cards have a cash advance fee.

Should I pay with a credit card or debit card when shopping online?

Advantages to online shopping with a credit card over a debit card usually include the ability to earn rewards on purchases.

But the most significant difference has to do with fraud. If someone makes fraudulent charges with your debit card, the money comes directly out of your bank account. Even if you can get a refund, it can take weeks or months to get that money back. With a credit card, you can dispute the charges and the funds never leave your account. With Discover, you get a $0 Fraud Liability Guarantee—you’re never held responsible for unauthorized purchases on your Discover Card.1

How can I lower my credit card interest rate?

Depending on your current standing and credit history, your credit card company may be able to approve a lower rate. Also consider a balance transfer to a card with a low or zero percent introductory APR offer, but watch out for balance transfer fees if you choose to do this.

What is the definition of cash back?

Cash back is when the credit card company gives you a certain percentage of what you put on the card back in the form of rewards. Different programs offer different redemption options. You may be able to use it as a credit toward your current statement, to shop online, to purchase gift cards, or simply have it deposited back into a connected bank account. 

What Is a statement credit?

A statement credit is a positive amount on your credit card bill. For example, if you accidentally overpay, most credit cards will apply a statement credit toward your future purchases. As mentioned above, some rewards cards also allow you to redeem cash back for a statement credit, lowering your balance by using your cash rewards.

When should I redeem rewards on a credit card?

With Discover, your rewards never expire. We will credit your account or send you a check with your rewards balance if your account is closed or if it has not been used within 18 months.

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