Whether purchasing a car, a television, or a restaurant meal, Americans often use credit to help pay for goods or services. Understanding the types of credit and their costs can help consumers use credit wisely.
Consumer credit falls into three general categories.
Open-end credit allows a person to charge purchases, but the creditor expects full payment within 30 days. Local businesses and travel and entertainment cards like American Express offer open-end credit. Revolving credit allows a consumer to pay all, part or a minimum amount of the outstanding balance each month. Any unpaid amount revolves to the next month s balance and incurs a finance charge, or the cost for the consumer to owe that money for 30 more days. Credit cards issued by banks, oil companies, and large retail businesses typically work this way.