Woman With Credit Card

How Credit Cards Work

Learn more about how credit cards work and what terms you need to know regarding them.

If you’re considering opening up a credit card, it’s critical to know the details. Understanding how credit cards work is at the heart of that process. This doesn’t just mean knowing the features and benefits of your particular card, or when to make payments, but the full workings of how credit cards are used.

The Basics Of How Credit Cards Work

Credit cards are a line of credit. A lender agrees to provide you with access to a set amount of money. Let’s say they offer a credit line of $1000 - That means you can make purchases on the card up to $1000. You can use the card anywhere it is accepted. Today, that’s very versatile!

When you make a purchase, your balance increases and your available credit line decreases.

For example, if you charge $100 worth of groceries you now owe $100 on your credit card and your available credit limit drops to $900. Your lender will send you a bill for $100, but you don’t have to pay the entire balance off at once. Rather, you must pay the minimum payment established by your lender. The remaining balance is carried over to the next billing cycle.

Pretty convenient, right? Yes! However, there are fees and terms you need to know about when using credit cards. Let’s take a closer look at what happens after you’ve used a portion of your available credit.

Understanding Credit Card Terms & Fees

A lender is required to provide you with a list of terms that outlines all of the details of the card. Read these carefully. By using the credit card, you are agreeing to the terms.

Here are a few important terms to look out for:

Credit Limits

Your credit limit is the available line of credit and the limit to what you can charge on the card.

Billing Cycle

This is the period of time you have to make purchases. When the period ends, you will receive your bill for what you’ve charged.

Balance

Your balance is the amount you owe. You’ll see this listed on your credit card statement at the end of the billing cycle. This amount reflects what you borrowed as well as any accumulated interest.

Minimum Payments

Most lenders do not require that you pay the entire balance of your credit card at the end of the billing cycle. Rather, you have to pay a minimum amount which is a small percentage of your total balance.

Late Fees

If you fail to make your minimum payment on time, most lenders tack on a late fee. Late fees can be expensive, and late payments may reduce your credit score.

APR

Perhaps the most complex element of credit cards is the annual percentage rate or APR. This is the amount of interest charged to you for borrowing money. If you pay your balance in full during your billing cycle, there is no interest applicable to you. This is called the grace period.

The Cost Of Using Credit

Interest is the fee you pay to use a credit card. As noted, if you pay off the balance in full during your grace period, you don’t pay interest. However, most people will carry a balance month-to-month. That is when the APR applies. Lenders will communicate what your interest rate is before offering you a card.

Also, be sure you read through the terms to know all of the other potential fees including:

  • Annual fees
  • Late fees
  • Balance transfer fees
  • Cash advance fees
  • Transaction fees for overseas payments

The Benefits Of Using Credit

Credit cards give you a bit of extra spending power when you want to make a big purchase. If you use credit, make payments on time consistently, and keep your balances low, you will be engaging in positive credit behavior. This can help you build a strong credit score.

Later, when you want to buy a home or a vehicle, a good credit score means you’ll pay less interest.

Finding The Right Credit Card For You

Lenders, like big banks and local credit unions, offer various types of credit cards. If you’re thinking about applying for a credit card, review your options carefully and decide what offers give you the features and benefits you need. You’ll be surprised at the different perks available, like zero interest on balance transfers, cash back rewards, points, and more.

At Listerhill Credit Union, we offer two credit card options, Visa Platinum Cash Back and Visa Platinum Merchandise. Both cards offer low-interest rates, great features, and perks. In addition, these credit cards do not have annual fees and they offer rewards. You can choose cash back or points to use towards gift cards or travel experiences.

Ready to explore your credit options?

Find the Right Credit Card

default icon for Solution Finder Intro
What can we help you with?
default icon for Checking For Mature Members
What are you borrowing for?
default icon for Checking For Mature Members
Vehicle Options
default icon for Checking For Mature Members
Home Options
default icon for Carrolls
What are you saving for?
default icon for Carrolls
How old are your kids?
default icon for Cord
Which of these banking options are you interested in?
default icon for Cord
How old are you (or your child)?
default icon for Cord
How old are you?
default icon for Cord
What kind of account are you looking for?
search popup background

What are you looking for?

Common Links

Frequently Asked Questions

  • How can I access my Listerhill accounts without a nearby branch?

    If you live in Alabama or in south central Tennessee but don't have a Listerhill branch location nearby, there are still plenty of ways to access your accounts. You can use our online banking, mobile banking app, and cards app to access your accounts from your devices. You can also take advantage of our CO-OP Shared Branches for easy access to your money wherever you are. If you need to get in touch, we're always one call away.

  • Can I open a Listerhill account online?

    You can open your Listerhill account from the comfort of your home with our easy online application. Or, if you want to apply for a mortgage, you can learn more about our offerings and start your application here.

  • Am I eligible for membership at Listerhill?

    If you live, work, attend school, or own property anywhere in Alabama or Maury County, TN, you're in luck! You're eligible to become a Listerhill member.

  • The Great Giveback Official Rules

    1. Eligibility: No purchase or obligation necessary to participate and win. All participants must be 19 years of age or older at time of contest participation. Employees of Listerhill Credit Union are not eligible to register for the contest.

    2. How To Enter the Contest: All Listerhill members who have consumer loans in good standing, (subject to limitations below) are automatically entered. Anyone who takes out a new loan with Listerhill Credit Union, or refinances a loan from another lender with Listerhill Credit Union (subject to limitations below) will automatically be entered to win. Limit of one entry per loan.

    NO PURCHASE NECESSARY: To enter the contest without a loan, send a self-addressed, stamped envelope to: Listerhill Credit Union, P.O. Box 566, Sheffield, AL 35660, Attn: Great Giveback Contest Entry. Limit one entry per person. Written entries must be received no later than July 3, 2021.

    Listerhill Credit Union will not be responsible for incomplete, lost, late, misdirected or illegible entries or for failure to receive entries. All entries become property of Listerhill Credit Union and none will be returned. Any questions regarding the number of entries submitted shall be determined by Listerhill Credit Union in its sole discretion, and Listerhill Credit Union reserves the right to disqualify any entries by persons determined to be tampering with, violating, or abusing any aspect of the contest.

    3. Contest Entry Requirements: In the event the Credit Union, in its sole discretion, determines that any Entry contains content that does not comply with these Official Rules or does not otherwise comply with regulatory guidelines, Credit Union reserves the right to disqualify the entry.

    4. Determining the Winner: A Credit Union employee will select at random four (4) $500 winners (one per day July 12-15) and one Grand Prize Winner from all entries received on July 16, 2021. You do not have to be present to win.

    5. Prizes: $500 Cash Prize: the Credit Union will award four (4) members with $500 cash each. Grand Prize: The Credit Union will pay up to $25,000 toward your loan with Listerhill Credit Union, or combination of loans. No loan payments will be made to loans with any other lender. No cash equivalent provided, and the total prize amount may be less depending on the outstanding amount of loan balance(s) with Listerhill Credit Union. In no event will the prize awarded exceed the total amount of the winner’s outstanding balance of qualifying loans with Listerhill Credit Union. Federal, state and local taxes are the sole responsibility of the winner. IRS regulations require the Credit Union file a 1099 on behalf of the winner.

    A Credit Union employee will call the prize winners and the prize winners will be called up to five times during regular business hours at number provided on entry form and will leave no messages. Failure to reach winner during these calls may result in disqualification of winner, forfeiture of his or her interest in all prizes, and selection of a substitute winner drawn from the drum. Winner will be required to schedule a time, at least 48 hours in advance, to visit Listerhill Credit Union, located at 4790 2nd Street, Muscle Shoals AL, 35661 in person, during regular business hours within seven (7) days of being notified to claim prizes by providing proof of eligibility for prize won and completing and signing an affidavit of eligibility and a liability and publicity release. Failure of any Winner to timely contact the Credit Union, visit the above Credit Union office in person and sign and return any required affidavit and release, or to claim a prize or comply with any term or condition of these Official Rules, will result in drawing Winner's disqualification and the forfeiture of his or her interest in the prize. Winners may waive their right to receive prizes. Prizes are non-assignable and nontransferable. No substitutions allowed by winner.

    6. To be eligible to win, all loans must be in good standing (not more than 30 days past due at the time of drawing. Eligible loans are limited to auto loans (no indirect dealer loans), personal loans (no loans secured by real property, such as mortgages, 2nd mortgages, and Home Equity Lines of Credit) and recreation loans made to consumer borrowers (not business or commercial loans).

    6. Participation. By participating, entrants agree to be bound by these Official Rules and the decisions of the Contest. Except where prohibited, acceptance of any prize constitutes winner's consent to the publication of his or her name, biographical information and likeness in any media for any commercial or promotional purpose, without limitation the Internet, or further compensation. Prizes not won and claimed by eligible winners in accordance with these Official Rules will not be awarded and will remain the property of the Credit Union.

  • How do I redeem my Merchandise Rewards?

    The easiest way to redeem your Merchandise Rewards is to log into Listerhill’s Online Banking and click the “Get Info” link to the right of your credit card information. This will take you to our credit card servicing site within the same window. Select “Rewards” on the upper right side within the screen (below FICO Score) and on the next screen, click on the CURewards logo. This will automatically sign you in to be able to redeem your Merchandise Rewards points!