How does a credit card work?

A credit card is a payment method that makes money available to customers even if their account balance is insufficient when they are making a purchase. There is always a credit limit, above which no transactions are allowed. In other words, it is as if the bank or entity that issued the card has pre-authorised a small loan for you that you can use quickly and easily. You then have to return this in a lump sum or in instalments, depending on your chosen payment method.

In addition to purchases, you can also use your credit cards to withdraw cash, repaying the bank under the same conditions as your other purchases, in instalments, at the end of the month, etc. Bankinter offers this service under the name Smart Cash.

In general, you can return the money flexibly when you use your credit card: this could be at the end of the month, with no interest, or in several instalments at the interest rate set by the bank.

As this is a payment method and the payment is associated with a current account or a salary account, the bank authorises collection using this system. You are then charged a monthly repayment comprising capital and interest, depending on how you have decided to pay.

You must consider the period for repaying the money and the interest, which are key elements in the use of credit cards. If you decide to postpone paying for your purchases for a few months, the interest rate may vary depending on the entity and the repayment period, and the amount of the card's limit used.

Credit cards have advantages and disadvantages. It is a good idea to use this payment system for essential, one-off and urgent expenses or purchases, avoiding impulse buys. The success of your finances depends on how you manage your spending and your budget, so you have no unpleasant surprises in future.