4. Credit 101

Put simply, a credit card provides a short-term loan from a bank that you are expected to repay quickly. In exchange for giving you a short-term loan, the bank will charge you interest — often referred to as an Annual Percentage Rate or APR. An issuing bank will evaluate your credit-worthiness and determine if you are a low risk candidate (likely to repay) or a high risk candidate (unlikely to repay) for a line of credit, and will offer you an APR based on your credit report and how it profiles you financially. Some banks will offer you a “Teaser” APR — essentially a low introductory rate that will change to a higher APR six or more months later. We'll provide some guidance about this concept below.