How Credit Cards Work: Everything You Need to Know Before You Swipe

What Is a Credit Card and How Does It Work?

A credit card is a financial tool that lets you borrow money from a bank or financial institution to make purchases or pay bills. Unlike a debit card, which uses your own funds, a credit card gives you access to a pre-approved credit limit — money you can spend now and repay later.

In simple terms:
The bank pays the merchant, and you pay the bank back later.

Each card comes with specific features like a credit limit, billing cycle, and interest rate, which determine how your spending and payments are managed.

 

How Credit Card Billing Cycles and Statements Work

Every credit card has a monthly billing cycle — usually lasting 25 to 31 days. At the end of the cycle, your bank sends you a credit card statement that summarizes your:

• Total amount spent
• Minimum payment due
• Payment due date

You can either:
Pay your full balance — no interest charged, or
Pay the minimum amount — and interest will be charged on the remaining balance.

Tip: Paying your balance in full helps you avoid interest charges and maintain a healthy credit score.

 

Understanding Credit Card Interest and Grace Periods

If you pay your full amount due before the statement due date, you enjoy a grace period (interest-free period).
If you carry forward a balance, the bank will charge daily interest on the remaining amount.

Example:
You spent AED 2,000 this month. If you pay it off before the due date, you pay no interest. If you pay only AED 500, interest will apply to the remaining AED 1,500.

 

What Is a Credit Limit and Why It Matters

Your credit limit is the maximum amount you can spend on your credit card. Using too much of this limit can hurt your credit score — a measure of your financial trustworthiness.

Credit utilization ratio = (Amount used ÷ Credit limit) × 100
Example: If your limit is AED 10,000 and you use AED 3,000, your utilization is 30%.
Try to keep this below 30% for a strong credit profile.

Credit Card Rewards, Cashback, and Offers

One of the biggest benefits of credit cards is the rewards they offer. Depending on your card type, you can earn:
Cashback on everyday purchases
Air miles for travel spending
Discounts at partner retailers and restaurants
Exclusive access to lifestyle events

By using your credit card strategically, you can maximize rewards and save money on regular expenses.

How Credit Cards Build Your Credit Score

Responsible use of credit cards helps you build a positive credit history, which improves your credit score. This score is crucial when applying for car loans, mortgages, or other financial products.

To build good credit:

• Pay on time every month
• Keep balances low
• Avoid unnecessary new credit cards

Remember — credit cards can be your path to financial freedom if used wisely.

Key Takeaways on How Credit Cards Work

• Pay your full balance every month to avoid interest.
• Keep your credit utilization under 30%.
• Track your billing cycle and due dates carefully.
• Use rewards and cashback benefits smartly.
• Credit cards can build or break your credit score — depending on how you use them.

 

Final Thoughts: Mastering the Art of Credit Card Use

A credit card isn’t just a payment tool — it’s a gateway to financial flexibility. When you understand how credit cards work and manage them responsibly, you can enjoy convenience, rewards, and a strong credit score.

The rule is simple:
Use credit wisely, pay on time, and reap the rewards.

Benefits of Deem Credit Cards

Deem Credit Cards offer the perfect blend of rewards, flexibility, and lifestyle perks to make every spend more rewarding. Apply digitally and get a guaranteed AED 500 welcome bonus, plus earn up to AED 1,000 extra when you meet the eligible spend criteria. Enjoy Deem’s innovative JOY and WIN rewards programs via the mobile app — earn and redeem Joy Points on daily purchases or enter cash prize draws worth up to AED 250,000 every six months. Depending on your card tier — Titanium, Platinum, or World — you can earn up to 100,000 Joy Points per month.

Frequent travelers enjoy complimentary access to 1,000+ airport lounges, along with hotel and car rental discounts through partners like Avis, Booking.com, and Rentalcars.com. Lifestyle benefits include Buy 1 Get 1 Free movie tickets at VOX and REEL Cinemas, dining discounts, and special offers on food delivery via Talabat. Every purchase comes with purchase protection and extended warranty, offering peace of mind with every transaction.

With Easy Payment Plans (EPP), balance transfers, and select free-for-life cards, Deem Credit Cards deliver unmatched convenience and value — empowering you to spend smarter and enjoy more.