At their most basic, credit cards offer cardholders a short-term loan on purchases they make. Each month, you can spend up to a pre-set maximum (your credit limit) without having to pay for any of those purchases out of your own bank account.

At the end of the month, you’ll receive a credit card bill with a balance that reflects the purchases you’ve made throughout the month (plus any outstanding balance from months past as well as applicable fees), at which point you can pay anything between the minimum payment and your entire balance.

If you pay only the minimum, the remainder of your credit card balance will start accruing interest. But if you pay your entire balance each month, you won’t have to pay any interest.

You can think of credit card interest as the amount of money you have to pay for the privilege of using a bank’s money to fund your purchases. Just like with a personal loan or student loan, credit card interest accrues based on the APR you agree to when you open your account. Credit card interest compounds daily, so it can add up quickly—so it’s a good idea to pay your full balance as often as possible.

Because there are so many different kinds of cards, the first step should always be determining exactly what you’re going to use the card for. If you don’t have any specific credit card need in mind, then start by asking yourself, “what do I spend the most money on; grocery stores, dining out, entertainment, travel, gas, etc.?” In other words, let your spending habits guide your decision on what type of card will best meet your needs.

Be sure to read the fine print on any card you’re offered. Some of them have interest in excess of 30 percent APR, steep annual (or even monthly) fees, and easily triggered penalty fees and rates.

Under the law, every credit card issuer is required to lay out the main points about the credit card such as APR, late payments, fees, etc. in the same way, making it easier for you to compare one credit card with another. You’ll also want to review any exclusions, especially on rewards cards. For example, if you are looking for a cash back card for groceries, you’ll want to make sure that the store where you shop is not excluded.

Yes. Each credit card application will generate a “hard credit pull” that can lower your credit score. This mark will go away after a few years, but it’s generally a good idea to do your research and apply for a card you really want—and that you think you’ll have a high chance of being approved for.