All credit cards work like a short term loan. When you pay for your holiday or new dishwasher with a credit card, you essentially borrow the money from the card issuer. You then settle the debt when you receive your monthly statement. You can either clear the debt in full, in which case you will usually pay no interest and the loan is free. Or you can pay off the balance in instalments to spread the cost. You would then normally be charged interest – and the rate could be as much as 19% or even higher.