The cycle of borrowing, repaying, and borrowing again is described as revolving credit.

All credit cards work the same way. You make an agreement with the card issuer—typically a bank or credit union—that establishes your credit limit, your nominal APR, potential penalty charges, various benefits, and your rights as a card user.

As you use your card, the issuer tracks your purchases and payments and creates 12 billing statements each year, each covering about 30 days. The statement shows the amount of your outstanding balance (what you owe), the day payment is due, and the required minimum payment. That’s the smallest amount you can pay to meet your obligation.

The payment date must be the same every month and at least 21 days after the statement is posted online or mailed to you. It’s a good idea, though, to check your account online from time to time to verify the purchases you’ve made and check on your spending.

There may be times when using credit costs you more than paying cash, such as when you’re buying gas, for example. But mostly the cost of using revolving credit depends on how you pay your bill.

If you always pay in full and on time, and your card has a grace period, there’s no cost for using the credit. But if you pay only part of what you owe, here’s the rub: You’ll owe a finance charge on the unpaid balance as well as on every purchase you make in the next billing cycle, starting on the day you buy it.

Your billing statement includes a chart that alerts you to the cost of pay-ing off your bill over three years and of paying only the required minimum each month. This information is a wake-up call about rising debt. Worse, the calculation assumes that you’ll stop spending with the card. If you continue to use it, you’ll rack up more interest and your repayment cost will go even higher.

You may find that you manage just fine with a single credit card. But often using two might make more financial sense.

For example, suppose you normally pay your credit card bill in full and on time every month. If your card has a grace period, it doesn’t really matter what the APR is. But what if you need to make a major purchase, such as a refrigerator or furniture, that costs more than you could pay for in a  single month?

In a situation like this, which is pretty common, you’d make out better with two cards from different issuers. You could use the first for most purchases and the second, with the lowest possible APR you can find, for major purchases that you pay over time. That way you don’t take a hit on the card you use regularly, and you’re paying off the second at a lower rate.

Another approach is to apply for credit from the retailer for your one-time purchase. You may be offered credit-free terms for making scheduled payments over time. But if you do, be careful. If you’re late even once, you’ll probably face stiff interest charges and perhaps a demand for payment in full.

One benefit of paying by credit card is the float—the time between when you buy something and when you have to pay for it.

If you time a major purchase for just after the account closes for the current cycle and before your new statement has been issued, you’ll have about seven weeks before payment is due. The float works, however, only if you always pay your bill in full and on time.

While cards are similar, not every card will meet your needs as well as another. In fact, you should be as careful in selecting your credit cards as you are in choos-ing a bank or credit union account or a loan provider.

Here are the basic questions you’ll want to ask:

• What’s the card’s APR, or the rate at which interest is calculated?

• Could you be charged different APRs? If so, what are they, and when do they apply?

• Does the card have a grace period? A grace period is the length of time you have to pay your outstanding balance in full before a finance charge is added. You’re eligible for a grace period only if you paid your previous month’s bill in full and on time.

• What fees apply for missed or late payments, foreign transactions, cash advances, and balance transfers, among others?

• What benefits, like car rental insurance, travel insurance, or roadside assistance, does the card offer?

• Is there a rewards program and how does it work?

• Is there a sign-up bonus?

• Is there an annual fee? Will the bonus or rewards offset the cost?

This Money Briefing is part of the Defense Credit Union Council (DCUC) “Armed Forces Financial Guide,” which you can download for free in English and Spanish.

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