Cash Course: Using Credit and Debit Cards

credit cards and debit cards are a huge part of us spending today with billions of transactions annually making shopping in person and online a breeze in fact paying with plastic has grown so popular that the use of cash is steadily declining H I wonder how that happened well as the legend is told one New York City night in 1949 Frank mcamera was having a business dinner in a prominent restaurant when he suddenly realized he had forgotten his money embarrassed he set out to find a solution to avoid being in the same situation again H the following year in 1950 Frank returned with his Diner Club card that could be used to pay for a meal at not just one restaurant but multiple restaurants the idea soon caught on and his card gained over 20,000 users by the end of the first year and was accepted by at least 28 local restaurants and two nearby hotels and thus the credit card was born the debit card on the other hand wasn't established until decades later and was only issued to customers who were in good Financial standing originally these cards were only used to withdraw money from automated teller machines or ATMs now after partnering with major credit card companies debit cards can be used to make purchases anywhere credit cards are accepted cool story so where do I get One debit cards are usually given to you for free when you open a checking account at a bank or credit union this card is tied directly to your checking account which means that as soon as you use it to make a purchase the transaction amount is deducted from your account boom gone so be careful and if you do spend more than your account balance by accident the bank will temporarily cover the cost of your purchase but they'll also charge you an overdraft fee these can be very costly usually around 35 bucks non- Network ATM fees are pricey too these fees are charged anytime you withdraw cash using your debit card from an ATM managed by a bank different from where your account is located finally a four-digit pin number is assigned to your debit card this pin verifies your identity when making purchases and withdrawing cash from an ATM so keep this number safe and never give it to anyone a credit card on the other hand is tied to an amount of money that can be borrowed from the issuing creditor at any time with the promise to pay them back in the near future at the end of a billing cycle period you'll receive a credit card statement detailing all of your monthly transactions the total balance and the minimum required payment due you can choose to pay the balance off in partial payments or in full as money is repaid it can then be borrowed again that's called the revolving line of credit right that's right yes but beware if a balance is carried over you'll be charged interest and could end up paying more than what you originally spent in the first place in general the sooner you pay off your credit card balance the better if your minimum payment isn't received by the billing due date you could be charged a late fee some credit cards also charge an annual usage fee this is a yearly cost charged by by Banks or credit providers to use their cards these fees can range anywhere from $35 to $500 or more so make sure you know what you're signing up for thankfully some credit cards have no annual fee at all so many fees and the interest why would anyone want to use a credit card well credit cards come in handy when you don't want to drain too much of the cash in your checking account and when you need more time to cover a big expense or purchase don't buy anything too big though because your credit card has a credit limit any charges beyond the limit will be denied this limit is determined by several factors including your total income and credit score the more money you make and the more fiscally responsible you are the higher your credit limit will be if you're ready to get your own debit card head to your bank or credit union and open a checking account ask about any credit cards they may offer like student credit cards which are geared towards students who have little to no credit and reward credit cards which offer perks like cash back for every dollar spent many stores even offer their own reward credit cards with tempting accounts but be careful about signing up for too many it's recommended not to have more than two or three credit cards make sure to compare the perks the annual usage fees and interest rates before committing to a card using plastic is super convenient but you must use it responsibly be sure to frequently monitor your checking account balance and be mindful of your monthly budget combining debit and credit cards with your good spending habits can help you become a great money manager subscribe and watch more at prer kids.com