Credit Cards

It's Real Money

What is a credit card?

A credit card is a payment card issued by a financial institution to help you buy goods and services and make purchases without cash.

Using a credit card is like taking out a loan. Credit card companies allow customers to borrow their money, but everything must be paid back in full and on time by the end of the month. Using a credit card is like paying for the convenience of using money you do not have, but the card company can charge interest and limit your spending.

What happens if I don’t pay?

Unpaid credit card balances count as a debt that will grow by accumulating interest. Not paying your credit card bills will adversely affect your credit score (see below). In short, you face many immediate, lasting, and significant consequences if you do not pay off your credit card debt.

Debit cards

  • Allow you to use money directly from your checking account
  • Have no interest rates or finance charges
  • Make it impossible to spend more than you have
  • Come with most checking accounts

Credit cards

  • Can help you make very large purchases that would otherwise be impossible
  • Can only be obtained by applying for one
  • Require an investigation into your credit history to check your eligibility

Calculator: How much will you have at retirement?

Credit Cards vs. Debit Cards

Item Credit Cards Debit Cards
Interest / Charges You must pay interest on any outstanding debt. You also have to pay penalty fees if you make a late minimum payment. There are no interest charges.
Debt You are provided a line of credit, which is the maximum you are allowed to charge, but this limit is flexible and could allow you to take on too much debt. Your card is linked to money you actually have in your account, so you can’t spend any more than you actually have and go into debt.
Membership A plethora of membership rewards are available. Few membership rewards are available, but you can earn some eventually.
Purchase Protection They offer protection of purchases from theft, loss, and accidental damage. Limited purchase protection compared to Credit Cards
Acquisition You fill out an application to determine if you are approved for the credit card. They are provided with almost all checking accounts.
Credit History You are required to have a positive credit history to obtain a credit card and late payments can affect your credit score. No investigation into your credit history is required to obtain a debit card.

Fun facts:

  • The first general credit cards had a limit of $300 and were made of paper.
  • All credit cards in the United States stacked up would form a tower almost 300 miles high.
  • There are two credit cards for every member of the population of the United States.
  • American Express’ famous “Black Card” is actually called “The Centurion Card.” Since AMEX never had a trademark for Black Card, Visa got a trademark on it and is now rolling out advertising campaigns for its own Black Card.
  • The reason credit cards expire is because the magnetic strip gets a lot of abuse and needs to be replaced. A magnetic strip is good for only about three to four years of swiping.


  2. http://

You May Also Like