How do Credit, Credit Cards, and Debit Cards work?
I’m going off to college in the fall and while I’ve read information on how credit, credit cards, and debit cards work I still don’t really get it completely. Does anyone know of any websites that specifically address these concepts in an easy to understand but in depth manner?
Tags: Cards, Credit, Debit, Work
Credit Cards:
-Loan from bank
-Payment due each month account has a balance
-If you pay in full you pay no interest
-Account is reported monthly to credit bureau
-If you’re under age 21 in the US you will need a cosigner or guarantor, unless you can prove independent ability to pay (student loans are not income)
-Low hassle fraud handling
Debit Cards:
-Able to use most places Visa/Mastercard are accepted
-Funded by money in a linked checking account
-Only able to spend funds available in the account
-You pay no interest. In fact you may earn interest income
-In the US, starting this fall you will have to “opt-in” to overdraft fees
-Potentially more difficult fraud handling
In essence, with debit cards you only spend money you have. With credit it’s a loan. As long as you pay in full each month it can be a great financial tool. You just have to be smart and ask yourself what you really want to pay interest for. Hope this helps.