Teaching your kids the difference between a Debit Card and a Credit Card - By Peter Geckeler
If you fall into the “Generation Y” or “Millennial” category you may remember the joy of walking into a classroom and seeing that you would be watching a “Bill Nye the Science Guy” video. One excerpt in the video always started out with the phrase “DID YOU KNOW….” which was expressed in a loud, animated voice. Bill would then proceed to teach the viewer a simple but interesting science concept. I tell you this to preface this section of our next gen blogs, which will be focused on introducing simple, but important financial topics to our young readers. So without delay –
DID YOU KNOW….
The difference between a debit card and credit card?
Debit card and credit cards both offer convenience, but work in different ways. Debit cards will pull money directly from your checking account when you are making a purchase. The store that you are making the purchase from sends the transaction to the bank, and the money gets transferred from your account to the store. Think of a debit card as handing over cash from your wallet to the store, but it’s just being done electronically. Important to remember - even with the speed of technology, it can still take a few days for the transaction to show up at the bank, so it is important to know how much you have in your checking account so that you do not overdraw your account and experience a penalty.
A credit card actually allows you to borrow a certain amount for making a purchase. The credit card company, instead of the bank, covers the purchase. The credit card company will then let you know how much you owe using monthly statements and charges you interest on the amount that you owe. To pay off the amount that you owe you will need to pull money out of your checking or savings account. You can think of using a credit card as going to a friend and borrowing some cash from them, then going to the store and using that cash to buy the thing you want. At some point though you are going to have to pay back your friend, and possibly pay him/her a little bit more than you borrowed since you used their money to buy the item that you wanted.
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