Credit and Debit Cards

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What is a Credit Card?

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A credit card is a payment card that allows the cardholder to borrow funds from a pre-approved limit to pay for goods and services. The cardholder must repay the borrowed amount, usually with interest, at a later date.

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What is a Debit Card?

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A debit card is a payment card that deducts money directly from the cardholder's bank account to pay for purchases. It does not involve borrowing money.

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What is the main advantage of using a Credit Card in emergencies?

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Credit cards provide access to funds that can be used immediately, making them useful for emergencies when cash is not available.

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What happens at the end of the month with a Credit Card?

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The cardholder receives a bill detailing all purchases made during the month, which must be paid back.

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Can using a Credit Card affect your credit score?

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Yes, using a credit card responsibly can help build a positive credit history, while missed payments can negatively impact your credit score.

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What does it mean when each purchase on a Credit Card is a loan?

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It means that when you use a credit card, you are borrowing money from the credit card issuer to make a purchase, which you must repay later.

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What is a key feature of both Credit and Debit Cards?

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Both cards are convenient to use for making purchases, either online or in-store.

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What is the difference between a Credit Card and a Debit Card in terms of payment?

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A credit card allows you to borrow money up to a limit, while a debit card uses your own money from your bank account.

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What is a potential risk of using a Credit Card?

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The risk includes accumulating debt if purchases are not paid off in full, leading to high-interest charges.

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What is a benefit of using a Debit Card?

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A debit card helps you manage your spending by only allowing you to spend what you have in your bank account.