Credit Cards and Debit Cards

Once you are an adult, and sometimes even sooner, you may be offered credit cards. Many young adults quickly get into trouble by getting these cards without understanding what happens if they charge purchases but don’t pay their bill in full each month. If you charge a purchase and do not pay your full credit card balance each month, you’ll be charged a very high rate of interest on the unpaid amount. As a result, the amount you owe is likely to grow faster than you can repay. Sometimes, you might even pay more in interest than you paid for whatever you bought with the credit card!

A debit card is different from a credit card. Most ATM cards are debit cards. A debit card is like a credit card, meaning you can “charge” purchases, but the amount you charge is immediately taken out of your bank account. So, with a debit card, you will not have a monthly bill to pay. However, if you don’t carefully track your spending, you could end up with an overdraft if you “charge” (or withdraw cash) and write checks for more money than you have in your account.