Skip to main content

Know the Difference

While debit cards and credit cards look almost identical, the way they work is totally different.

When a debit card is used, the amount you spend comes directly out of your checking account.  A debit card works more like cash in the sense that you can only spend what you have in the account. Debit cards have a PIN, but most places CAN run it like a credit card and get your signature instead–you just have to ask.

When a purchase is made with a credit card, you are borrowing the money from your bank and will have to pay a high amount of interest on that money if the money is not repaid within a certain time. A credit card also allows you to spend more than you have available, thus automatically creating a loan to your bank. These loans carry a high interest–it can cost you A LOT to borrow that money. Credit cards do not have PINs.

 Let’s say you use a regular credit card to buy a new TV for $1000. Your payment will be about $20 a month, but the INTEREST on that will be about $15–the "cost" of "borrowing" the money from the bank that gave you the credit card–which leaves only $5 to go to paying off the original $1000 cost of the TV. Because of the way credit cards work, making the minimum payment each month will guarantee that you will be paying interest on top of interest. It will take you more than 17 years to pay off that TV, and it will cost you over $4000.  I don’t know about you, but I’d like to keep that extra three grand. 

If you do not know which of your cards is which, find out. Now, get your scissors out and bring them with you to next week's blog.

Comments

Post a Comment

Popular posts from this blog

One More–Christmas Experiences Part II

Christmas is just a week away. Hopefully you’ve checked everything off your to-do list and can spend some quality time “experiencing” Christmas gifts with your family. Because, after all, your loved ones will be far more touched by how you made them feel than they will be with what you gave them. This week, I want to share with you my sister, Carey’s, family Christmas experience. “One Christmas, when my boys, now 18, 23 and 28, were little, we gave them an experience that is still talked about now. And it’s something so easily replicated that any family can do it, and it’s not too late to do it for Christmas (even ON Christmas) this year. We drove around our neighborhood and looked at all the homes decorated for the holiday. We took note of the addresses as we numbered them. We talked about what made each ornamented yards stand out. And at the end of the night, we voted for our favorite. I had my sons help me make some of our favorite holiday desserts and, in addition to taking p...
Post a Comment
Read more

It Happens Like That

And, in what seems like the blink of an eye, Memorial Day is over, school is out (or almost out), and my favorite time of the year is here! I love summer. I love it when the sun comes up early and wakes me. I love flip flops and shorts. I like to be warm (ok, not HOT, but warm). This is when I thrive. And I think it’s an excellent time to take a vacation or road trip. That being said, I plan a long time in advance for a vacation because I won’t finance one–and I’ve taken some pretty amazing vacations! I don’t usually just take off on last-minute road trips, either, but I’m learning to be more flexible in my old age. So I have done that on occasion, too.  Now, this blog post isn’t about the last-minute drives I’ve engaged, cruises I’ve embarked, or the countries I’ve explored (being a debt-free, self-employed, budget-loving, young, empty-nester has its perks!). This post is about getting you to a point where you, too, can take vacations without stressing about paying for it late...
Post a Comment
Read more

Timing is Everything

I was told that a good time to buy a car is January or February. Why? I would guess it’s because many people are financially destitute right after Christmas (because they have not yet been introduced to my blog!) so car sales are down. I do think there is another reason. I think that most people have yet to file their taxes and receive their tax returns (a.k.a. overpayment that they loaned interest-free to the government ) with which they plan to make a down payment. Now it’s March, and many people have already filed their taxes and received said overpayment that we common-folk refer to as a return, and it’s burning a hole in their pockets. This can be good news for you if you have things you want to sell. Now is the time to capitalize on the extra influx of cash. What do you have around your house that you no longer use that you can sell? Speaking as someone who has done this very thing, I must warn you. Selling stuff you don’t need anymore and collecting the cash can be addicting...
Post a Comment
Read more