10 Things You Need to Know about Credit and Debit Cards

Credit and debit cards can be incredibly convenient, but they also come with some downsides. Here are 10 things you need to know about credit and debit cards before you use them next time.

1) What is a Credit Card?

Credit cards are unsecured loans. That means you don’t need collateral to get one, but that also means you have a debt—just like if you took out a loan from a bank. But unlike with traditional borrowing, if you fail to make timely payments on your credit card bill, you could end up paying extra (interest) and/or paying for other people’s late or missed payments as well. So it pays off in many ways—in terms of both time and money—to manage your credit cards wisely. Here are 10 things you need to know

2) How Does it Work?

To pay for purchases, customers present their credit or debit card at a point-of-sale (POS) terminal. If a magnetic stripe is used, it’s swiped through an electronic reader. In some cases, you may have to enter your PIN number into an electronic keypad. A computer that’s linked to a central payment network processes transactions instantly and debits your account almost as quickly. The transaction goes through one of three major systems: VisaNet, MasterCard Network or American Express NetSPRINT/Visa.

3) Why Do I Need One?

Do you ever leave your house without your credit or debit card? Chances are, if you’re an adult living in a major city, you do. How else will you pay for groceries or pick up a copy of Vogue from your corner newsstand? These days, it’s rare that anyone pays for items with cash. The truth is that credit cards are incredibly useful—but if used improperly, they can also have huge downsides. Here are 10 things everyone should know about using credit and debit cards: 1. Check out these Credit Card Fees 2. My Bank Charges $10 for This? 3. Credit Card Fraud Is Rising 4. Make Your Own Rules About Canceling 5. Are Credit Card Rewards Worth It? 6.

4) How Much Does it Cost?

Credit cards can be a useful financial tool, but they also carry some risks. If you’re not careful, it’s easy to get into debt with credit cards. To make sure you don’t end up spending more than you can afford, learn how much credit cards cost before taking one out. Use our quick guide below to see 10 things you need to know about credit and debit cards—including how much it costs if you don’t pay your balance in full each month.

5) When Should I Use It?

There are lots of things you should know before using a credit or debit card, but if you’re looking for a quick take away, here are some of our favorites: 1. Using a debit card is exactly like withdrawing cash from an Bank ATM. This means that your protection under federal laws like Regulation E (for Electronic Fund Transfers) does not apply when you use a debit card. 2. Credit cards provide some consumer protections—like chargebacks—that debit cards do not. 3. Credit cards also require that retailers and service providers maintain certain protections for their customers, like proof of authorization in order to take money from your account . 4.

6) Where Can I Use it?

Credit and debit cards are extremely convenient. The only thing better than a plastic card that swipes is an app on your phone. But with great convenience comes great responsibility, or at least information you need to be aware of before making any purchases.

7) Will I be Expected to Pay Interest?

When you apply for a credit card, you’ll be asked if you want to pay interest on purchases. Be sure to clarify how much interest (if any) will be added. This is important because your payment requirements might change depending on whether or not you're charged interest on new purchases. If you do end up paying a monthly fee, make sure that it fits within your budget: $20 may seem like chump change now, but it can cost serious cash in six months' time if your debt grows quickly.

8) Is There Ever an Alternative to Using Credit or Debit Cards?

If you’re really serious about building your credit score, using a credit card will help you achieve that goal. It takes time, but when you pay off your entire bill each month, it’s possible to rebuild your history in a positive way. By only making small purchases on your credit card and paying off that balance every month, you’ll be proving to potential lenders that you can manage debt responsibly. If all of these factors come together—you keep a low balance on a card (if any at all), pay it off consistently and stay out of debt—you can do quite well for yourself over time.

9) Why do Banks Offer Rewards Programs with Credit/Debit Cards?

Banks offer rewards programs with credit/debit cards to attract new customers as well as retain existing ones. Banks have found that consumers are more likely to use credit cards for purchases if they are given incentives, such as cash back or frequent flyer miles. This is a direct benefit for banks, since more spending means more interest income from late fees, over-limit charges, penalty fees, etc. In order to qualify for many of these rewards programs, you have to make payments on time and carry a low balance in your account. Those who do not will be charged extra fees by their bank (in addition to what they already pay in interest). These additional fees typically wipe out any potential savings offered by reward programs.

10) What are Prepaid Cards?

A prepaid card is an alternative to a traditional bank account or credit card. The money you load onto it from your checking account acts as your credit line for buying things with that card, at stores or online. Because they are often tied to debit cards, you may be able to withdraw cash from ATMs as well. There's also usually no credit check involved when applying, so they're typically available even if you've had some financial trouble in the past. Some prepaid cards have been shown to offer consumers protections similar (or even better) than what's offered by traditional credit cards; however, there are also plenty of subprime options out there - including fees not disclosed until you open up an account - so do your research first.