Today, while driving home from a park play day with other homeschoolers, C asked, "What's the difference between a Credit Card and a Debit Card?" I commended him for this awesome question, as most kids don't understand much about money. I know I didn't know the difference until I was in High School! I explained to him, "Debit Cards are linked directly to your checking account electronically. So, when you use the card to purchase something, the money is taken out from your checking account. You are using your own money to purchase." He nodded, so I continued, "Now, when you use a Credit Card, you are using someone else's money, usually the bank you got your credit card from. When you buy an item with your credit card, the bank pays for it, and then you have to pay back the bank, along with the interest the charge. So, it's much better to pay using your Debit Card than your Credit Card" I told him, "Do NOT keep a balance on your Credit Card. Pay it off in full every month before they charge the interest. Only buy with the Credit Card if you know you have the money to pay it back right away." He seemed satisfied with my answer and said, "I'm ahead of the game if I know this stuff right?" I agreed with him whole-heartedly.
There are ADULTS who still don't understand this concept and that is why they are in big trouble with Credit Cards!
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