How do credit cards work? How is it different from real cash? How does it work? Will it really make money obsolete? Can I really buy things with this piece of plastic?
These are the kinds of things we think about or hear from other people. We're really not sure if these are true or if these questions are good ones. Let's look more closely at credit cards and how they are changing (if they haven't already) the way we live now.
What is a credit card, first of all? The Columbia Encyclopedia says that it is "a way for a consumer to get credit when buying a product or service." Basically, a credit card is a piece of plastic that looks like an ID and has a black magnetic strip on the back. This strip can be used to sign for purchases. How could this be? The customer gives the seller his or her credit card information by swiping the magnetic strip into a special machine that can read the card. The seller is then paid by the bank or credit card company. The customer and the credit card company then do business, with the customer paying a monthly fee to the bank to cover the amount he owes. If he can't pay the full amount, he can pay a minimum balance. However, he will have to pay interest on the remaining balance, which is usually around 3.5 percent. When you use your own credit card for the first time, you'll find that it's really easy. All you have to do is hand over the card, sign it, get it back, and pay later.
Credit cards seem to be the thing to do now, and their popularity will only grow in the future. Many people would not be surprised if it completely replaced cash in a few years. As time goes on, more and more people use credit cards. More and more businesses are accepting credit cards, and this trend doesn't look like it will stop any time soon. Think about it: would you rather carry around a few inches of cash in your wallet or purse, or a thin, plastic thing about the size of an I.D. card that you can use for the same purpose, or even more? Once you've run out of cash, you can't buy any more. You can buy a lot more with the credit card in a single day. Many people today shop with their credit cards and bring home bags and bags of stuff without having to pay a single dollar in cash.
Yes, this little piece of plastic can help you shop. Before, only a few stores would accept credit cards. Now, only a few stores do not accept credit cards. A credit card can be used to buy almost anything. You can even buy things online now. People are buying more and more things online. To do it, all you need is a computer, an internet connection, and a credit card.
There is something called a "credit limit" on credit cards. It is the most credit you can use in a given month. Anything over it won't be counted toward that month's total. If your credit limit is full and you try to make a purchase, your credit card will be turned down until you can pay at least the minimum balance for that month. Some credit card companies will give you a "secured" card, which means you have to put down a cash deposit that will be used as your credit limit. For example, if you put down $1000, that will be your credit limit. Most of the time, people with bad credit are the only ones who can get secured credit cards.
People's lives are slowly changing because of credit cards. For a lot of people, it's kind of like a security blanket. But it can also be bad because you can spend more than you have in an instant. It's nice to have a credit card, as long as you use it wisely and don't let it run your life, which it has the power to do.
