Cash v. Credit

Cash versus Credit

You know that you can use money to buy things you really want or need. But sometimes, instead of paying with cash, you might see adults paying with a credit card.

What’s the difference between cash and credit cards?

 

Cash is Money You’ve Already Earned

 

You earned the money in your piggy bank or in your savings account. That money belongs to you. When you pay with cash, you’re using money that you have today. 

Adults Borrow Money with Credit Cards

 

Some adults use credit cards to borrow money to pay for things. Usually, they do this when they don’t have enough money saved up to buy the item, but they need or want it right now. Let’s say that the roof leaks, and the family doesn’t have enough money to get the roof fixed. But the roof needs to be fixed right away.
 

If your parents use a credit card to fix the roof, they’re really borrowing money from a credit union or a business. If they don't pay the money back quickly, they will have to pay the credit union or business extra money. When credit unions or businesses lend people money, they charge people for that money!.

Smart people pay that money back as soon as they can. Until they pay back the money they owe, they don’t spend on anything “extra.” The sooner that people pay off the money they borrowed, the less “extra” money they owe the bank.

Credit Cards give you lots of advantages

A safe alternative to cash

Builds a good credit history

Bails you out of emergencies

Gives you time to pay

Learn more and check out the game "I Paid How Much?" from our friends at The Mint.