Credit and Debt Management

3.4  Credit and Debt Management
  • Credit: A facility that lets you borrow their money in order to purchase something. The money you borrow becomes debts to the facility.
  • Debt: An amount of money that must be paid by the debtor that is the person who owes the debt.
Differences of Purchase Using Cash & Credit
Purchase Using Cash Purchase Using Credit
-no debts
- no interest charged
- pay the initial price
- full payment using cash or debit card
- become debts
- interest is charged
- pay extra from initial price
- payment using credit card and can be an installment

          Credit Card:

  • When you use a credit card, you are borrowing money from the credit card issuer to make purchases or withdraw cash.
  • The credit card issuer pays the merchant on your behalf, and you are then responsible for paying back the credit card issuer the amount you charged to the card, plus any interest or fees that may apply.
  • If you don't pay the full amount back by the due date, you will accrue interest on the unpaid balance.
  • Using a credit card is like taking out a small loan each time you make a purchase, and you are responsible for paying it back.
  • If you don't pay the balance in full each month, you will incur debt as the unpaid balance accrues interest.