credit card

There must be something to be gained for them to do that. My assumption is that these companies are trying to familiarize children with the buy now - pay later concept, to create a nation dependant on credit. With a large percentage of purchases made through credit cards, it is easy to see who loses. It's the consumer. Retailers get hit with the fees from their merchant account, so they can process credit cards. They, in turn, pass the savings onto you.

If you're smart, you're using a card that offers cashback or some other real benefit to recover a little portion of that. I hit the jackpot with an Associates Visa, with 3% cashback on everything. It beats the crud out of Discover Platinum's "up to 2% with exclusions". Other cards offer frequent flyer miles and discounts on automobiles. There's something for everyone, but in the end, we all get screwed.

^*Just a note: legally, credit card companies cannot force minors to pay, but I don't know if it goes on their credit report. Also, if you have a co-signer, they are responsible, of course.

A small plastic card, about 8.5 cm. by 5 cm. (3.25 by 2 inch), with a magnetic strip on the back. It allows you to take out short term loans from the company that issued it.

Well, the magnetic strip is there so that you, and thus your account, can be quickly identified by a scanning machine. Your information is then sent via the phone lines to the credit card company, who will, with luck, authorize the loan. This all happens in under 30 seconds.

Besides the fact that it's really cool to have all your money inside this little card (fast and convenient!), it also provides (in theory) some small protection against theft, as you can cancel the card if it's lost or stolen.

You can also pay for things without being there -- the card will have an identification number, which can be typed into a vendor's credit card machine, allowing them to charge you even if they don't have your card. Thus, you can order things on-line or over the telephone.

Buy now, pay later. Yet another advantage -- you can pay for things even if you're broke. This will catch up to you -- you do have to pay the company back sometime.

Need real money? Most credit cards also provide cash advances -- for a small fee.

But we should also mention....

Credit card companies don't provide this service out of the goodness of their hearts. They get money from it.

First, some cards charge an annual fee. This isn't common, at least in America.

Second, if you do not pay off your bill (pay the credit card company back all the money they have loaned you for the month), you are charged a high interest rate -- usually 10%-15% per year. In order to avoid crass words such as 'interest', this may be called a finance charge.

Third, even if you are being charged this high interest rate, you are expected to pay the credit card company some small part of the amount you owe them every month (about 10%). If you don't, they will add a small charge onto your bill, which will then also start to be charged interest. They will usually also drastically increase your interest rate, over 20% per year in many cases. They will also charge you if you go over your credit limit.

And fourth, stores pay some small amount to the credit card company every time they charge something to a customer's card.

The major credit cards are MasterCard, Visa, American Express, and Discover.

Alternatives are the Debit card, Electronic Check, check, and good old fashioned cash.