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Fantastic Plastic: Making Cards Work For You! - Tuesday, May 1, 2012

Fantastic Plastic: Making Cards Work For You!

Plastic cards are everywhere and they are used for everything!  From adults with credit cards to kids with gift cards, plastic has permeated our lives so knowing about the various cards can be a real benefit!

Store-Brand Gift Cards:
These cards are not linked to any accounts; think of them as "plastic cash” which can only be spent in the store from which the card was issued.  Once you spend the total balance from the card, it can be safely discarded or brought back to the store to have more funds added.  They are very popular as gifts for birthdays and many stores use them when they make refunds to customers.

Refillable "Gift Cards” and "Debit Cards”:
These cards are not directly linked to any accounts; so when you spend the balance, the card has no value.  A new feature with some of these cards is that you can electronically transfer funds from your bank account to the card.  This card is not directly linked to your accounts, so your accounts remain secure if the cards are lost or stolen.   There may be maintenance or funding fees for this type of card. One should verify the fees and details for these cards upon purchase.

ATM Card:
These cards are linked to your checking account; they only allow you to make withdrawals from your account through use of an Automatic Teller Machine (ATM) or cash-register system that requires you to enter your 4 digit PIN for authorization of the transaction.

Debit Cards:
Think of these cards as "plastic checks”; the money always comes directly from your checking account.  Like traditional checks, transactions can also result in an overdrawn account when purchases exceed the balance.  They can be swiped using either "credit or debit”; the difference lies in how your account is accessed. "Debit” requires your PIN and you can get cash-back whereas "Credit” only requires your signature for purchase, but there is no cash-back option.

Charge Card:
These cards are an extension of credit which must be paid in full at the end of each billing cycle.  Charge cards do not allow for a balance to be carried forward or for "minimum payments” to pay off a balance over a period of time. American Express® offers a popular charge card product.

Credit Cards:
These cards are an extension of credit where the user can carry a balance forward.  It can be considered a short-term loan, and any balance carried forward may be subject to finance fees related to the user as an Annual Percentage Rate (APR).  You apply for a credit account with a financial institution (bank or credit union) who issues the card.  Each time you swipe your credit card, the purchase is paid by your credit card issuer.  Some popular credit cards include Visa® and MasterCard®.  At the end of the month you are required to pay the minimum balance due to maintain a good financial standing, and if you exceed your credit limit you may be charged over the limit fees.