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Credit Cards, Debit Cards, and Money

Updated on March 14, 2008

There are differences between these different forms of payment. You might want to think of your credit cards as a part of your stock of money because you use them to make purchases. This kind of makes them a means of exchange. Money is, in fact, a medium of exchange—an item buyers give to sellers when they want to purchase goods or services. So, aren’t credit cards a medium of exchange?

Credit cards aren’t considered the same as money because they aren’t truly a method of payment, but a method of deferring payment. If you use your credit card to pay for something, the bank that issued the card actually makes the payment for that charge. In turn, you pay the bank. So, when you buy a meal using a credit card, the bank pays the restaurant, not you. Later you pay the bank back by paying your credit card bill. Chances are that you will pay the bank for the cost you charged, plus interest.

Debit cards are different from credit cards because funds are automatically withdrawn from your bank account when you use a debit card. Rather than postponing payment for a purchase, a debit card lets the user automatically access deposits in a bank account. A debit card is actually more like a check than a credit card.

When you use good old cash, you cut all of the middle men out. You are simply exchanging money for your purchase, and this money will go on to be exchanged elsewhere or deposited into a bank.

Are Credit Cards Worth Using?

Credit cards are not considered a form of money, but they are worthwhile—as long as you don’t abuse them and go into debt. People can use credit cards to pay many of their bills all at once at the end of the month, instead of paying sporadically as you make purchases. This makes balancing your budget a bit easier. For example, we primarily use our credit cards for all of our purchases, from groceries to coffee to the electric bill. At the end of the month, we only have to pay the credit card bill, so there aren’t a ton of transactions going on in our bank account. We still have to track all of our purchases and spending, but as long as we stay within our budget there aren’t any problems. This is especially useful when we spend a bit more during the first half of the month than we do during the end of the month because we don’t have to wait until the next payday to have money in our account.

The key to making credit cards work for you is to pay them off every month. When you don’t, you end up paying interest, which means you end up spending more money on your purchases than they are worth.


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    • zaton profile image


      21 months ago from California

      Nice hub on credit cards and debt in general. Glad to see this hub has withstood the test of time..

    • profile image

      Carla Thomas 

      3 years ago

      I have recenently took out a somewhat small loan and for my first monthly payment last month i sent a check in the mail, i would like to know how i can sign up to be able to pay my payment every month online because while mailing out a check your not sure that it gets to the finance company on time and i for one am working on improving my credit score so i definitly don't need any late fees, can anybody give me any advice on how to set this up?? Thanks in advance & God bless

    • profile image

      Credit Card Chaser 

      9 years ago

      I try to use my credit card to pay for everything and then just pay off the balance in full every month. I have a cash back card where I get at least 1% cash back and up to 3% cash back for some things.

    • Web Market Guide profile image

      Web Market Guide 

      10 years ago from Moose Jaw, Canada

      Great Hub. We do use a credit card, but always pay it off monthly. always.

      There is a great need for financial education. I agree with Isabella and psp-downloads that our children would save themselves much grief if they learned how to manage money rather than just spend, spend, spend.

      I kind of resist a debit card because of a resistance to a cashless society and what that leads to.

    • drummer boy profile image

      drummer boy 

      10 years ago from Kirksville,MO

      Nice hub. I cut all of my credit cards up and only use a debit card now.

    • Isabella Snow profile image

      Isabella Snow 

      10 years ago

      Great hub, Stacie. I need to read more hubs like this!

    • cgull8m profile image


      10 years ago from North Carolina

      I use solely debit cards, it is very helpful and keeps us to spend only what we have instead of spending more than what we have. I also use, a great tool to check the balances and keep the spendings in check.

    • Rob Jundt profile image

      Rob Jundt 

      10 years ago from Midwest USA

      Good advice. My wife and I have found that by using our credit cards for the smaller purchases each month, i. e. gasoline or occasionally eating out, a budget is easier to maintain. Personally, I love debit cards. No cash to carry and no change. It is kind of scary though how easy it's become to not carry good ole' cash. Thanks for the hub.

    • psp-downloads profile image


      10 years ago

      Nice Hub! It always amazes me how little schools teach kids about personal finance.

    • Stacie Naczelnik profile imageAUTHOR

      Stacie Naczelnik 

      10 years ago from Seattle

      It isn't a direct form of payment. You use your credit card, but you don't directly pay for it. The bank does, and then you pay the bank. So, when you buy a pair of shoes with a credit card, you are deferring payment.

    • Whitney05 profile image


      10 years ago from Georgia

      I thought that I read in an economics book this past semester or two that credit is a form of payment or money or something. I just forget what it said exactly. But, the book did incorporate credit with debit and cash.


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