Topic Summary
Types of Bank Cards
- Debit Card:
- Withdraws money directly from your current account.
- Minimum age: 11 years old.
- Prepaid Card:
- Loaded with money by a parent or guardian.
- Minimum age: 6 years old.
- Credit Card:
- Allows you to borrow money from the bank to make purchases.
- Minimum age: 18 years old.
Important Considerations
Borrowing money is a personal decision that depends on individual circumstances. For some, borrowing may not align with their values. For example, in certain faiths such as Islam, charging or paying interest (known as riba) is forbidden. In such cases, money must be generated through legitimate trade and investment.
When issuing a credit card, banks perform checks and set a credit limit. Once approved, any purchases made on the credit card are added to a monthly statement that must be paid in full by a specified date. Failing to pay the full balance results in interest charges. The more you pay back each month, the lower the interest and the quicker you can clear the debt. Paying off the balance immediately avoids interest altogether.
Question
What is a credit card?
Discussion
Should all 18 year olds have access to a credit card? What might influence whether or not an 18 year old decides to have a credit card?
How it works in real life
Karim wants to buy a laptop that costs £2,000. He has £400 left over in his budget each month. Should Karim:
- Wait and save up to buy the laptop, or…
- Use a credit card with a 20% interest rate and pay the amount back monthly?