Payment methods

Payment methods (1 min 50 s)

Added on November 21, 2013

Description

What's the difference between cash, debit card and credit card payments?

  

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Payment methods (1 min 50 s)

Added on November 21, 2013 | Desjardins Group

Aiko is curious. She's always asking questions.

She noticed that when her parents make their purchases, they don't always pay for them in the same way.

At the grocery store, her mom uses her debit card.

Last week, at the movies, her parents paid cash.

And when her dad buys things online, he uses his credit card.

So Aiko asked her dad: “What's the difference?”

Her dad explains that there are different ways he can access money.

First, we make money by working. Aiko's parents each receive a salary for the work they do.

The money is saved in an account at a financial institution.

Whenever they need money, they may withdraw it at the ATM.

A secret code, called PIN, lets them access the money they have in their account directly and then withdraw cash.

Aiko's parents also use their debit cards to pay for their purchases.

This card directly withdraws money from their account and transfers it to the retailer's account.

This is what we call “direct payment”.

The credit card allows us to borrow money to buy things, such as furniture, a pair of skis or a book.

In other words, the money isn't withdrawn from Aiko's parents' account. It's actually borrowed from a financial institution that pays the store owner.

Aiko's parents then reimburse the amount borrowed based on their agreement with the financial institution.

That is how the credit works.

Whether they choose cash, direct or credit payments, Aiko's parents draw a budget to calculate how much they can afford to spend.

This is what allows them to treat themselves to the little extras, such as going to the movies!