How a Credit Card Works

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A credit card works by electronically pulling money from a bank to pay for transactions with a vendor. Understand that money spent on a credit card is not your money and must be paid back. Avoid abusing credit cards with tips from a registered financial consultant in this free video on credit cards.

Part of the Video Series: Money Management
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Video Transcript

This is financial adviser Patrick Munro, talking about how a credit card works. A credit card is an instrument that is tied directly to a bank, and a bank of course, once you carry that plastic card, and present it for the services that you are buying, or goods that you are buying, they simply swipe that through a terminal, and it electronically goes, and pulls the money out of the bank, and deposits it in the vendor's account. Now, you have a debt as the consumer. However, you do have the new goods and services, that you have just consumed, so it's important to realize how this works, and it's easy to fall in a trap, when you are not spending your own money, because really credit is not your own money. It's a future debt that can be put upon you, so be sure that you are mindful of the credit that you have. Keep your credit good, don't abuse your credit, and always make sure that you use it for a purpose, that will benefit you going forward. Try never to use your credit card for something frivolous in nature. Make sure that you use cash for that, if you must. This is Patrick Munro, talking about how a credit card works.

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