The big ideaA card is not extra money. It is a promise to pay later.
How it works
A card is not extra money. It is a promise to pay later.
The card company pays the café first. Ben pays the company later, in one bill at the month's end.
Pay it all on time and there is usually nothing extra. Pay only part, and the rest is a loan with a small charge called interest.
The café pays the card company a small fee. Cards changed from cardboard to plastic with a stripe to a chip.
Paying all of the bill, or only part of it.Cards changed, each quicker to use.Ben's bill: 6 coins. He pays 4, so 2 are a loan.
Example 1: Paying only part
Ben's bill is 6 coins.
He pays 4, so he still owes 6 − 4 = 2 coins.
Those 2 coins are a loan.
Next month the company adds a small charge of 1 pretend coin: that is interest.
The loan and the charge together are 2 + 1 = 3 coins.
Example 2: Paying it all
Ben owes 6 coins at the month's end.
He pays all 6 coins on time.
Usually there is nothing extra to pay.
Example 3: Who pays whom?
Ben shows his card, and the card company pays the café right away.
The café pays the company a small fee.
Later Ben pays the company in one bill. The card was only a promise to pay.
Example 4: A story of the first cards
People tell a story like Ben's about the first cards, in 1950, in a few restaurants in one city.
In the story, someone forgets their wallet and wishes for a way to say, I will pay later.
Nobody can be sure it happened exactly that way.
Words to know
promise
Saying you will do something. A card is a promise to pay later.
bill
What is owed, sent once at the month's end.
loan
Money not paid back, which can cost extra.
interest
The small charge the company adds to a loan.
fee
The small amount the café pays the card company.
Watch out
A card gives no extra money. It is a promise to pay after.
Things bought with a card are not free. They are paid for afterwards.
A card has no coins inside it.
The bill never disappears. It always needs paying, usually every month.
Try it
Ben owes 6 coins and pays 4. How many coins are a loan?
What is the small charge on a loan called?
Who pays the café first when Ben shows his card?
Is a card extra money?
Answers: 1. 2 · 2. Interest · 3. The card company · 4. No
Try at homeWith a grown-up, look at a card bill or a receipt. What is listed on it, and when is it due?
For grown-upsLook at a real card bill or a shop receipt together: what is listed, and when is it due? Keep it a calm look at how paying later works, not about your own family's money.
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