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Credit Cards, Debit Cards, Gift Cards and What You Need to Know About Using Them

Credit Card
Credit cards give you access to a revolving line of credit, the amount of which is capped by the card issuer. When you use a card to make a purchase, you are borrowing money from the company that issues the card. You sign the card on the back and when you make a purchase, you sign a receipt. The two signatures are then compared to make sure they match. When you buy something by mail, phone or Internet, you provide the card's expiration date and a security code found on the card. Every card comes with a customer agreement. It's important for you to know the terms of that agreement. Simply put: You agree to repay a minimum amount once every billing period and you receive a monthly statement detailing your charges, any interest that may have accrued on an unpaid balance and the minimum payment you must make.

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Guaranteed Credit Card: A Scam for Sure!
There is no such thing as a guaranteed credit card. Never pay anyone in advance for a so-called guaranteed credit card. If the entity making the offer doesn't steal your "advance payment" outright, what you may end up with is a card that can only be used to purchase certain goods from a particular company. No one can guarantee in advance that you will be approved for a credit card by a legitimate credit card company - you have to apply and be evaluated.

Debit Card
A debit card (also known as a check card or ATM card) is a card that is used to access money in a checking or savings account. Debit cards look like credit cards but operate like cash or personal checks. When you use a debit card, you are subtracting your money directly from your bank account and you can spend only up to the amount in that account. Debit cards can be used at Automated Teller Machines (ATMs) and some types are also accepted at many grocery stores, retail stores, gas stations, and restaurants.

There are different types of debit cards:

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Stored-Value Card
A stored-value card (also known as a pre-paid card) has an embedded computer chip or magnetic strip that contains the value of the card. The money can be accessed by 'swiping' the card, using a password, or entering a code number printed on the card into a telephone or other keypad. The issuer keeps track of your balance until all of the money is used up, then the card can be discarded or refilled. These cards are sometimes used as alternatives to checking accounts. There are two types of Stored Value Cards:

Stored Value Cards can be obtained in a number of ways. You may get a payroll card from an employer, an electronic benefit card from a government agency, or a phone card or gift card from a retail store. Multipurpose prepaid debit cards are usually obtained by telephone, online, or at check-cashing outlets and money transfer company locations.

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Secured Credit Card
A secured credit card is a card that has been secured by money, provided by you. The money is placed in a bank account by the issuer of the card, and acts as collateral, or a "guarantee" that you will use the card responsibly. The card looks and acts like an unsecured credit card, but if you default on paying the amount due on the secured credit card, the issuer can apply your security deposit to the outstanding balance.

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Store Charge Card
Store charge cards are credit cards that can only be used at the store that issued them. They often charge a high interest rate: familiarize yourself with the terms of the agreement.

Travel & Entertainment Card
Travel & Entertainment cards are charge cards that function like credit cards but require that you pay off all of your charges in full each month. These cards include cards such as American Express or Diner's Club.

Additional Resources

Credit Card Survey: The DFS arranges for a quarterly rate survey containing rate and/or fee information for credit cards offered by various financial institutions in different geographic areas of New York. Inclusion of information about a specific financial institution should not be construed as an endorsement by the Department of Financial Services, the institution or its product. Rather, institutions appearing in the surveys are considered to be representative of their respective geographic markets. The information is intended primarily to provide a frame of reference when shopping for certain types of cards.