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Home > Blog > Spend Smart: About Cash, Credit, and Borrowing
Spend Smart: About Cash, Credit, and Borrowing4/13/2022

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Money is used to buy things that you really want or need. But sometimes, people don't always have enough money to pay for things they need now. So, instead of paying with cash, you might see adults paying with a credit card. Below are some important things you should know for the future about borrowing money and the difference between cash and credit cards.

What is cash?

Cash is money that you've already earned. The money in your piggy bank, wallet, or the money that you put in your savings account at the credit union is money that belongs to you. When you pay with cash, you're using money that you have today. 

Borrowing Bucks

Borrowing words to know: 

  • Borrow: to get money that you plan to pay back
  • Lender: the person or business who gives you money to use (or lends you the money)
  • Loan: the money that you borrow
  • Payment: money that you give back after you borrow it

People borrow money when they don't have enough cash to buy something they need.

For example: You need to borrow $10 from your mom to buy a birthday gift for your dad.

Until you're a little older, you'll probably only borrow money from your parents or siblings. Adults, however, can borrow money from financial institutions, like credit unions or banks, to pay for things they need now, like a car or house.

For large purchases, like a car or house, adults typically apply for a loan. When they apply for the loan, they make an agreement with the lender to make payments each month until the loan is paid off. But, for smaller purchases, like fixing a broken part in the family car, adults can use a credit card to borrow money.

What is a credit card?

A credit card is a tool that adults can use to borrow money to pay for goods or services. For an adult to have a credit card, they must apply and qualify for credit with a credit union, bank, or credit company and prove that they are able to pay back the money that they borrow. Adults typically use credit cards when they don't have enough money saved up to buy what they need.

For example: The toilet in your house breaks, and the family doesn't have enough money to get it fixed. But, the toilet needs to be fixed right away.

If your parents use a credit card to fix the toilet, they're really borrowing money from a credit union, bank, or business. If they don't pay the money back in full when the credit card bill is due, they will have to pay the credit union, bank, or business extra money — called interest.

Financially savvy adults pay money they borrow as soon as they can. They budget and make a plan to pay the money they owe when it's due, even if they can't pay it all back by the due date. They know that the sooner they pay off the money that they borrowed, the less money or interest, they will have to pay in the end.



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