Daily Dose of English 23
Credit Cards
Daily Dose of English 23
Intermediate
Hey, everyone. My name is Ben and you're listening to a Daily Dose of English. This is a short, simple podcast that you can listen to every day to improve your English. You can find the transcripts for all episodes and more on benslanguagelab.com. I'm glad you could make it today. In this episode, we're going to be talking about credit cards. Credit cards, because I think credit cards are sort of an interesting topic. They're something that have existed for quite a while now, and a lot of people in the modern day have and use them, but they can also be sort of dangerous, and they do objectively cause problems for a lot of people. Um, and so I sort of just want to talk about credit cards, especially from the perspective of somebody from the U S and yeah. So let's talk about credit cards first. What is a credit card and where does the name come from? So credit is when something is owed to somebody else. And that means, so in this case, you're essentially borrowing money and then paying it back at the end of the month. because a credit card works where you have an agreement with some company or somebody saying, and that person says, okay, you can spend up to $1,000 and every month you will just pay me how much you spent at the end of the month. But you don't have to pay it all at once if you don't want to. Instead, you can pay it a little bit at a time, but I'll charge you a little bit extra because you're not paying me my money on time. And so that's essentially what a credit card does. You are getting credit from somebody else, and so they're giving you a credit line, is another term that you can also hear, of a certain amount of money that you can then go spend and use however you want as long as you pay it back eventually. But the way that they make their money is not on the people who just pay back their money right away because you're not making any money if you're just borrowing it for a couple days. Instead, credit card companies make their money on other things. For example, by charging a uh, a store to like use the card. Uh, that's fairly common where a credit card will company will charge an additional 30 cents or whatever, but they'll charge that to the merchant. They'll charge that to the person selling you the thing instead of you directly. Um, which is actually a negative for the business, right? Cause the credit card company is just taking a small amount of that. Um, or credit card companies also make their money when people don't pay back their, uh, what they owe on time and they charge interest. Because credit cards often have very high interest rates, um, up to a, of just a very large number. I actually don't know what is super common because I never. I always pay back my credit card bills because I treat them as if I'm directly spending my own money because I never want to pay extra for something that I do if I don't have to. I literally have to do something. So I don't actually know what the rates are, but they're pretty high. I think they're above 20%, which is a lot, right? If you borrow $100, you buy whatever with $100. And at the end of the month, you only pay back 50. And then the next month, you're not just gonna have to pay back 50 more, you're gonna have to pay back 50 or $60 in total, which is a fairly large price for borrowing money. But that's the other way that credit card companies make their money, which is in some ways very useful. It's obviously nice to be able to spend a large amount of money if you need to, right? If a large bill comes up or If your paycheck happens on the 15th of the month, but you want to buy something on the 13th, right? It's, you don't want to be like, well, can I have to wait two more days? Right. Because the credit card company, you can just pay it later on in the month. And it's a little bit more effective. And occasionally credit cards give you benefits as well. However, the downside here is that those benefits, you're actually just paying for, either through your yearly fee, if the credit card has a yearly fee, or there's a bunch of different ways that that money gets made, right? The credit card company isn't just giving away money. They're not deciding, oh, everybody should just get free airline points. No, they're making that money back some way and they're using it as a way to attract you in. And one of the ways is that a lot of people don't use their benefits. That's a pretty big thing, especially on like traveler's cards, right? There's some credit cards that charge you a couple hundred dollars per year, like $200 a year for some benefits. But if you don't use those benefits, you're out of luck, right? You don't really get to use them the next year. You only get them every year. And if you don't use them, that's just free money for the credit card company. But like I said, a lot of that extra money comes from stores or merchants who are accepting these credit cards because they have to spend a little bit of cash every single time somebody uses a credit card to buy. But then what happens is that the storage just has to raise their prices. If they realize that they can sell one thing for $1, that's fine. They can charge $1. But if the credit card company says, OK, you also have to pay me $0.15, that means that they can no longer charge $1. They have to charge $1.15. And so it creates this feedback loop. And the negative thing is that the people who don't have credit cards end up also having to pay for the people who do have credit cards. And you can only really get a credit card if you already have good credit, right? You already have good standing with the companies. And so it creates this sort of vicious loop, this vicious cycle that is kind of a net negative for a lot of the world and society because a lot of people also end up spending money that they don't have. If you look at your credit card limit, and it says $3,500, to some people that means, oh, I can spend $3,500. They don't necessarily think, I will also have to pay that money back, because that's not necessarily how the human brain works. And so in some ways, credit card companies are counting on the fact that some people will just do that, and then they'll get to make a bunch of money off of them. And that's also not a very nice thing to do, honestly. It's kind of shitty. But if you need some advice about credit cards, there's really only one, I guess there's sort of two pieces. The first one is that if you can, you should probably have a credit card because you're paying for that anyways, in stores, in whatever. And you might as well get some of the benefits. However, you should also treat it like cash. You should treat everything that you spend on the credit card as if you are spending your money directly. So that way you don't ever sort of go past your limit and have to spend more than something is worth. Like I said in that example, you don't want to end up spending $110 for something that only costs $100 or whatever the number is. And so if you get a simple credit card and you treat it like it's cash, then you're actually going to be okay and you're going to probably not spend any extra money. However, if you're a person who struggles with spending too much money and you want to spend less, maybe just don't get a credit card. It's not a huge deal if you don't have one. And then to add a little bit to this topic, just about, um, I guess, money terms and cards in the U S uh, a card that is not a credit card is a debit card. A debit card is just a card that is connected to your bank account. And when you spend money on it, it just directly comes out of your bank account. That's it. Debit cards are a lot safer in that way. However, some banks are also jerks about it because they will charge you a lot of extra fees, what are often called overdraft fees, for spending money on accident. For example, let's say you only have $12 in your account. and you go to buy something that's $15. Only three extra dollars. Your bank is not going to say, or some banks, maybe your bank does, but a lot of banks are not going to say, you know what, you don't have enough money, I'm gonna have to decline this purchase. What they'll do instead is they'll say, oh yeah, that's fine, make that purchase, but we're gonna have to charge you for that. We're gonna have to charge you an overdraft fee. And overdraft fees are often like $30. And so I've heard, I have friends who have like bought something small for like $15, like a food or whatever. And they end up spending like $45 because they just didn't have quite enough in their checking account. And the annoying thing about it in a lot of banks in the US is that a lot of people have enough money for it. It's just in a different account. It's in a savings account. because a savings account pays slightly better, right? There's better interest rates. And so some people only keep a couple hundred dollars in their checking account and the rest in their savings. And so if they don't realize that a bill gets paid or something automatically, they might spend a little bit extra on accident, which then causes an overdraft fee. And it's just a, it's very annoying and it's, it feels very, uh, predatory, that's a good word, by the banks, but that is how the system works in at least where I'm from. And so that's another reason that a credit card can be useful is because you can just pay all of your things at the end of the month at once instead of having to worry, oh, is my money in my checking account or my savings account? If I transfer it over, it's going to have to, I'm going to have to wait till Monday because whatever it is. And so that's another reason it can be useful. But I'm going to leave it there. I think I've talked enough about credit cards and overdraft fees and things. I don't know if that's the most interesting topic. But let me know. Does your country have a lot of credit cards, debit cards, or do people still use cash? I guess still. A lot of countries still do it. I know Germany uses cash a lot. Mexico uses cash a huge amount despite being both fairly advanced economies. But yeah, anyways, let me know what you use and I really appreciate you being here to listen. I hope that you learned some interesting words and I'll see you again tomorrow for another episode. Have a good one.
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