Plastic money
When we buy things, we pay for them in lots of different ways. We can hand over cash, write cheques or use a plastic card such as a debit or credit card.
Quick links to:
Cheques
When you or your family opens a bank account, they may get a cheque book and cheque guarantee card to allow them to pay for things without using cash. They can write out a cheque to the person or business that they are paying and hand over a cheque guarantee card. This guarantees that they have enough money in their account to pay for what they are buying. Cheques are now used less and less as plastic cards become more popular. Some high street stores and many filling stations no longer accept cheques. Exoffenders who are opening new basic bank accounts will not be offered a cheque book or cheque guarantee card.
Plastic cards
Plastic cards are now the most popular way to pay for things. They’re easy to use and as well as using them in shops we use them to pay over the phone or on the Internet. We also use them to get cash out of the bank. There are lots of different sorts of plastic cards:
Cash card
This is the simplest card. You can’t use it to walk into a shop and buy anything with it. Instead, it allows you to take money out of a cash machine. See the section on using cash machines for more information.
Debit card
A debit card lets you use money straight from your bank account without having to take out cash. You hand it over at the checkout and the money is taken straight out of your account, providing you give them your Personal Identification Number (PIN). You can usually use your debit card at cash machines as well, enabling you to take out cash when you need it. 26
Credit card
You use a credit card in the same way that you use a debit card. The two big differences are that:
(1) the money you spend isn’t taken out of your account
(2) interest is charged straight away on any cash you withdraw using your credit card.
The credit card company keeps a list of everything you spend and turns this into a bill, which they usually send at the end of the month. If you don’t pay back all you owe, you get charged interest. That means the amount you owe will get bigger and bigger. While credit cards are convenient and let us buy things before we actually have the money to pay for them, it’s easy to get into debt using credit cards.
Store cards
Some shops have their own cards, called store cards. They are like credit cards but you can only use them at the shop that has issued them. You’re often asked if you want to apply for one when you’re paying for something at the checkout. Most store cards have a very high rate of interest, which can make your bills mount up quickly if you don’t pay back everything you owe straight away.
Prepaid cash cards
You can use a prepaid cash card in the same places as a credit card. The difference is that you don’t get a bill. Instead, you load money onto your card in much the same way that you load credits onto a prepaid mobile phone. If you lose your card, as long as you report it, you don’t lose the money loaded onto it. Rented property often has meters which require this sort of card to pay for electricity or gas.
Chip and PIN
(Personal Identification
Number)
These days, plastic cards come with a Personal Identification Number (PIN). This is a four-digit number that will be sent to you by your bank, building society or credit card company. It’s really important to learn this number rather than carry it about with you. You need to make sure that no one else knows it because if they do, they can get hold of your money.
We use a PIN to get cash out of cash machines and for purchases made in places such as shops and restaurants. You’re asked to put your card into a small machine at the checkout and punch in your PIN.
The ‘Chip’ is a microchip embedded in all cards; it holds your personal account details. If the card becomes damaged, it will stop working.
The Money Matters to Me website has a Chip-and-PIN simulator to help you learn how to use your cards.
Cash machines are the machines we use to take money out of our accounts. They are really called ATMs, which stands for Automated Teller Machines, but most of the time you hear them called cash machines, cash points or even the ‘hole in the wall’. You find them set into the wall outside banks and building societies and also in stations, post offices and supermarkets.
To use a cash machine, you’ll need a plastic card such as a cash card, debit or credit card and your PIN. Then you just put your card into the slot in the machine and follow the instructions on the screen. Some companies charge you to use their ATMs. A message will be displayed on the screen and you have a choice to carry on with the transaction or withdraw your card.
As well as taking out money, you can often do other things at cash machines such as pay in money, pay bills and find out how much money is in your account.
Key points to remember:
- Don’t stand close to anyone using a cash machine and make sure no one stands close to you. This is because you need to keep your PIN number private.
- Some cash machines charge you for taking out money while others are free. If you want your money to go further, stick to the free ones.
- If you take cash out using your credit card, you will be charged interest straight away. With a debit or cash card, as long as you have money in your account, you won’t be charged interest.
- Ask for a receipt when you take out cash so you can remember how much you’re spending and have a record of it.
- Always double-check that you haven’t left your card, cash or receipt in the machine.
- Cash machines sometimes get tampered with by people trying to steal your card details and money. If the machine doesn’t look right, don’t use it and report it.
To have a go at using a cash
machine, visit the Money Matters to Me
website. It has a simulator that you can practise
with. You’ll find it
at:
www.moneymatterstome.co.uk/Interactive-Workshops/ATM.htm.
Protecting your identity (Identity theft)
Identity theft happens when someone steals your name and personal information to commit fraud. They might do this by running up credit card debts in your name or using your information to take out loans. Unfortunately, it is one of the UK’s fastest growing crimes. It can cause real problems in our financial lives, particularly for people on low incomes who don’t have money to fall back on.
There are a number of steps you can take to protect yourself:
Take care with your personal details
- Rip up or shred personal documents including envelopes that have your name and address on them before you throw them out.
- Don’t give out personal details over the phone or by email unless you are absolutely sure you know who you are dealing with.
- NEVER give out your PIN to anyone.
- Your bank or building society won’t send you emails asking for information like this so if you receive any, they will be false.
Take care online
- If you bank, book tickets or shop over the Internet, do not use the same passwords for all your accounts or store details on a computer.
- When shopping online look for the https:// in the navigation bar – this means the site is secure. Up-to-date antivirus software and a firewall also help to stop hackers, (people who obtain access to someone else’s computer system without permission, often to find out personal information or do something illegal).
Chip and PIN
Shield your number from those people who are nearby, using your hand or body, and don’t use the same PIN for all your cards.
Check your statements
Bank and credit card statements need careful checking to pick out any unexpected purchases or withdrawals.
Moving house or flat
You are more at risk when you move home so make sure that no mail is sent to your old address.
Report it
If you are a victim of fraud, report it to the police straight away. They will give you an incident number. Report a missing or stolen card to your credit card company straight away.
Check your credit rating
Our section on your credit history explains how to do this.
