Chapter 14, Problem 21AA

To determine

To ascertain: The reasons for which debit cards are treated as similar to money whereas credit cards are not.

Explanation of Solution

Debit cards work in similar way as cash, where consumer typically cannot spend more money than having deposit on bank account. All transactions made from a debit card are deducted from the checking account immediately. So, it is similar to money in checkable account money.

Even though many people use their credit cards to purchase any requirements, the credit card itself is not money. It does not function as an accounting unit, or as a store of value. Credit cards delay payments, rather than as a total transaction involving the use of money.

Economics Concept Introduction

Introduction: Debit cards provide the opportunity for purchasing items without carrying cash. It is necessary to swipe the card onto the key pad and type the PIN number. Debit cards remove funds from account immediately.