Payment methods. Ever heard of them? A payment method is a way to pay for goods and services. You probably already know about cash payments. That’s when you pay for something—say, your favourite pop—with coins or bills. But did you notice that your parents don’t always pay for stuff in cash? They probably use a card sometimes to pay for things in the store or online. There are 2 kinds of payment cards: debit cards and credit cards. They’re similar, but they work in different ways. Let’s take a closer look together. When you open an account in a financial institution, you get a debit card. You can think of your debit card—along with your password, which we call a PIN—as a kind of key. It gives you access to your account. Your debit card lets you use money that’s been deposited in your account. When you want to buy something, you can take out money at the ATM or use your card at a store. How about an example? Let’s say that Noah’s dad buys Noah an ice cream cone for $3. He inserts his card into the machine, enters his secret password and bam! The financial institution uses the money from his account and sends it to the merchant. This process is called direct payment. It lets Noah’s dad leave all those coins and bills at home. Pretty handy, right? But don’t forget: Those $3 are automatically withdrawn from his account. Even if we don’t see it, the money is still spent. The other card is the credit card. It looks a lot like a debit card, but it works differently.Let’s say Noah and his dad keep shopping and stop to buy some flowers. Noah’s dad decides to pay for the bouquet with his credit card. The financial institution sends money to the florist. But instead of taking money from Noah’s dad’s account, it temporarily lends him the money. That means the money isn’t taken out of his account right away. Noah’s dad still has to pay it back on time otherwise he’ll need to pay even more. This way of buying things is called credit. Credit is a bit like a library card: When you use your library card to borrow books, they don’t belong to you. You have to return them after a certain time, otherwise you pay a fine. Credit works the same way. That’s why you have to use it wisely. Whether you’re paying with cash or a payment card, you don’t always see the money you spend. That’s why budgets are so important: They help you understand where your money is going and know how much you can spend. Well done! You’ve now finished watching our video on payment methods.