Credit cards can be like borrowed money. When you use a credit card, you are basically taking out a loan from the company that gave you the card—known as the issuer—to pay for something. You can pay this amount back in full every month with no interest, but if you don’t pay it all back every month, you will owe interest—the bad kind of interest. Interest rates on credit cards can be more than 20%, so something that cost $100 would end up costing you $120.

Why do banks charge you interest? Because Banks and credit card companies are businesses and one of the ways they make money is by charging interest. When you use a credit card, you’re making purchases with their money, not your own. If you don’t pay the full amount on your credit card, you will keep paying extra for that borrowed money.

What about debit cards? Debit cards are a way to electronically spend the money that’s in your bank account, much like you do with a credit card. Debit cards can be used to make purchases when you don’t have cash. But they immediately take the money out of your bank account. That way you can’t spend more money than you have in your account and you aren’t borrowing from the bank so don’t owe any interest.