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In a world where out-of-hand credit led to one the worst financial crisis ever experienced by the global village.

This is the same out-of-hand credit is presently taking the Caribbean by storm, banks in the Caribbean who were once very reluctant in issuing credit cards likewise debit card to just anyone – nowadays anyone with a job is pre-approved for one of these cards.

The fact of the matter is, almost 75% of the people who apply for these credit, debit or charge cards have no clue how these cards work and then after a couple of years find themselves in a debt – trying desperately to keep up with the minimum payments. It’s time for a little personal finance 101.

One of my favorite personal finance weblog ‘The Simple Dollar’ take a beginner’s look at the pros and cons of three kinds of plastic: charge cards, debit cards, and credit cards – explaining the differences between each, including the advantages and disadvantage of each payment method. For example:

Charge cards are often confused with credit cards, but they actually function in a fairly different fashion. Like credit cards, charge cards extend credit to you from the issuer, but you’re required to pay the full balance at the end of the month. Some charge cards also have an annual membership fee. Charge cards are typically associated with American Express; many store chains often issue their own charge cards as well which can only be used at that store.

To be honest, I’ve always assumed charge cards were the same as credit cards, but then I may be behind the curve on this one, and so might be a lots of people. The point of this post is to make people understand each of these cards might work better than another for specific types of purchases, so knowing which to use in any given situation is important. Click the link above to read more about these charge cards and how you can protect yourself.

If you use more that one type of plastic, let’s hear how you divide up your spending among them in the comments.

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