Credit Card vs. Debit Card

We all have them in our wallets, using them every day to pay for things without actually handing over physical cash. Credit cards and debit cards are both methods to make payment electronically, but there are significant differences in how they operate. Understanding those differences is important and can influence you decision on whether to make a payment with a credit card or a debit card.

Credit Card

Credit cards are effectively a pre-approved loan (at a set limit) from the issuer that you can use whenever you have funds available on the card.
Important aspects of credit cards include:Credit cards can be very useful credit tools when you need access to cash you don't have immediately at hand and when it comes to building a credit rating. They do need to be used with caution, however, as the interest charges are substantial and many people with out of control credit card balances are forced into bankruptcy.

Debit Card

Debit cards access your underlying saving and checking accounts and can be used to spend those funds. If your account has an overdraft limit you can also effectively end up borrowing with these cards, with fees attached. Important aspects of debit cards include:

Credit Card vs. Debit Card

When choosing which card to use you need to consider your overall financial position. Ideally you only want to use credit cards when you know you can pay off the balance at the end of the month, avoiding interest while improving your credit rating. Aside from that you should only be using your credit card in emergencies where you simply do not have any other recourse to access funds. With any credit card and debit card it's important that you review the specific terms so that you clearly understand any fees or charges that will be incurred. As credit card companies vie for your business many perks have been rolled out to encourage the use of your credit card, which ultimately can be very beneficial to you.
By Jeffrey Glen

Copyrighted 2020. Content published with author's permission.

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