While most adults usually have at least one debit and credit card, understanding the difference between the two and the benefits of each may offer an important distinction that can affect more than just the balance in your bank account.
So, which one is right for you?
A debit card is, ultimately, an extension of your financial institution, which hosts the checking account. With the debit card, you, as the user, are able to withdraw money directly from your checking account. The debit card can be used as a form of payment for purchases physically but also gives you an easy solution for withdrawing cash from your checking account. Furthermore, you are able to use the debit card wherever credit cards are accepted.
Think of your debit card as a personal piggy bank.
On the other hand, a credit card is a payment method, which allows for you to borrow funds from your financial institution to make payments. The bank of choice then charges, you, the borrower an interest rate on your transactions with a grace period of thirty days, when the payment is due. If the entire balance of what was charged on the card isn’t paid off at the end of the thirty-day cycle, the interest will be added to the outstanding balance on the account. The interest rate of the credit card is dependent on your credit history and the financial institution of your choice. While it varies from card to card, it is an important consideration when making a choice.
While charging you an interest, credit cards are oftentimes thought of as being more secure and flexible. Dependent on your line of credit, you are able to make large purchases with ease, make payments abroad while traveling, dispute any transactions that are fraudulent and receive a return from your merchant. Credit cards can also offer other benefits to incite the consumer, such as cash-back, air miles for travel or other loyalty-based programs.
Miles and perks … Done and done, right?
When deciding whether to use your credit or debit card, it is important to remember your budget and the balance in your checking account to ensure that you do not have to incur the interest rate of your credit card. Budgeting can be hard and keeping a close eye on your checking account is always a good idea. Most importantly, both debit and credit cards can be compromised and keeping your card information safe is a priority.
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Bundlefi can help you find the right Community Bank or Credit Union for you.