Put Your Credit And Debit Cards To Work For You

Saturday, July 19, 2014, 1:00 AM | Leave Comment

As we all know, using credit cards can have advantages as well as disadvantages. The same is true using debit cards. Both can have a positive impact in your personal finance if you use them wisely. In some cases, it’s a better idea to use credit card for your next purchase and other cases using debit card is a good choice for your personal finance.

It’s hard to realize at the time of purchase which card should be used for better financial living.

The plastic cards in your wallet may look alike, but there are big differences between debit and credit cards. Use either card wisely. Know your financial limits.

Credit Card

Here’s how the cards stack up.

  • When you make a purchase

    With Debit Card: The purchase amount is taken directly from your bank account.

    With Credit Card: The amount is added to your balance, which you must pay each month.

  • Your spending limits

    With Debit Card: The amount in your bank account. Beyond that, you can get hit with an overdraft fee. Better to find out the total in your account before you make purchase.

    With Credit Card: Set by the credit card issuer and can range from a few hundred dollars to tens of thousands. Better to find out your spending limit before you make purchase. Otherwise, you could be hit with a fee or higher interest or both.

  • Impact on your credit history

    With Debit Card: No impact at all. Use of your debit card won’t change your credit history one way or another.

    With Credit Card: Big impact. Use the card responsibly and it will help your credit score. Missing payments or racking up large balances may lead to lower score.

  • What about interest?

    With Debit Card: You are not borrowing from your own bank account so there is no interest whatsoever.

    With Credit Card: The average variable rate card recently charged an APR (Annual Percentage Rate) of almost 14%. If you miss a payment, your interest rate may rise.

  • How about consumer protection?

    With Debit Card: There is some protection in the case of fraudulent purchases. Get information from your bank.

    With Credit Card: Most cards cover fraudulent purchases and may also cover merchandise broken during shipping, and most cover rental car damage.

In a Nutshell
There you have it. Both cards have advantages. The disadvantages come into your financial life when you misuse either type of card.

I personally use my debit card as an ATM card. That’s the only time I use it to withdraw money. I make all my purchases with credit card but I make sure that I am able to pay in full each month by the due date.

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