Credit vs Debit Cards

In this post I want to explain the differences between credit vs debit cards. What are there differences and likeness?

First lets explore credit cards. Lets define the meaning, in short, this is the amount of credit that a bank will extend to you on a line of credit. For example, say your credit score is between 650 to 700 then you could receive a line of credit of a few thousand dollars. The higher your score will result in even a larger line of credit with a very low interest rate. Now the down side to this scoring system is that if your credit score is below 650 you may not receive a line of credit above a thousand dollars. And, your interest rate will be vary high. Beware of credit card companies that try to lure you into a introductory APR ( Annual Percentage Rate ) then turn around and hike your rate. Make sure you read the Terms And Conditions before you accept these type of cards. The real draw back to this card is that you have a monthly bill and you are required to make at least the minimum monthly payment. And only paying the bare minimum on your card account will only sustain a balance for years to come.

Next a look at a bank debit card. For the most part, these cards are generally linked to your checking, savings or other account that allows you to withdraw a pre set amount on a daily basis. The best aspect of this card is that it is widely accepted as both a credit and debit card. However, you are paying for goods and services as you go with a direct debit from the aforementioned accounts. Normally there is no charge for this service from your bank unless you overdraw your account with purchases. Then you would have to pay a Non Sufficient Funds Fee. You must be careful as to make sure you are able to keep up with your balance at all times. The one draw back to this would be when you purchase a item on a debit card and ask the merchant to run the card as credit. Be careful here as not all credit transactions post immediately to your account. This can cost you a lot of money in NSF charges.

Lets review, Credit cards are costly and you must be prepared to make a payment, at minimum each month. Interest rates can become overwhelming if you fail to abide by the terms and conditions the bank sets forth in the signed agreement.More important is your ability to repay your debit. Failure to make one payment on time can result in your credit score dropping around 25 to 30 percent. Now debit cards are much easier to use, are in the form of a credit card and can be used as a credit or debit card. The upside of this card, no monthly payment or interest rate to pay. The down side is you must keep track of your balance this type card is attached to. However, over the long term even if you had to pay a few NSF charges you would still come out ahead financially and save a lot of money alone in interest charges. This makes the Debit vs Credit card a better value for the consumer.

Money Guy