Credit Cards versus Debit CardsSubmitted by Robert McEachern & Scott McEachern on April 4th, 2019
Most consumers typically have both a credit card(s) and a debit card. Of course, the biggest difference between the two is that a debit card will immediately take money out of your bank account when used, unlike a credit card, which will pay for the purchase and later add the amount of the transaction to your monthly statement.
But are there any other differences between the two?
It turns out that there are some major differences that you may not be aware of. Also, it’s important to note that both debit and credit cards have their own distinct advantages and disadvantages.
Here are a few situations where choosing between a debit and a credit card can make a great deal of difference:
When You’re on a Budget
A debit card is the clear winner when it comes to sticking to a budget, since you can only access funds that are already in your bank account. Of course, the possibility of over-spending still exists with a debit card, but the fact is that sticking to a budget can be a lot harder when you have the temptation of the buy-now, pay-later scenario that credit cards offer.
Cash Back and Other Rewards
Credit cards clearly excel in this category, with users being rewarding with everything from cash back on monthly spending to accessibility to other discounts and travel bonuses. Of course, these bonuses are negated if you carry a large balance on your credit cards (and paying lots of interest!), but can be extremely profitable if you pay off your credit card balance each month.
Using a debit card will do nothing to increase or decrease your credit score, while using a credit card responsibly can help you build your credit. Of course, if your credit card is not used responsibly and you incur over-limit fees, late payment penalties, or over-utilize the card, your credit score can drop as well.
It’s clear that both debit and credit cards have their own very specific place in your wallet. It’s up to you to use them both to your advantage.