When you go to the store, you are faced with a variety of choices. What do you want to buy? How much money do you want to spend? How are you going to pay for it? Even though a lot of people overlook the last question, it is a critical decision. How are you going to pay for your purchase? You might be thinking about using a debit card. You open up your wallet, and you see it staring you in the face. On the other hand, you may also notice a credit card. What is the difference between a debit card and a credit card?
An Overview of a Debit Card
So, what is a debit card? A debit card is a direct line to your bank account. As soon as you swipe your debit card, the money comes out of your bank account. A lot of people like to use a debit card because it beats carrying cash. If you lose cash, it’s gone forever.
If you lose your debit card, you can cancel it before someone steals all of your money. Your debit card is protected using a PIN. People cannot use your debit card unless they have that number. Furthermore, if you are a victim of fraud, you may be protected by the bank. You can also use your debit card to withdraw cash.
An Overview of a Credit Card
Even though a credit card looks like a debit card, it is very different. When you swipe your credit card, you do not necessarily have to pay for that item immediately. You will receive a statement at the end of the month with all of your purchases. Then, you need to pay off that statement by moving money from your bank account to the credit card company to balance the books.
The biggest risk of using a credit card is that if you do not pay your statement in full, you may have to pay a lot of interest. On the other hand, a credit card is better because it allows you to build credit while also giving you a reward for your purchases. There are lots of credit cards out there, and you can select a credit card with rewards that match your spending habits.
When To Use Which Card
So, should you use a debit card? Or, should you use a credit card? If you have stable finances, you are probably better off using a credit card. The biggest reason why you should use a credit card is that you can collect significant rewards depending on what you buy.
On the other hand, if you do not feel like you can pay off your credit card in full at the end of the month, you could have to pay a significant amount of interest. If you feel like you can’t control your spending habits, then you may want to use a debit card instead.