Is a debit card the same as a credit card? Sort of. The difference is where the money comes from to pay for what you bought.
When you used a debit card the money is connected directly to a bank account. A debit card has a major credit card symbol on the front of it (VISA/Mastercard), and it can be used like a credit card. The way this works is you make a purchase with you debit card and your bank puts a hold on your account for the amount of your purchase. The merchant then reports the purchase and the funds are released to the merchant. Now the hold may not stay on your account as long as it takes the merchant to report the transaction, therefore it may seems like you have more in your account than you thought. This is a good reason to keep a running total on your account all the time to avoid overdrafts.
When you used a credit card to make a purchase the merchant is allowing you to use a line of credit. They get their money from the credit card company and the credit card company is charging you interest until you pay it back. However, they usually have a 30 day grace period on the interest. So if you don’t carry over a balance from month to month you will not have to pay extra for what you have purchased.
Debit Card vs. Credit Card
So now you are asking which one is better to use? It depends on what you are using it for and how well you manage your money.
With a debit card you can spend only what you have in your account. When you are out of money your card will simply not work. This is a good thing if you do not handle your money well. The cost of a debit card is relatively inexpensive also. Although you can have maintenance fees for your checking account you can find checking accounts that are free. Using a Debit Card does not affect your credit scores either way. It does not help build credit and it won’t adversely affect your credit.
Using a credit card is pretty much the same as a debit card and vice-a-versa. I found only a couple of instances that using a credit card over is a must, renting a car and a hotel. Not all car rental agencies or hotel rooms but be aware there are some out there. Also, it has been said that credit cards offer additional insurance and can make it easier to return or receive a refund. Be sure to do your research on your credit card to find out about this benefit. Other benefits include building your credit, discounts on purchases, rewards, travel, and business expenses.
So in the end, It is best to use your debit card for your everyday purchases. However, there can be benefits to using credit cards. If they are used wisely credit cards can be a valuable tool.
How do you use your credit card? I would love to hear about any rewards, benefits, or even drawbacks. Feel free to leave and comment below.
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