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A Good Credit Card Application or a Handy Debit Card?
I have two cards in my wallet. Both of them are plastic. Both of them have card numbers. One of them has the Visa logo on it. The other has a MasterCard logo. But what is the difference between these two cards? One is a debit card. The other is a credit card.
Each card has its good points and bad points. Before you go picking one over the other, it is very important that you understand the pros and cons of each type of card. Their functions are drastically different, so you should differentiate your spending for each one and always know which card you want to use in certain situations.
The main difference between a debit card and a credit card is a rather clear cut. A debit card will require you to either sign your name or enter a personal identification number (PIN) in order to complete a transaction. Once the transaction is completed, the money is taken directly from your bank account. It takes the middle step of withdrawing money yourself out of the equation.
A credit card is more of a “buy now, pay later” scheme. After swiping your credit card and signing to verify your purchase, no money is taken from any of your accounts. Instead you will wait for a bill to arrive from your credit card company and you can then pay back the money you owe them. Some credit card companies allow you to pay online and others still require that you pay by check. Also, while a debit card will remove money as each transaction occurs, a credit card will compile all transactions made and the bill will contain the total sum of those transactions. You can either pay back part of the sum or all at once.
A debit card requires that you keep a close eye on your funds, writing down all transactions made in your checkbook. A credit card allows more freedom from keeping a close eye on each transaction and just dealing with the total at the end of each billing cycle. However, unbridled spending with a credit card can deplete your funds just as much as unbridled spending with a debit card. The difference is that you will go into debt with a credit card and may find it hard to escape the payments as interest is added to any outstanding balances, possibly leading you into a position of bad credit and a negative credit report. A debit card will simply empty your bank account completely and leave you with nothing much sooner.
Your ultimate choice will be whether or not you want to pay for things now or later. Are there items you would prefer to pay for immediately, or do you want to have the flexibility of paying it off at a later date? Knowing your spending habits is very important when deciding which card to get. If you tend to spend a lot on whims, while both may not be a great idea, at least a debit card will force you to keep track of your money and hold yourself in check, lest your account balance dwindle down to zero. Overspending with a credit card will only add more and more money to the pile that you will eventually have to pay. If you continue to spend, you may end up over your credit limit and be forced to pay extra charges, which will not help your situation.
If you are more responsible with your money, and tend to pay for everything the moment you buy it, you may not need a credit card. However, you could easily apply with one good credit card offer in order to use the card to help build up your credit history. Paying off your balances in full as they come will not only help your credit score, but can also make for a great way to earn rewards. Compare credit card offers to find one that will give you the sort of rewards you want.
Even if you use your credit card for larger purchases and will have to pay the balance off in separate payments, as someone who is responsible with money, you can easily pay it off in just a matter of months and be back on track, having only paid a few dollars in interest.
Two other things to consider when choosing between a debit card and a credit card are liability and protection. With liability, what are the rules the credit card company will have you comply to? If someone steals your card and makes a purchase and you fail to report your card soon enough, how much will you be liable for? $50? $100? You want to find a credit card that does not allow much, if any, for you to be liable for. With a debit card, you must also quickly notify your bank if your card becomes lost or stolen. Different banks and credit card companies have different policies, so be sure to check them out before accepting a credit card offer or debit option.
The protection on a purchase with a debit card is very limited as the money is immediately removed from your account. With a good credit card, you can request that your credit card company withhold the payment until you sort out your purchase problems, such as if the merchandise is damaged or not as expected. This can be especially handy for an online purchase that you may suddenly realize is fraudulent.
Know all your options for debit cards and credit cards. Picking one or both pieces of plastic should be a good decision and one that serves you well.
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