credit cards vs. debit cards: a guide


Understanding the functions of credit and debit cards is an important aspect of managing our personal finances effectively and creatively.

The main difference between these two financial instruments is that debit cards are drawn directly from your personal bank account, while credit cards essentially use money you haven’t earned yet, which you can use to shop and track the passage of time. The answer to this question varies from consumer to consumer, but statistics show that more than 45% of American households have credit card debt.

Fraud Liability

Credit card companies protect their consumers from liability for fees, interest, or surcharges for purchases made in error or by people who should not have access to their credit card number.

Refunds When you request a refund for a credit card purchase, you will not receive «cash back» for your purchase. In other words, you’ll see your total refund subtracted from the amount you owe the credit card company.

Advantages and disadvantages of paying with a debit card

In general, debit cards make everything easier and eliminate the need to go to the bank the next day or week to withdraw money. If you really need the money, you can also use your debit card at any store to get cash back at the end of the transaction. Debit cards also make paper checks a thing of the past. Debit cards can be used to pay utility bills, car payments, and credit card bills over the phone.

Debit cards are the best option for those who want to avoid additional fees and accumulate debt.

Types of debit cards

There are fewer types of debit cards than credit. Standard debit cards are the basic debit cards that are linked to your personal checking or savings account. EBT cards are issued by state and federal programs and are for individuals and families who need help with food and other necessities. Cards are replenished at the same time each month until the family or individual no longer needs assistance.

Prepaid debit cards are useful for those who don’t have a bank account but don’t want to carry cash. Payment cards are similar to prepaid cards, except that they are usually «loaded» by your company.

When to use credit or debit

Debit cards are the best option when it comes to everyday recurring expenses. If you don’t already have a card, you may want to start with a debit card from an FDIC-insured bank. Credit cards are the way to go when it comes to hotels, car rentals, airline tickets, restaurants, or any type of purchase subject to any type of dispute. If you’re having a hard time paying your credit card bill or generally having trouble switching between payrolls, try Rain. Having access to your money when you need it can keep you from overusing your credit cards and racking up unnecessary debt.

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