Debit Card or Credit Card – Which Should You Use
The decision on whether to use your bank debit card or your credit card to pay for purchases can be confusing sometimes. Both types of cards have advantages and disadvantages when using them. Understanding your spending methods and your particular needs as well as the advantages and disadvantages of each of these cards will help you to determine the best way to make your next purchase.
Debit Cards:
Debit card purchases are deducted immediately from your checking account. In essence, it is the same as writing a check or making a cash withdrawal at an ATM machine. The money for the purchase needs to be in your account before you can use your debit card to make your purchases.
Advantages of Using a Debit Card:
Debit cards do not have interest and there are no monthly payments involved.. other than a monthly service charge you may pay your bank for having the checking account.
They help to restrict your spending on items that are not necessary because you will be essentially paying cash for them at that moment.
Disadvantages of Using a Debit Card:
Even though you are not charged an interest fee, many stores (especially convenience stores) may charge a fee for using your card.
Sometimes, depending upon your bank, you might make a purchase and not realize that you have exceeded your balance. This can cause overdraft fees that can cost you a fortune.
With debit card purchases you do not get the same buyer’s protection that you do with some credit cards.
Debit card purchases are not reported to the credit bureaus, and therefore will do nothing toward helping to build your credit rating.
Credit Cards:
Credit card purchases will not have to be paid for immediately. Your purchase may not show up on your statement for 30 days or more. If you know when your credit card closing date is.. and you use your credit card the day after your closing date to make your purchase, you should have approximately 7 weeks before the payment for your purchase comes due.
This could be helpful if you have had some unexpected expenses and are running a little low on cash, but know that by the time the bill comes due your finances will be such that you will have the money to pay it off.
Advantages of Using a Credit Card:
Some credit cards offer bonuses and rewards for using them such as airline miles, cash back rebates, bonus points, donations to charities and other various rewards.
If the item you are purchasing is expensive, it is nice to be able to pay for it over time instead of having to put out all of the cash at once.
Many credit cards also offer buyer’s protection plans that debit cards do not. This protects you in case the product was defective or not up to the standard you were led to believe when you purchased it. Some credit card protection plans also protect you against loss, theft and breakage.
Using credit cards wisely will improve your credit score, especially if you are paying the balances in full each month.
Disadvantages of Using a Credit Card:
If you are not a thrifty spender you could get yourself into trouble by making too many purchases on a credit card and then have difficulty paying off the balance.
Credit card purchases do come with the additional cost of interest. This makes small non-essential purchases impractical due to the fact you will be paying interest on things that could have, and should have, been paid for with cash to begin with.
