Debit Card or Credit Card

For the average American credit and debit cards are a necessity, both allow an individual to make purchases at a variety of stores and online. There are many similarities between the two types of cards, but also some key differences. For the young fiscally responsible consumer it is important to understand these differences, to ensure that you have the best card for your own preferences and lifestyle.

credit card
Credit card or debit card?

Debit cards directly withdraw money from an your checking account while Credit cards are based on a credit system. An individual who uses their credit card is essentially taking a loan from their credit card company that they will pay back at a later date.

The biggest advantage of a debit card is somewhat obvious, by using a debit card you can never over extend your credit. Since the money used comes directly from your account, you will never be able to use more money than you actually have. Another perk of a debit card is that it can be used to withdraw cash from an ATM. Essentially the debit card acts as a more transportable mode of cash. A debit card can be used as a good tool to teach yourself about budgeting and monitoring your expenses.

The advantages of debit are also its weaknesses. Debit cards are often less protected than credit cards. Because debit cards have direct access to your account a thief has an easy way to quickly remove your money. Many debit cards do have fraud protection policies, which are always important to ask about. However, if your card is stolen and is used fraudulently the money is removed directly from your account. This means that you could be left without money for days or weeks before your bank acts on the problem and reimburses you.

Credit cards offer more protection than debit cards. Because credit cards loan you money instead of directly withdrawing money from your account fraudulent charges will not actually take away your money if you or your credit card company notices the charges in time. However, this system also has problems. Because credit cards loan you money you can easily use more money than you actually have. This may cause you to build up debt. Another aspect of credits cards that adds to the accumulation of debt is how the credit card bill is set up. Credit card bills do not have to be paid in full; it is possible to make a minimum payment on your credit card bills. Essentially this allows an individual to pay enough to keep the card active, but they will still need to pay off the rest of their debt at a later time. While this might be helpful during a time period when you need to stretch your money a little further, it is a dangerous cycle to get involved in, and it often does not end well for the credit card owner.

Debit cards and credit cards are both useful monetary tools. They both offer advantages and disadvantages. Debit cards offer more protection from yourself than credit cards do; however, credit cards more effectively protect you from the ill will of others. Depending on what type of a spender you are, and how much protection you want for your money you can easily decide the type of card that best suits you.