Credit Cards vs. Debit Cards

 Cheyenne Kaatz,

All you see in this day and age are people purchasing goods, swiping cards, and paying using their mobile devices.

As checks and cash are quickly becoming a thing of our past, it is now more beneficial and convenient to carry

non-cash payment options around - which include both credit cards & debit cards. It is critical to know about credit and

debit cards as each have different purposes and are more beneficial or less helpful for different scenarios. In this blog,

you will learn about both cards, the major differences and when to use the right one. 

A debit card is the first payment option and can be used to obtain cash or to buy goods/services. The debit card draws the

funds immediately from your checking account which means that your spending amount is limited to what's available

in your checking account. When using your debit card, the exact amount of money you have to spend will change

from day to day along with your account balance. Debit cards are set up with PIN numbers that are used when making

transactions, this is a security measure and adds safety to your bank account. Debit cards are best to use on smaller, essential

purchases that you can quickly pay for from the security of your checking account while credit cards can be helpful for

making larger purchases or handling unexpected expenses that you either cant or don’t want to pay in full right away. 

Credit cards are another form of payment issued by your bank or financial services. This card allows the cardholder

to pay for goods and services based on their accrued debt, with the agreement that you will ultimately pay back the

card issuer for the costs of whatever you purchased along with fees and interest. In the end, a credit card acts like a loan

that enables you to make whatever purchase now and pay back later at a higher rate (usually with interest). 

 

When comparing debit cards to credit cards, it's important to know that they are both used in different instances, and one might provide more benefits than the other in a certain event. With a credit card, you are essentially borrowing money from your line of credit, as with a debit card you are making purchases and using money right out of your own bank account not having to pay back anyone. Using your credit cards for your purchases also guarantees you have a financial grace period - often between 21 and 30 days - after the close of your billing cycle to pay back any money without interest. If you are unable to pay it back within that time frame, you may have to pay interest depending on your card (promotional rates of interest depend on your bank), which you will be charged and expected to make minimum monthly payments until your balance is paid off. If you're wondering what the spending limit for credit cards are, you will be told that it is all determined by the credit cardholder’s credit scores and reports, which credit card companies will review before giving you a credit card. Credit cards also can help provide benefits for you as the bank technically pays for your purchases through your card with the exception that you pay it back at the same higher cost, they can help build credit, and you can earn card rewards and cash back! Although for some people you can have limited credit card opportunities due to poor credit history, things like a debit card with rewards does exist but not too often. Debit cards are also better for cash withdrawals and helping avoid overspending and debt.

Overall, both debit cards and credit cards play important roles in our day to day lives and are needed for making purchases

in our future. As each card has its own benefits and externalities of using each one in a certain situation. Finding out

which one, or both, fit best in your life is a decision you have to make as it will impact you and all your future spending decisions. 

Works Cited

Lamberg, Erica. “Here Are 4 Times You Should Reach for Your Debit Card over a Credit Card.” CNBC, CNBC, 23 Oct. 2021, www.cnbc.com/select/when-is-it-better-to-use-a-debit-card-over-a-credit-card/.

Pritchard, Justin. “Should You Spend With Debit or Credit Cards?” The Balance, The Balance, 12 July 2021, www.thebalance.com/should-you-spend-with-debit-or-credit-cards-315480#:~:text=A debit card is better,you stick to safe ATMs.