From credit cards to debit cards, paying with plastic has become one of the most common methods of paying for purchases today. The convenience and security that these cards provide make it easy to understand why they’re so popular, and many people carry both credit and debit on them at all times – often ignoring cash altogether. If you’re among them, it’s important to understand the differences and similarities between the two so that you’ll know just what it is you’re doing when you slip that card out of your wallet and make a purchase. Understanding the differences is easier than you might suspect.
First, we’ll look at the similarities. Both debit and credit cards are simple to use – you just slide them through the terminal or provide your card numbers to make a purchase. You’ll be able to use either of them nearly anywhere that cards are accepted, and can even utilize both types of cards to make online purchases from a wide range of different retailers. And they make it easy to track your finances since you’ll get access to online account information as well as printed statements mailed to you on a regular basis. In other words, you’ll be able to enjoy a huge assortment of conveniences through their use.
But the differences are even more important to understand. With debit cards, your purchase is deducted directly from your bank account. When you use credit cards, the purchase is paid by your credit company. You’ll then be required to repay minimum monthly payments or more, all the while incurring interest based on your balance. You won’t have to have the money at the time of purchase, but you’ll certainly have to repay it over time. They’re essentially small loans given out to you by the credit card company, and can help in a variety of ways.
The payment history you have related to your credit cards will also have an impact on your credit score, so it’s vital that you make the payments on time. Debit card payments won’t impact your score one way or another, but can trigger fees and penalties from your bank and are just as important. And it may also be more difficult to get a credit card since you’ll have to apply for them, go through a credit check, and more. But still, both credit and debit cards provide a way to pay that is easy, convenient, and secure. They’re great financial tools when used properly.