Credit Cards vs Debit Cards
When you start analyzing your financial situation, you may look at more than just the big picture. Some people will take a second look at their mortgage or rearrange their budgets. Others get down to the details. For example, you might need a new way to make purchases, and if so, you might be considering which options will do you the most good. Whether you need new purchasing options for yourself or your business, here are some things to keep in mind.
Credit Cards vs. Debit Cards
Upfront, credit cards and debit cards work the same way. The difference comes from what happens after the purchase is made. When you make a purchase with a debit card, the money comes directly out of your bank account. When you make a purchase with a credit card, on the other hand, you don't spend your own money right away. Instead, your bank or credit card company will essentially pay for that purchase for you. Later, you'll get a bill from your credit card company so that you can repay all of those purchases with interest.
Pros and Cons
Which choice is better? That depends on your financial goals. Credit and debit cards have plenty of pros and cons for you to consider.
Take credit cards, for example. On the plus side, they can let you make major purchases, even if you don't have the funds upfront. You can then pay off those purchases in increments. On the other hand, it's easy to lose track of how much money you've spent with a credit card. That's how a lot of people end up with major credit card debt. They overspend, and then the interest becomes nearly unmanageable.
Debit cards are simpler. They take the money directly from your checking account. If your bank has an app to track your spending, you can easily see just how much money you have in your account and whether or not you can afford to make a purchase. However, debit cards can't help you raise your credit score, and most debit cards don't let their users earn points or rewards, either.
Why Some People Use Both
Some people choose to keep a credit card and a debit card so that the pros and cons of each one can balance each other out. For instance, a person might use her debit card for most of her purchases, but then she might choose to use her credit card on groceries. This way, she won't lose track of her spending, but the regular credit card usage will also help her credit score.
Whether you want a new credit card, debit card, or both, the right choice starts with the right financial institution. Bundlefi can help you choose the right one. The banks and credit unions in our database aren't megabanks. They're local, community-focused institutions that support small businesses and help build local economies. Take a look at your options through Bundlefi today.