Differences Between Debit Cards and Credit Cards
Debit cards and credit cards have been a staple of the US economy for decades. For those who want to start a new business, take more control over their financial lives, or simply learn more about their options, knowing the difference between the two can impact future financial decisions.
Credit vs. Debit
Credit and debit cards are both cards that one can use to pay for goods and services. However, they work in fundamentally different ways. A credit card uses a “buy now, pay later” method of transaction. The card owner can use the card to pay for items as long as they don’t reach their credit limit, or the upper limit of money that the bank has decided they can borrow. Each month, the user receives a credit card statement so that they can pay for the items that they had purchased earlier. A debit card is simpler. The card is linked to the user’s checking account. As soon as the user buys an item, that exact amount of money is taken out of their account. Debit cards don’t come with monthly statements because the user pays for their items immediately.
Pros and Cons
Which card will work best for you? It depends on your needs and your spending habits. Take debit cards, for example. Because the money comes straight from your checking account, you can always stay on top of the amount of money you spend. Your spending won’t take you by surprise, which is great for budgeting and overall fiscal responsibility. However, a debit card won’t help you build your credit score. Since credit scores are necessary for obtaining loans, mortgages, and other important things, many people choose to use a credit card for score-building purposes. Credit cards come with their own pros and cons as well. As stated earlier, credit cards can help you build your credit score. They also let you make larger purchases. Business owners, for example, often use credit cards to cover their business needs. However, credit cards can put you into overwhelming debt quickly if you don’t monitor your usage very closely.
Finding the Best Card
Whether you want a debit card, credit card, or both, what should you look for? When you do your research, compare interest rates, rewards programs, monitoring, and protection. When you want to find the card that will work best for your needs, Bundlefi can help. Contact Bundlefi today to learn more.