Monthly Archives: July 2012

Debit Card vs. Credit Card

Two common ways of paying for items now a days are your debit and credit cards.  Rarely is cash used to purchase items.  Plastic cards are much easier and accessible and you dont have to worry about carrying change or bills.

So which is better to use?  I will explain the benefits and drawbacks of the two:

Debit Card

Your Debit Card is basically an extension of your bank account and has taken the place of writing checks.  The Debit Card allows you to withdrawal cash from an ATM and the money is immediately withdrawan from you bank account.  You do not have to pay a bill at the end of the month.

Postives:  A debit card allows you easy access to purchase items without having cash.  You can withdrawal cash from an ATM if needed.

Negatives:  You do not get any rewards for using your debit card.  There are no perks when you use it.  And now, even some banks are charging you a monthly fee to use your debit card (Around $5/month)

Credit Card

A Credit Card allows you to pay for items with the promise of paying it back in the future.  You can afford to buy things in the present without having the full amount of money in your account. It is basically a loan of money that you must payback in the future.

A Credit Card is great if you pay your entire bill off at the END OF EVERY MONTH. If you pay your card off every month, your credit card basically becomes a debit card.  If you do not pay your entire amount off at the end of the month, the credit card company charges you interest and a lot of it.  They typical interest rate charge for Credit Cards is between 12-20%.

Any balance you have remaining will be charged an interest of 12-20% depending on your card.  This is why it is very important to pay off your credit card.  If you have a credit card debt of $1,000, you could end up paying twice as much if the card is not paid off quickly.  If you pay off the $1,000 at the end of the month it was used, you will only pay $1,000.

Also, Credit Cards offer rewards.  Different companies offer different rewards, but a lot of them give you points for every purchase you make.  These points never expire and can be used for things from flights, hotels, trips, and gifts.

If you are smart with your credit card and pay off your balance every month, Credit Cards are much better to use than your debit cards.

If you are disciplined with your money and paying off your bills, a smart thing you could do is never use your debit card except at an ATM to get cash and instead always use your credit card for every day purchases.  Your points will grow into free trips.

IMPORTANT NOTE:  ONLY DO THIS IF YOU PAY OFF YOUR BILL EVERY MONTH IN ENTIRETY.  YOU SHOULD HAVE A ZERO BALANCE EVERY MONTH.

Here is a link to top reated credit cards:

http://www.creditcards.com/reward.php?a_aid=1004&a_cid=1015&a_did=111937&adused=12765414180&gclid=CO_ptY-5kLECFQFx4AodDnFBeA

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