Debit Cards and Credit Cards – Pros and Cons
Lately the use of debit cards has surpassed the usage of credit cards. According to something called the Nilson Report, consumers are more cash strapped than prior years and that and the age of the consumers has led to a more broad use of debit cards. The younger consumer is more used to having a debit card in his or her wallet. They use the debit card as consumers once used checks from their check book. They whip it out for small purchases and use the credit card to spread a larger purchase out over time. Which is best? Most financial advisors say neither; it is best to use cash. They also advise that the consumer pick the card that fits his/her need. So, how do you determine that?
Always remembering that cash has no hidden fees or interest, you can be certain that you have read the fine print on your credit card account or even your debit card account. The first thing is to know the cost of using either one to make your purchases. Does your credit card have any hidden charges that you need to be aware of? What about your debit card? Let’s look at the two below.
Most banks offer a debit card when you sign up for an account. Before you decide that you want one and start carrying it around in your pocket, find out what the charges are. Suppose you use your debit card at the movies and are unaware that you will be going into overdraft. What is going to be the cost for those movie tickets after the overdraft fees are added and how long is it going to be before you have made up that loss?
Does your debit card charge for each transaction? Oh, you say, it’s only 50 cents per transaction. Well, it only takes two of those transactions to be a dollar and dollars have a way of disappearing quickly.
With a debit card the merchant may put an account block on the amount it is charging until your money has been put into their account. Hotels and gas companies often block out a set amount even before allowing you to make a charge. This could prevent you from using all of the money in your account.
Are you using a prepaid debit/gift card? You may be surprised to discover that there are fees attached. These cards aren’t regulated like bank debit cards and often have ATM fees, transaction fees, and something called “non-use” fees.
A debit card is easier to get than a credit card.
With a debit card it is easier to get cash.
Debit cards do not improve your credit score because they depend on the amount you have in the bank and not on a “credit” basis.
The worst thing about a debit card is that if it is stolen your bank account can be emptied quicker than you can call 911.
Rewards: credit card rewards can help you purchase things from different merchants based on the total amount of spending the consumer has done.
Credit cards can make it easier for you to buy things you cannot afford or really don’t need.
Credit cards may not be accepted. If you have late payments or unpaid bills, your card company may not allow you to charge on it.
You may be able to use your credit card to borrow money.
If you don’t pay your balance at the end of the month there are fees added to your balance and interest charged on the total. This means that a $3.00 item can end up costing a lot more.
If someone steals your credit card you are usually covered for anything over $50 that is fraudulently charged to it.
Convenience: having a card in your pocket can allow you to pay for something you need in an emergency. The difference between the debit and the credit card is that the debit card charge depends on how much money you have in the bank and your relationship with that bank.
It takes less time to complete a transaction with a debit card than a check and even than a credit card.
Learn all the facts and then decide which type of card is best for you in your situation.