When you’re checking out after a long day of shopping, paying your tab at the bar, or buying groceries, the cashier often asks the same question: “credit or debit?” So which is better? What if you only have one and not the other… is that a big deal? Are there certain times you should be choosing debit over credit, or credit over debit?
First, let’s look at why they’re different. Debit cards, also known as bankcards, are used to make smaller purchases and withdraw money at ATMs. The money is taken out of your bank account immediately, so you have to make sure you have enough money there before you swipe.
Credit cards, on the other hand, are still used for purchases, but they allow you to borrow money from the bank up to a certain limit to purchase items or withdraw money.
Debit cards automatically draw from your bank account, so they’re the way to go when you’re making smaller purchases, or purchases you know you have the money for. If you overdraw money, your bank might charge you and your card will be declined. It’s essentially the same as cash – there is no borrowing or credit involved.
Your debit card also requires a pin; keep this number secret and don’t share with anyone – with this four-digit number, anyone could have full access to your card and funds.
There are many different types of credit cards out there – some can help you accumulate points for cash back, flying miles, or hotels. When you’re looking to acquire a credit card, first figure out what you want and if it’s available.
You’ll want to check your credit history before, during and after. There are a few credit bureaus that offer free credit reports every year, so you could use one of those to get a closer look. If you’re a first time credit card user, go after a card that’s designed to help you build up your score. With a good credit score, you’ll be able to do much more in the long run.
Finally, don’t carry a balance. If you don’t pay off your bill every month, your bank will start to charge you interest on the amount you owe. Avoid problems like these by only buying what you know you can afford and paying as often as you can. Although credit cards are often used for “bigger purchases,” this doesn’t mean it’s a free-for-all. Only buy what you can and you’ll be in good shape.