Much to-do is made about the benefits of one type of card or another. In fact, you would not be hard-pressed to find experts and consumers commonly contradicting which card is best – the credit or debit card.
There is no simple way to label one the “best” card. Like many subjects and choices in the world of finance, the answer or best path to take is often dependent on your preferences and personal features. Here we look at how each could be best for you.
The Credit Card
Credit and debit cards are often essential to use when it comes to protection; purchasing items with a credit card is obviously a safe idea online.
Perhaps the biggest benefit to credit cards involves one’s credit rating. This number is certainly not a fond point for most consumers, but you can’t argue against how important it is. In some way, shape, or form, you must pay a bit of attention to your credit rating, especially if you want reasonable rates on important purchases, such as your car or home.
Credit cards are also great for their perks. When used efficiently, you can rack up all kinds of great rewards – from airline miles to cash back – on your everyday purchases on your credit card.
Of course, the downside to credit cards is potential debt and a great deal of agony. Impulse spending, along with the accruement of debt, is an all-too-common sight with consumers, whether it is used irresponsibly or when times are simply tough. It is not easy using credit cards efficiently and wisely, especially when unexpected expenses, a loss of one’s job, and other scenarios appear.
Credit cards are often best if you can take advantage of rewards, and then pay them off each month in full. There is a certain level of risk if you “play the credit card game,” though, which can significantly undermine your finances in a number of ways.
The Debit Card
What’s the biggest advantage of a debit card? Well, it’s not a credit card…
The great thing about a debit card is that it forces you to spend within reason. You will notice that impulse purchase reflected immediately in your checking account. They are actually, for the most part, a budget-friendly way to purchase items.
It would be nice to pay cash for everything, avoiding the pitfalls of credit card use. However, debit cards are the “high-tech version,” if you will of paying in cash. Also, not to mention, some individuals simply don’t have the option of using credit cards.
There are, of course, some things to watch out for if you use a debit card regularly. One important element is keeping a close eye on your account. Small purchases can add up – which is big trouble when it comes time to pay bills.
You should also watch for holds, which can stress an account that is a little close for comfort – hotels and rental car companies, for example, may do this to your card. Finally, and perhaps most dangerously, watch for overdraft fees and overdraft protection (try to link it to a savings account if you can).
The Winner Is…?
Only your situation can dictate the best course of action, in terms of using a credit card, debit card, or some combination of these.
If you’re battling with debt, using a debit card may be your strongest option – except for perhaps using a balance transfer option (in conjunction with a plan to make significant progress). Racking up further debt on a credit card is not a wise idea.
A credit card can build credit and allow you to reap the rewards involved. If you can pay off the card every month and stay within your budget, then, by all means, the credit card may be best.
