You can reduce your expenses by using credit and debit cards. But have you ever observed that you prefer using a debit card to pay when your pocket is complete and switching to a credit card when your bank account is empty? But did you know that compared to using debit cards, utilizing credit cards will enable you to reduce your spending more? Debit cards, unlike credit cards, also have several advantages, but it is tough to match the savings you can get with the correct credit card. Understanding the difference between a debit and a credit card is essential.
Difference between Credit and Debit Cards
The following sections reveal all about credit and debit cards and their major differences:
Credit Card
Customers can borrow money to make purchases using a credit card, a plastic card issued by a bank. The cardholders must return the funds to the commercial bank within the allotted time. If not, the credit card company will be fined a high-interest rate for your late payment. It is not necessary to have a bank account to use a credit or debit card, which is one of their main differences.
Even if you don’t have an account at the same bank, you can still apply for a credit card. For different individual needs, credit cards are offered in a variety of categories. You can choose a credit card based on your needs.
Although having a credit card can give you a few advantages, it is also equally important to keep a good credit score if you wish to keep using it. Think about signing up with an online debt collecting agency to manage your debts better, especially if the credit card was for your business.
Debit Card
Debit cards work similarly to credit cards but are connected to your bank account directly. In short, this means that money is taken from your associated bank account each time you make a transaction. Therefore, to obtain a debit card, creating an account with the bank is essential. Like credit cards, debit cards can be used for offline as well as online transactions.
In general, a debit or ATM card lets you withdraw money from your account whenever it’s most convenient. In contrast to debit cards, which allow you to access your account’s cash, credit cards require you to borrow funds from the card company and repay it.
Why are Credit Cards Better for You Compared to Debit Cards?
Wondering what makes credit cards better than debit cards? Here are the major reasons:
Improving credit score
Using a credit card responsibly can help you if you want to establish credit or if you want to raise your credit score. Debit cards, on the other hand, aren’t listed anywhere in your credit history, so they can’t help you to build or raise your credit score. Your credit journey can be greatly helped by using credit cards properly, which includes repaying your bills on time, keeping a low credit utilization ratio, and avoiding applying for many cards at once. Therefore, picking a credit card is always a good idea if your objective is to raise or improve your credit score.
Safer to use
Until you pay your credit card bill, the funds in your bank account are not affected by credit cards. So, if your credit card is stolen and used to make a purchase, you will have plenty of time to report the fraud. After notifying the card issuer, the card will be stopped, and following a successful investigation, you will receive fraud protection. Credit cards are safer since even if you lose your card, you won’t lose the money in your bank account.
No need for a bank account
Having a credit card is not dependent upon opening a bank account with the bank. So, you can borrow money and then pay it back using a credit card, which is not connected to your bank account. With credit cards, you may make purchases without cash and then pay them off whenever convenient. At the same time, a savings account is required to use a debit card.
Reward systems
Credit cards are becoming a more popular option to earn rewards or cashback, although debit cards also provide these benefits. Also, credit cards exceed debit cards in terms of benefits such as travel benefits, health benefits, and more. However, you should keep in mind that while debit cards are free, credit cards typically have an annual fee.
Conclusion
To sum up, credit cards are far better than debit cards in terms of savings and other advantages. Yet, using your credit card wisely is just as important as using its benefits. Therefore, if you already own a credit card and are using it responsibly, try to use it for most of your transactions to maximize the rewards. Check your rewards via the credit card app online.
