Debit Card
Gone are the days where we pay for small or big things in cash. Though we do carry a couple of bucks in our wallet, we have to admit that in most payments, we use these magic cards we’ve come to know as the debit and credit card. Although these two can be interchangeably used, they actually have striking differences.
Basically your debit card is directly connected or linked to your bank account. When you use your debit card to withdraw cash or pay for purchases, the amount is automatically deducted from your account.
Pros
1. Less Hassle
When making payments with a debit card, it causes you a lot less trouble compared to credit cards. With a Debit Card, you have peace of mind because you know you are spending your own money, and not money that you will end up owing the bank.
2. Budgeting
With a debit card, you really are forced to keep your spending within the limits of your budget. Having said that, you may also have an overdraft option for those occasions where you need to spend a little bit more than you currently have.
Cons
1. Lack of Funds
When paying with a debit card, you always have to remember to keep your purchase within the amount of money in your account. Lets say your account only has $20 left, and you’ve recently paid for a $30 item in debit. If your account doesn’t have overdraft coverage, then this item may end up costing you around $100 instead. This is because some banks charge $35 for every $5 overdraft.
2. Fees
There are some stores that charge $0.50 – $2 for every time you use a debit card in their store. Withdrawal fees, none-use fees, reload fees and activation fees are just some of the many fees a debit card may charge you with.
Credit Card
Spending with a credit card is basically like spending with borrowed money. At the end of the month, you will receive a bill noting you on how much you owe and how much you should pay.
1. Great for Emergencies
With a credit card, you can still pay for emergency items or bills even if you currently don’t possess a sufficient amount of money.
2. Rewards
Whenever you use your credit card, you can sometimes earn points. These points can accumulate and you can exchange these points for great rewards.
Cons
1. Interest Fees
It was said earlier that with a credit card, you receive a monthly bill. If you don’t pay this monthly bill in full, then you can be charged further interest on the amount you owe.
2. Debt
If you spend too much that what you can pay, then you can get yourself buried deep in debt.
About the Author:
This guest post was written by Charles. As a result 0f working in the finance industry for many years, Charles has learnt many things about managing his personal finances. He has written many articles with tips on budgeting and finance management. He is also a content writer for creditcards.com.au.
