>> Nov 29, 2012
When it comes to deciding how you want to make a purchase, you have two main options: a credit card or a debit card. Each one is popular for different reasons, so which one should you choose? From airline miles to overdraft protection, American consumers are weighing their options. Here are the main differences between the two so you can decide which one is the best for you.
WHERE THE MONEY COMES FROM
Rediff writes that a debit card is the closest option to cash because the money actually gets withdrawn straight from your bank account. On the plus side, you get the convenience of being able to spend your “cash” online and other various places that do not accept cash. In order to use a debit card you do need to be on top of keeping track of your account balance. It is easy to overdraw with a debit card, which can lead to costly fees.
On the contrary, when you use a credit card you are not spending your actual money. Instead, you receive a bill every month that you must pay in full to avoid interest charges. If you can control your spending to stay within a manageable monthly amount, a credit card is definitely much more convenient. In addition to being a good steward with your credit, you can see your credit score actually rise if paying on time and not going over your limit.
IDENTITY THEFT PROTECTION
Fox Business points out that both cards carry a risk of identity theft. However, with a credit card your actual money is not at risk. If your credit card gets stolen, the company will investigate the charges and make the appropriate corrections before you actually owe them any money. With a debit card, it can take your bank several days or weeks to fix the charges. In the meantime, your money is M.I.A. Identity theft is a crucial threat that targets any consumer and with the rise of digital dependency and online purchasing, identity theft protection can only help to keep your accounts and personal information monitored and protected by a company like Lifelock. You can visit Lifelock's Twitter page to get great tips to help better protect yourself and your purchases.
Everyone likes a perk, especially if it comes after doing something as simple as making purchases. ABC News states that credit cards definitely take the cake in this category. Many credit card companies offer you airline miles, points to use towards merchandise, or even cash back just for using your card. If you plan on solely using your credit card for all of your purchases, these rewards can add up very quickly and are definitely worth considering. When it comes down to it, the rewards basically act as free money.
According to The Street, there is a third option: the charge card. This card is similar to a credit card because the money is not drawn from your bank account, but instead is due once a month. However, with a charge card you have to pay your balance in full every month. That being said, there are no preset spending limits, so in that respect it is more like a debit card. Many charge cards also offer the same rewards and fraud protection that you will get with a credit card. Consider this a hybrid card, pulling from the best of both options.
A guest post written by James Burrow.