What’s the Difference Between Credit & Debit ?

Debit and credit cards are both used as a way to pay for goods or services without the hassle of using cash or writing a check. The difference between the two is where the money to pay for the purchase comes from.

Debit and Credit  – What’s the difference?

When you use a debit card and select debit, the amount of your purchase is taken from your checking account in real time – almost instantaneously. When you use the credit option on your debit card, the amount will be charged to your line of credit, meaning you will pay the bill at a later date, which also gives you more time to pay. Depending on the merchant or store you are purchasing your item from will determine how quickly the charge goes through and is deducted from your checking account. For bigger items, such as vacations, rental cars or hotel rooms, you should use credit so that you can save up money by the time you have to pay. It can often be complicated to decide when it is best to use each card.

Advantages of using credit

There are several benefits of having and using a credit. Credit purchases give you extra time to pay. At the end of your monthly credit card cycle, you will receive a bill stating how much you owe for purchases made in the last 30 days. Depending on when you made the purchase, you have up to a few weeks to pay your credit card bill. Technically, you are only required to pay the minimum fee each month but this could lead to future debt.

For example, if you spend $1,000 in a month but only pay your monthly minimum payment of $15 and you spend again next month, you are likely to fall into a debt ripple effect. Each month that you don’t pay off the entire bill, there will be a certain amount charged for interest by the credit card company. A helpful tip is to pay off as much as you can each month to earn better credit and avoid building up debt.

Credit card use can help to build your credit history but only if you use it properly. Each time you purchase something with your credit card and then pay it off on time, your credit history will build up. Building good credit is essential when it comes time to take out a loan, buy a car or even a house. Paying off your credit card bill each month will show that you are capable of paying off debt and can help increase your credit score.

Convenient for emergencies. Having a credit card is very useful and convenient when there is an emergency. If you suddenly need to pay for a repair in your house, you can put the charge on your credit card. In this case, you probably did not plan for this expense, so your credit card company will extend you credit until you pay the bill at the end of the month. Again, this gives you a little extra time to pay for something you weren’t expecting to pay.

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