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Credit Card Versus Debit

Credit and Debit Cards may look a great deal alike. But just because it walks like a duck, it just might be a penguin... or maybe a kangaroo. Not knowing the characteristics of each can create some difficulties.

Credit Cards

To begin with, all ducks are not alike. Guess what-- not all credit cards are alike, either. So it pays to shop for the terms that you need in interest rate, functions, and benefits. Additionally credit card companies themselves calculate charges and apply benefits in different ways. You need to read the disclosure's fine print to determine how your particular card works.

When selecting a card, you need a card to fit your purpose. Perhaps you need a card as a convenience and you plan to pay the entire balance every month.

Another consideration is that bonuses may have drawbacks as well as perks. Flyer mile cards, auto discount cards, and such are not in business to loose money. They may have higher interest rates, enrollment fees, limiting features, or benefits paying only after a selected plateau. Bonuses are not the only area requiring that you check the fine print. Sometimes that "low interest rate" is an introductory offer only. In other cases if you are late on your payment, low rates disappear for future purchases.

The bottom line is you need to know the terms before agreeing to the card. You should know as a minimum:

  • the annual percentage rate
  • grace period to pay the full balance without being charged interest
  • if there are any annual fees
  • how finance charges are calculated
  • if there are any transaction charges for such things as balance transfer, late payments, cash advance, going over your limit, etc.

Most consumer advocates agree that you should also be on the lookout for one additional sentence: "We reserve the right to change the terms of this agreement."


Debit Cards

Debit cards have doubled in the last two years, according to the research firm (See link below). Similarly, 20% of credit transactions are now done with a debit card. As reported by, "... debit cards are still used mostly for ATM cash withdrawals,... usage for merchandise purchases was also common, as 40 percent of households with debit cards used them monthly for merchandise purchases, according to BAIGlobal’s studies. Grocery stores, gas stations and discount stores were the most common types of establishments where purchases were made. "

By far, I support the use of the debit card because there is no interest accrued against its use. There are usually no fees if you are careful where you use it. (Look for this perk when getting your debit card). There are also minimum concerns about repaying the purchase because the money is automatically withdrawn when you use it. Debit cards look like a credit card and to a certain extent act like one specially if someone won't take your check. But because the amount comes straight out of your account, You may have a financial fiasco if a debit card falls into the wrong hands or you do not immediately deduct transactions from your checking account.

Unlike automatic teller machine cards that require you to enter a personal identification number (PIN), debit cards often look like credit cards. And if used as a credit card, they do not require a PIN, They can be used very easily at any cash register. But, as mentioned, the money for the transaction is immediately transferred from your checking account unlike a credit card. If a thief gets your debit card -- or even just the account number of your debit card -- they can clean out your account along with any overdraft protection. That may also mean checks already written probably will not clear. With a credit card, the worst case scenario often is only $50 liability.

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