06.22.07 | Credit cards vs. Debit cards: Which to get?
If you have an account with a local or national bank, most likely they’ll offer you an ATM card with a Visa or Mastercard logo. These cards (called “debit cards”) can be used at any store that accepts the Visa/Mastercard as well as your local cash machine. So, how does it differ from a regular credit card?
Say you buy the new Kelly Clarkson CD for $14.99 using your debit card. Swipe, sign, and bag it. Since the debit card is connected directly to your bank account, the $14.99 is automatically deducted out of your account. No bills in the mail from Chase or Citibank.
Using a credit card for this purchase, such as these cards geared towards students, would add Ms. Clarkson’s vocal stylings’ $14.99 to your current month’s bill, which you pay off when it comes in the mail.
What are the benefits of using each one?
The debit cards are certainly more convenient. The account is tied to your bank account and there is no bill to pay (or accrue interest on). It also doubles as your ATM card, which is a nice plus. However, there are a few reasons why they aren’t as powerful as credit cards (and why I don’t have one). Let’s say your wallet is stolen. Mr. Thief decides to rack up a series of charges on your debit card. Since he/she can most likely fake your signature, AND the amount is yanked from your bank account, it is very tough to get that money back. I’ve seen ads that say there is no risk with debit cards, but I find it tough to believe. At least with a credit card, you see an itemized bill before you actually pay it. Find an incorrect charge? Call up your credit card issuer and tell them!
Additionally, since the credit card companies are hoping and praying that you rack up thousands of dollars of interest (a.k.a. profit) they offer many more incentives to use their card. You can earn points, frequent flyer miles, and all the other stuff I spoke about. These are some very nice perks. Finally, you have the opportunity to build up your credit score, which isn’t effected when using your debit card.
At the end of the day, it’s up to you which one you choose. In my opinion, though, if you don’t mind carrying an extra card with you and can pay off the balance each month, the perks and niceties of the credit card outweighs a bank’s debit card by quite a bit.
