June 26, 2012
Take advantage of the benefits of credit cards and debit cards
Use one card to make purchases more convenient and secure.
While consumers have become savvy when it comes to managing their money, many could take greater advantage of using either a credit card or a debit card by better understanding the benefits of each.
Below are considerations to help individuals choose for themselves when the benefits of using a credit card outweigh those of using a debit card, or vice versa.
Benefits of debit cards:
• Withdraw cash when making purchases. Debit cards not only allow access to cash from ATMs, but also the ability to withdraw money when making a purchase.
• No balance due at month's end. Charges made using a debit card are pulled directly from a savings/checking account and not added to a credit card balance. Some consumers like the freedom of not worrying about a balance at the end of the month and are able to better establish a monthly budget.
• No due dates. To avoid interest charges, credit card users must pay close attention to due dates and pay off their balance. Debit cards, on the other hand, pull money from a savings/checking account immediately, eliminating worry about when a balance will be due and any interest that could result from missing the payment due date.
Benefits of credit cards:
• Earn rewards on daily purchases. Many credit cards earn rewards. And if consumers pay off their credit card when the payment is due, no interest will accrue on everyday purchases such as gas and groceries.
• Building credit history. Using a credit card responsibly may help to build good credit, which may make it easier to get loans and better interest rates.
• Funds to make large or unexpected purchases. Whether it's a large purchase, such as new furniture, or an unexpected expense like a last-minute home repair, credit cards offer access to spending limits typically greater than one's checking account balance.
• Security benefits. Credit cards offer the security of funds not being tied directly to a savings/checking account, as they are with debit cards. So if fraudulent activity occurs, the funds in a savings/checking account are not depleted.
The decision as to when to use a credit card versus a debit card is a personal one, as there are benefits to both, and no two people manage their money in exactly the same way.
—North American Precis Syndicate, Inc.