Credit Card VS Debit Card: Which Is Better?

With the slump in the economic growth of the country, using credit is not always the way to go. It really is not a matter of which is better. Both debit and credit have certain advantages and disadvantages.

Both are useful, because today a lot of places prefer that you use plastic instead of paper. Though most people think of them as being the same they are really two different types of cards. While I do a lot of small business consulting, I also do a great deal of pro-bono financial consulting to those in debt. I find that many, in business and personal life, confuse these two.

Credit cards are a way to borrow money a little bit at a time and the debit card is a way to use the money you already have. Read on to see the advantages and disadvantages of both and then you can decide which is the best choice to meet your needs.

The Credit Card

With a credit card although you have instant access to money it is not your money. It is loaned to you and you have to pay interest on it. This is an additional fee. The credit cards have yearly fees, service fees and even maintenance fees. That is a lot of extra money that you will be spending for the use of someone else’s money.

Then you have to think about what happens when you cannot pay or are late making a monthly payment. You incur another fee which is about 25-30 dollars depending on the card.

The good thing about the credit card is that you do not have to have ready cash to use it. Credit cards are accepted almost everywhere. Credit cards send information to the credit reporting services and this could be either a plus or minus depending on your situation.

The Debit Card

This is a card that allows you to access your funds that are in your bank account from point of sale or ATM’s all around town. Most businesses are now treating the debit card as if it were the same as the credit card. Most of the banks now offer some form of fraud protection these days and you have to now have a pin number to get at the funds in the account.

The disadvantages associated with a debit card are that, if you are not careful you can easily overdraw your bank account. This results in huge overdraft fees and could even get your account suspended. Another scenario is even more potentially damaging. If you were to, for instance, buy web hosting for your website using your debit card, and you ran out of money in your bank account and couldn’t pay, you could end up losing your website for a few days or weeks. While this is a “worst case scenario”, if your website was a money-generating website, this could cause some big problems. The other disadvantage is that you can only spend what is in the account so it cannot be used for more expensive purchases like tires and such.

In conclusion, both are good to have as a duo. You can control your impulse spending by making those purchases only on the debit card and saving the credit card for true emergencies. If you are trying to rebuild your credit the best thing to have can be a secured credit card.

You get the benefit of having the information about your payments sent to the credit reporting bureaus. A debit card cannot help in this area. Now it is up to you to decide, debit or credit…which is best for you?

Pat Lindle is a veteran of the small business consulting industry. For those entrepreneurs looking to buy web hosting, Pat Lindle is experienced in which types of web hosting are best for you company.

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