While cards are a convenient means to make purchases without having to use cash, one has to be keen enough to know the difference between using a debit card and a credit card, and how to use them wisely.

Read below for a quick guide when using a credit vs. a debit card.

What Is a Credit Card?

A credit card is actually a loan or a debt instrument used for purchasing items. You are borrowing from the bank or financial institution against a credit limit. Then, you’ll have to make repayments each month with an added interest rate.

The credit limit, which is the allowable amount of money you can borrow from the bank, depends on your credit score.

You have to be able to make timely repayments for the balance you owe plus the accrued interest. Each purchase is added to your credit card’s outstanding balance.

When to Use a Credit Card?

Use a credit card only if you are capable of paying back what you have borrowed. It may be a good option to use a credit card for making big purchases, as each purchase can build up your credit score.

By paying your credit card balance within 30 days in full, you can gather more points to build up your credit score. This will be the grounds for credit card companies to offer you amazing VIP deals like hotel discounts, travel points, cashback, and other loyalty programs.

What Is a Debit Card?

Similar to a credit card, a debit card has both the logos of a Mastercard or Visa. These logos signify that you can use your debit card at any store or company that also permits the use of a credit card. If your debit card has a Visa logo on it, then you can use it at any retailer that takes a Visa.

When you use a debit card to purchase any product or service, the money is taken directly from your checking or savings account. There is zero interest or any monthly payment when using your debit card.

By having a debit card in your wallet, you won’t have to pay cash or sign a check to purchase anything. You can readily withdraw your money by inserting your debit card in an ATM without having to go to the bank—read even more on this from SumUp.

To ensure a safe transaction when making a purchase, you will be asked to input your personal identification number (PIN). Make sure to keep changing your PIN regularly.

When to Use a Debit Card?

Using your debit card instead of a credit card prevents you from overspending because you are only limited to the amount of money from your checking account.

For minor purchases, a debit card would probably be a better option. Credit cards always have additional interest and transaction fees, so you have to weigh in if it’s worth the extra added fees.

When your credit card balance has already piled up, it is safe to use a debit card. Credit card companies offer notoriously high interest rates. Failing to make repayments within 30 days will cost you additional deficits.

Both Cards have Risks

Debit card owners and credit cardholders can be potential victims of fraudulent transactions.  When the owner’s debit-card information is stolen, there’s a huge risk of losing all the money in that account, with a very slim chance of retrieving it.

Credit cards have fraud protection, but, can still be compromised by scammers and thieves. If your card information is breached, make sure to reach your bank immediately to guide you on what to do. You can freeze your credit card or lock your debit card to avoid any further problems.

Tips on How to Use Cards Wisely

If you are still having second thoughts on which card to use, keep in mind that you have to be responsible in either scenario.

Take note that a debit card has a direct link to your bank account. Be wise enough to spend your money on essential things. You can even save some money for an emergency fund, so you won’t have to borrow money through a credit card.

On the other hand, make sure that you use your credit card wisely. Avoid making that habit of swiping here and there without even thinking about the consequences. A credit card can provide you with investment opportunities, but you have to earn them by being a responsible and trustworthy credit card owner.

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