Both credit cards and debit cards have a place in your wallet. Here’s why you need to understand how they work. Doing so can help you make the right choice when it comes to managing your finances.
Using Cards
Using plastic to pay for things is incredibly convenient. Each day, millions of people opt for this form of payment. They don’t have to worry about carrying cash that can be lost or stolen. Cards fit neatly in your wallet. They are less bulky than a large billfold and certainly easier to have on hand than a pile of dimes.
Not All Equal
At the same time, not all types of plastic are equal. In general, there are credit cards and debit cards. As the experts at Lanern by SoFi point out, “Modern-day credit cards have been around for about 70 years.” That means Americans have been making use of them for decades. If you use your own plastic all the time, you should know there’s a huge difference between a credit card and a debit card.
Some Amazing Advantages
There are many amazing advantages to using a credit card. This allows users to build a credit history over time. In a Lantern by SoFi credit card survey most users cite building credit as the major benefit of working with a credit card rather than a debit card. It’s also an ideal option when you don’t have the money on hand right now. You can use it to buy the things you really want and need like groceries. Once you have your paycheck on hand you can pay back the card.
Be Careful
While there are many advantages to having a credit card on hand, there are a few disadvantages that you should know about before you make the choice to apply for one. Managing credit is a crucial skill that can take some time to master. It’s also a skill that requires you to pay close attention to your budget every single month. You need to know how much you are spending on certain items. The credit card will not tell you this fact automatically. You will need to keep a careful tally of your expenses in order to avoid exceeding your budget in any given month. That can be tricky.
Making it Work
A debit card takes funds out of your account right after you use it. You don’t have to pay interest on the funds. However, you will need funds in your bank account to cover this amount. If you don’t have these funds and you still buy things, you could also be subject to all sorts of problems including bank fees. That means this also requires a lot of attention to detail and a great deal of understanding of your finances. That’s why both methods mean you will need to create a budget and stick to it in order to avoid fees.
Understanding how both cards make your life easier.
