Debit Card or Credit Card

There are reasons that you would want to have both a credit card and a debit card. They both have their advantages and their disadvantages. Neither is better than the other, they really serve different purposes. That is why most people will carry both credit and debit cards. This gives them the greatest flexibility when it comes to making purchases.

The advantage that a debit card offers is that you can’t go into debt with it. A debit card will only allow you to spend the money that you have already deposited on your card. Given the number of people who have trouble with credit card debt this can be an important consideration. You don’t need to have good credit to get a debit card and you can’t damage your credit with one. This makes it perfect for many people since they can be used in a lot of situations where a credit card would be required without actually requiring you to have one.

The main disadvantage of a debit card is that it does nothing to help your credit rating. Since you aren’t actually being granted credit they don’t make any reports to the credit bureaus. It is important to establish good credit so that you can get a loan down the road for things like a mortgage. In order to do this you will need to have a good credit history. Unfortunately a debit card will do nothing to help you establish a good credit history. There are also some situations where you won’t be able to use a debit card, liking booking a hotel room or renting a car. These types of things will require a credit card.

The advantages of a credit card are completely the opposite of a debit card. With a credit card you are actually being loaned money every time that you use it. Every time that you pay your bill you are paying your loan back. All of this gets reported to the credit bureaus and will help you to establish a credit history. There are also some situations where you will actually need to have a credit card to make a purchase so you will want to have at least one.

The disadvantage of a credit card is that you are borrowing money every time that you use it. While this can help to improve your credit rating you can also seriously damage it if you don’t use your card in a responsible way. If you start making late payments or missing them altogether you are going to destroy your credit. The other bid disadvantage of a credit card is that unless you pay your bill off in full each month you will need to pay interest on the money you have borrowed. Given the high interest rates that come with credit cards this can add up to a lot of money.