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The convenience of plastic, whether in the form of debit or credit cards, is hard to beat. They both offer advantages, yet have significantly different features and uses. Here is what to consider when deciding if you should make a purchase using a credit card or debit card.
Credit or Debit? What’s the Difference?
Although banks and credit unions issue both debit and credit cards, they are similar in that they look alike and belong to the same networks, such as Mastercard or Visa. However, there are important distinctions between the two surrounding debt.
A credit card is based on a loan from the issuing entity and represents debt to you — the card user. On the other hand, a debit card is self-funded by you through deposits made to the bank or credit union issuing the debit card. In other words, a credit card forces you to incur debt, while a debit card requires you to pay for purchases of goods and services with money you already have.
Advantages of Credit Cards
Credit cards offer many advantages to you as a consumer. Although different cards may have different sets of terms and conditions, those advantages may potentially include:
Advantages of Debit Cards
Similarly, debit cards also offer distinct advantages to you as a consumer which may potentially include:
Like credit cards, terms and conditions may be different between debit cards, so it is crucial that you understand which of these advantages apply to your specific card and which do not.
There’s no “best” card for everyone. Instead, the best card type depends on your unique financial situation, past credit history, comfort with incurring debt, projected use for the card, and what, if anything, you’d like in return for using it.