Credit Card vs. Debit Card

Chances are you have at least one of both types of cards in your wallet, but which is the all-around better choice? When it comes down to a credit card vs. debit card, both offer benefits and possible cons. How much a card will help you or put you at a disadvantage depends on your spending habits, credit report, and how much you have in the bank. Compare credit vs. debit below to learn more!

Credit vs. Debit: What to Know About Credit Cards

Credit cards are issued to approved cardholders by credit unions, banks, and other financial institutions in Detroit. When a cardholder activates their card and begins using it, they’re obligated to repay the money plus interest. Generally, there are four credit card types:

  • Standard Card — gives the cardholder a line of credit.
  • Rewards Card — includes special bonuses, such as travel points and cashback rewards.
  • Secured Card — requires a cash deposit to be used. These are good options for first-time credit cardholders.
  • Charge Card — doesn’t allow unpaid balances to carry over into the next billing period but also doesn’t have a spending limit.

The most important thing to note about credit cards is that their use impacts your credit. When you apply for a credit card or loan, your credit score showcases your “creditworthiness” while your credit report allows lenders to delve deeper into your credit limits, debt-to-income ratio, how often you’ve made payments on time, etc.

If you use a credit card wisely and don’t buy into credit building myths, a credit card can be an effective tool in boosting your credit score, furthering your chances of getting approved for a car loan, a mortgage on a new home, low interest rates, and more. Using a debit card, however, doesn’t impact your credit score one way or the other.

Credit vs. Debit: What to Know About Debit Cards

If you have a credit union or bank account or do your banking online, you probably have a debit card. Debit cards are a physical link between a cardholder and their checking and savings accounts. There are three types of debit cards:

  • Standard Debit Card — allows a cardholder to complete a transaction and draws the money from their accounts electronically.
  • Electronic Benefits Transfer (EBT) Card — allows a cardholder to make purchases with state and federal government-issued cash and/or food benefits.
  • Prepaid Debit Card — functions like a regular debit card but includes a pre-loaded spending amount and isn’t connected to any account.

Unlike credit cards, debit cards don’t require fees (pre-paid debit cards often have activation and usage fees). Also, because you’re using your own money, you don’t have to worry about paying interest. In addition to convenience, one of the strongest cases made in favor of debit cards is debt avoidance. When you have a credit card with a high spending limit, it can be more tempting to impulse-buy. Making more purchases with your own money forces you to think more frugally and decide what you really need.

Get More Financial Info from Public Service Credit Union!

Now that you know the differences between a credit card vs. debit card, you can make the right decisions for your wallet! Do you have more questions about credit unions, such as how to choose one? Or, are you looking for tips on how to prevent credit and debit card fraud? Contact us at Public Service Credit Union for more information and one of our representatives will be happy to assist!

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