In part one of this series we explained some basics about debit and credit cards: how they work and some fundamental differences
Let’s move further and analyze the benefits and drawbacks of debit and credit cards.
Benefits of debit cards
- There is no question of liability in case of debit cards as the money charged to the card is deducted directly from your savings bank account. It is a good mechanism of self control if you constantly find yourself in debt as it allows you to spend only based on what you have.
- Debit cards can be easily applied for if you have a savings or current bank account, no credit checks are required to get this card.
Drawbacks of debit cards
- Everytime you charge your debit card, money from your savings account is withdrawn, meaning that if you lose control, you potentially lose all your hard-earned savings. Overdrawing from your account may also lead to overdraft fees.
- There are fewer rewards programs and privileges associated with debit cards.
Now, let move to credit card section.
Benefits of credit cards
- You are allowed to spend the money you don’t have yet, until your spending reaches your credit limit, of course.
- You can earn a better credit score if you consistently make punctual repayments on your credit card. This helps to obtain your future loans easily for better rates.
Drawbacks of credit cards
- Interest. This is unique to the credit card, in return for allowing you to spend money you don’t necessarily have yet. It is essentially borrowing money. You must repay this amount in time or interest is added to your outstanding amount.
- Failing to repay your outstanding bills on time may lead to a weaker credit score.
Here are a variety of credit card
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