It’s not news that most Americans are following the trend of using credit cards over debit cards. Across the country, the number of people using debit cards is declining. It hit an all-time high in 2016, when only 1/3 of Americans used debit cards.
Although this has not always been the case, the number of people who prefer to use credit cards is increasing. This article will show some basic differences between the two types of cards and outline the pros and cons of using both.
Credit card vs debit card
Although credit cards and debit cards may seem indistinguishable from each other, they are different in the way they are used. Debit cards are used to have safe and easy access to and spend your own money. Credit cards are used to store the money you borrow from a lender. The lender also charges you an interest rate for the service of providing you with a loan.
Use a credit card or use a debit card
When deciding whether to go with a debit card or a credit card, the rule of thumb is to use the card that meets your goals. Debit cards are good if you are not interested in paying off your debts. They are also suitable for spending the money you already have in your account. On the other hand, if you want to build your credit score and get rewards for your daily expenses, go for a credit card.
Benefits of using a credit card
One of the main advantages of credit cards is that they can be used to establish a good credit rating. When you take out credit, your reliability in paying it off on time positively affects your credit score. The higher your credit score, the more likely it is that lenders will approve your applications for loans that you can use to buy a home or car.
Benefits of using a debit card
Using a debit card is pretty much spending money. The major benefit of using a debit card is to manage and control your spending.
Disclaimer: The information on this site is provided for discussion purposes only and should not be misinterpreted as investment advice. This information does not in any way constitute a recommendation to buy or sell securities.