Many people are used to taking their debit or credit card with them just about everywhere they go. Both accounts are linked to different banks and it is important that you understand such differences and which type of payment method you should use. Here are some of the major differences and things that you need to think about.
When using a debit card, it is usually linked to your checking account and the money will pull directly from this account. This can be convenient if you do not like to carry cash or a checkbook with you. However for a person that likes to spend money frequently, it is important that you look at your account and balance it often to avoid penalties due to overdrafts on your account.
Some banks will allow you to choose how you would like to have your purchases processed. This means you can have your debit card processed as a credit card transaction. In the majority of cases you are only given $100 for your debit card transactions that are used as a credit card.
In order to make a purchase with a debit card, you need to have a 4 digit PIN number that is given to you by the bank. This will help to ensure that you are the card holder and that no one else can use your card if they do not have your PIN number. It protects your information to keep your bank account information safe from identity theft, credit card fraud, and other issues.
Always have a savings account with emergency cash in it to cover the extra charges you may have from time to time. Since you never know when an emergency ER visit can arise, having some money that can be transferred from savings to your debit card can save you from expensive overdraft fees. Check for banks that offer the highest interest rates on savings accounts to make this type of account a worthwhile investment.
With a credit card you are limited to the total available credit limit. It is important that you know what your balance is on the card so you do not overdraft the card and end up with penalties. A credit card will charge you interest on the balance amount. The upside is that most places will accept credit cards. The retailers will have to pay a processing fee for credit cards, but with the majority of people using them the fee is not that expensive for businesses.
Some credit cards offer kick-backs to the customers in the form of rewards. You can often get cash rewards for using a credit card or you can get other rewards like having travel points for free airfare. Determine what type of need you have from a credit card and watch your spending habits so you do not rack up the credit card debt and end up with a serious situation.