Debit & Credit : 2 Very Different Cards

credit and debit two very different cards all right so let's talk about credit and debit cards both are used in place of cash to pay for things you buy both are convenient and accepted almost everywhere both are made of plastic and probably yeah in your wallet right now and both offer you know some kinds of fraud protection and security especially when compared to cash right but do you really know the advantages and disadvantages of each hmm or what makes them different from each other do you well there's actually a lot separating the two yeah so let's start by taking a look at your daily routine shall we okay this is fun say you're out and about and you stop for a cup of coffee latte my fave because you know you like to treat yourself right you deserve it you get to the register pull out your wallet and the cashier asks you credit or debit here's the thing it's a question we hear almost every day but don't really think about that much you know I mean what's the what's the difference between the two which which one should we use and when and most importantly why is it so important to know the difference all great questions and the best way to answer them is to take a look at the pros and cons associated with each but first lets you know clearly define each type of card a debit card is a payment method that's linked to your bank account so the money you spend comes right out of your own personal checking or savings account easy-breezy a credit card is also a payment method but instead of tapping into your own money your purchase is paid for temporarily using someone else's money like the bank or card issuer this of course comes at a price interest okay now for the pros and cons let's start with debit after you swipe that debit card money is automatically taken out of your account yeah so you know in this way it's a lot like using cash except more convenient since you don't have to carry cash any of it plus it's also great for keeping track of what you spend because if you're enrolled in online banking you can review your transactions online or you can always check your balance at the ATM oh and speaking of ATMs let's say you need some paper money well your debit card well you know it's usually combined with your ATM card meaning if you have money in your account you can usually get cash wherever you can find an ATM which these days is pretty much everywhere but remember to avoid those ATM fees be sure to use your own bank's ATM another plus is that many stores that you know they allow you to take cash out at the register yeah all you need to do is use your PIN but good question here we go what if you leave your card at the register or it falls out of your pocket somewhere along the way can anyone just pick it up and start making cash with Charles too well thanks to your PIN number most likely they can't know your PIN is an identification code that adds a layer of security making it difficult for anyone to access your money you know I mean it's important to safeguard your PIN to keep your money safe so so don't give it to anyone and in those cases where let's say someone gets hold of your debit card and and uses it for something where your PIN isn't required well luckily most banks have some kind of fraud protection policy in place that can help protect you if this happens and here's one more benefit of your debit card you don't pay interest on your purchases like you would with the credit card so your latte may be overpriced but as long as you have the sufficient funds in your account you only pay the price that's listed making your debit card a great way to avoid the interest that can come with buying on credit so those are the pros debit is convenient secure interest free and some people find it easier to keep a budget now let's talk about a few of those cons first your card can be declined this happens when you don't have enough cash in your account to cover your purchase getting the Klein happens sometimes even to the best of us and while not being able to complete a purchase can be frustrating it does protect you from spending the money you don't currently have do keep in mind that some banks allow customers to overdraw their checking accounts for a fee if you think this might be a useful feature for you check with your bank to find out their specific policies okay so now let's rewind a little bit the loop and talk about credit cards some people think of credit cards is is working like like short-term loans because essentially you're borrowing money from a bank or card issuer to pay for your purchase you know and when it's that time to settle up if you've carried a balance from one billing cycle to the next you know most likely going to have to pay interest in addition to being useful for making everyday purchases a credit card can really come in handy in emergency situations when you're short on cash so let's say you find yourself stranded on the side of the road because a big ol pothole just took out a couple of tires a credit card is a good thing to use for a tow and new rubber the thing to remember is you have to pay for it later and speaking of pain when you pay your credit card bills on time guess what good things happen to your credit overall in fact if you pay your bills on time stay within your credit limit and pay more than the minimum balance on your card I mean you can improve how your credit is evaluated that's huge and you know that might qualify you for lower interest rates on loans and credit cards which is great news if you're looking to take out a mortgage or something like an auto loan in the future lots of credit cards come with extra perks too you know like grace periods that allow you to make purchases with without interest as long as your balance is paid in full each month or rewards points that can be used for all sorts of things like like airline miles or hotel stays and you know some cards even offer cash back every month in fact if you already carry a credit card you know you might be missing out on features you don't know about things like gum travel insurance or purchase protection that's a great one you know that's that can really come in handy when you're buying a big-ticket item like a new brand new washing machine or a cool laptop you know in fact when something goes wrong with the purchase I'll call to your credit card company can make the difference between you fighting to get your purchase refunded or replaced on your own and having the power of a big company on your side to help you out which is nice fraud protection is another big benefit of a credit card let's say someone gets hold of your card and uses it you might not be liable for what they buy with your good name and this is true of debit cards as well but you know the policies you know they might be different so as you can see there there are clearly many benefits to using credit cards but you know there are some potential downsides as well and those typically come about you know when you don't use your card responsibly like when you miss a payment you'll be hit with late fees and your annual percentage rate or APR can also rise even worse it can have a negative effect on your credit you should also be careful about going over your credit cards limit because because if you do you'll likely pay for it in fees another thing to look out for is overspending some cards they'll give you pretty high spending limits and without discipline you know you can end up spending your way into a place where you may not want to be unnecessary debt a and that's a hole that can be hard to climb out of so credit or debit the choice is yours and and that's what we're really talking about here making a smart decision and understanding the pros and cons that come with each so the next time you're standing at that register you know you'll know that whichever card you decide to use you'll be using the one that's right for you it's the kind of knowledge that helps you sleep better at night unlike that extra-large latte you just bought yourself you

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Views: 550,370

Rating: 4.8428946 out of 5

Keywords: debit, credit, card, pros, cons

Id: XbtSftL6dbY

Length: 8min 10sec (490 seconds)

Published: Wed Oct 16 2013