Compare Debit Cards And Credit Cards

Many people use credit cards for their convenience but they pose a high risk of overspending since you can buy on credit and pay later, regardless of whether you have the money or not. While cutting all your credit cards to stop your spending habits sound too drastic, switching over to debit cards will be an easier solution. These VISA or MasterCard debit cards are equally widely accepted at all merchants worldwide.

Advantages Of Debit Cards

Using debit cards, you enjoy the same convenience of making purchases without carrying cash and there is no risk of running up card debts since the maximum amount you can charge is up to the deposit you have in the account. Debit cards only allow you to buy things you can afford and but with your future earnings. When you make a purchase, the amount is deducted electronically from your account instantly. Therefore, if you have insufficient funds, the transaction will not go through at all and you will be stopped from buying.

The main difference between VISA or MasterCard debit cards and normal bank ATM cards is that the former is accepted by more merchants within the US and in other countries. Note that you should check your debit card account balance regularly especially if you frequently issue checks. If the balance is running low, you may end up with unnecessary bounced check fees as well as bad credit records within the bank.

Banks offers a interest free grace period for your credit card purchases if you carry a zero balance on your account. That means you pay your credit card bills in full and on time every month. Funds are deducted from your debit card account the moment you try to charge an expense to it. This means credit cards let your money earn a tiny bit of interest instead of paying for your purchases immediately.

It is easier to dispute charges for problematic merchandises especially when you buy online. Most issuing banks allow you to dispute charges within 60 days after the purchase and the dispute resolution is usually in your favor. However, many debit cards do not offer such guarantees and the dispute window may be as short as 1 week.

Debit cards do not offer as many benefits as credit cards such as reward points, free travel insurance, discounts at selected merchants, etc. If you have good credit, you can qualify for rewards credit cards with no annual fees.

Besides banks, some large investment firms such as TD Ameritrade and Vanguard issue VISA or MasterCard debit cards that are linked to asset management accounts. An advantage of using such investment firm checking accounts is the natural mentality of trying to cut down on spending so that you have more cash for investments. However, be sure to choose your investments carefully in accordance to your age, financial goals and risk profile. Otherwise, you may lose a lot of money in bad investments. The main disadvantage with investment account linked debit cards is they need an account opening deposit of $5,000 or $10,000. Banks usually require only a small $500 opening deposit for checking accounts and guaranteed issue debit cards for bad credit.

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