It is no 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 decreasing. It has hit an all-time low in 2016 when only 1/3 of Americans were using debit cards.
Although this wasn’t always the case, the number of people who prefer using credit cards is on the rise. This article will show some basic differences between the two types of cards and highlight the advantages and disadvantages of using both.
Credit Card vs Debit Card
While credit cards and debit cards may seem indistinguishable one from another, they are different in how they are used. Debit cards are used to have safe and easy access to your own money and to spend it. 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 a loan.
Using a Credit Card vs Using a Debit Card
When deciding whether you should opt for a debit card or a credit card, the rule of thumb is to use the card that accommodates your goals. Debit cards are good if you aren’t interested in paying off debt. 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 spending, then opt for a credit card.
Advantages of Using a Credit Card
One of the major advantages of credit cards is that they can be used to build a good credit score. When you take out credit, your reliability in paying it off on time positively affects your credit score. The greater your credit score, the more likely it is lenders will approve your requests for loans that you can use to buy a home or a car.
Advantages of Using a Debit Card
Using a debit card is pretty much like just spending cash. The major advantage of using a debit card is to manage your spending and keep it in check.