Credit Card vs. Debit Card

by Shelton on December 14th, 2014

filed under Cash Advances

We all have them in our wallets, using them every day to pay for things without actually handing over physical cash. Credit cards and debit cards are both methods to make payment electronically, but there are significant differences in how they operate. Understanding those differences is important and can influence you decision on whether to make a payment with a credit card or a debit card.

Credit Card

Credit cards are effectively a pre-approved loan (at a set limit) from the issuer that you can use whenever you have funds available on the card. Important aspects of credit cards include:

  • Any balance you have on the credit card at the end of your monthly billing cycle will incur interest.
  • Interest rates on credit cards are universally on the high side, often exceeding 20% per year.
  • Cash advances on credit cards often involve a fee plus even higher interest rates.
  • Credit card usage contributes to your credit rating. When you make your regular payments your credit rating can improve, but if you miss payments it can have a major impact on your credit rating. Credit cards are often the first way for an individual to start building up a credit rating.
  • Security of credit cards is low, particularly in the US where personal identification numbers (PIN) are not commonly required for use. Credit card fraud costs stores and banks billions of dollars a year.
  • Liability for individuals on the other hand is low. When fraudulent activity occurs on your card you don’t often have to pay for it.
  • You can set daily limits to ensure if fraud occurs the amount of funds accessed is limited.

Credit cards can be very useful credit tools when you need access to cash you don’t have immediately at hand and when it comes to building a credit rating. They do need to be used with caution, however, as the interest charges are substantial and many people with out of control credit card balances are forced into bankruptcy.

Audit shows improving finances in Gretna

by Shelton on December 14th, 2014

filed under Finances



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Audit shows improving finances in Gretna
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