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Credit Card or Debit Card – Which and When?
  • June 23, 2021
  • admin

Experts often warn people against using credit cards, although they are a very convenient option to purchase when cash is not in your hand. Some suggest dumping credit cards to prevent you from racking up your credit card debt.

However, this suggestion targets those users who are not responsible for handling credit card bills. Many people keep borrowing money against the credit card and do not pay off the bills on time and, as a result, keep accruing the debt. However, they do have the option of 24-hour loans in Ireland to consolidate the debts. Still, looking for permanent solution is imperative.

Just then, the credit card shifts from the convenient plastic card to a high-interest debt causing card. Although credit cards are very convenient, they provide you with a lot of benefits. If you use your credit card responsibly, you can take advantage of those benefits very conveniently.

The other card you may be familiar with is a debit card. You generally know the fundamental difference between both cards. This blog discusses the difference in detail.

Credit card cost vs debit card cost

When you are using a credit card, you are borrowing money from your credit card issuer. The limit of borrowing varies from card to card, and it depends on your credit score and reputation.

Some credit card companies provide a line of credit facility, which means even if you pay off a small amount of your debt, you are eligible to borrow that money down the road.

However, whatever the feature your credit card issuer offers, you will have to pay interest if you do not pay off the balance within the interest-free period.

While a credit card allows you to use money that belongs to your credit card issuer, the debit card allows you to use money that you already have, which means you do not have to pay interest on it.

The money in your account will decide your spending limit. Therefore, there is no cost of using a debit card as long as you have enough money in your account, which you want to use. It is because otherwise, you will have to bear the opportunity cost.

Risk and rewards

Although credit cards can cost you a lot of money in the form of interest if you do not pay back the money within the grace period, they also offer a lot of benefits like discounts, travel points, cashback on purchases, and other rewards.

How much you will likely get cashback on the purchases depends on the type of your credit card. However, according to a survey, people could save about €250 through cashback. However, if you want to take advantage of cashback, you will have to use your credit card sensibly.

If you are accruing interest because of late payment fees, of course, you will not be able to receive these benefits. They work for those who are financially responsible. Many people use credit cards because they want to avail themselves of such benefits.

Another most significant benefit of using your credit card is that it helps improve your credit score. If you pay back the whole of the money within the grace period, your credit card issuer will report it to credit reference agencies, and as a result, your credit score will go up.

Once your credit score improves, you will be able to apply for small loans like doorstep loans in Ireland at affordable interest rates. This can even let you apply when you are unemployed and need money to tide over.

Debit cards do not offer much benefit. They impose a higher risk in case of theft. You may be responsible for part or the whole of the damage depending on how quick you have been to inform your bank.

However, when your credit card is stolen, you are not responsible for the damage at all. Further, debit cards do not contribute a role in improving your credit scores.

Of course, you know now that both credit cards and debit cards are poles apart. You all have been using credit cards for a long time, but you must be using them sensibly because they are subject to some risks as well. So here is how you can become a good credit card user.

  • Be slow

When you receive your first credit card, you can be tempted to make a big purchase. As far as it is about building your credit score, you should start with a small amount that you can manage to pay back within the grace period. Make sure that you have analysed your budget that you will not behind the repayment.

  • Choose a credit card smartly

Note that there are various types of credit cards that companies issue. Therefore, it is essential to research before choosing the one.

Not all credit cards can help you build your credit score, nor can all of them have to offer various benefits and rewards. Make sure that you have asked the credit card issuer all relevant questions to make a decision.

  • Use the card when it is urgent

No matter how convenient the credit cards are, you should use them only when urgent. Then, you should try to use cash to make a purchase.

If you use a plastic card, you can end up making a big purchase without realising that you are overspending. As a result, you will end up racking your credit card debt. So use these cards only when you cannot access cash, and it is very urgent.

As far as it is about risks and benefits, both cards have them. However, it is crucial to be careful while using your credit card because it is riskier than a debit card.

The tips mentioned above can help you be a better credit card user. Using your card smartly, you can build your credit rating and avoid falling into a debt trap.

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