OnPath Credit Union

Debit vs. Credit Cards

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Take a look at your wallet. Most Americans carry several different payment cards in their wallets; some debit, some credit. Maybe you have a system in place for which card to use when, or maybe you use one type all the time. But do you really know the difference and when it is more beneficial to use one over the other? Below, we’ll put debit cards and credit cards in a one-on-one showdown to see where and when using them may be best for your finances.

 

Debit Cards

First up: Debit Cards. Debit cards are cards that are directly linked to a savings account, checking account or group of accounts at the same financial institution. Typically, you can withdraw or spend money directly from checking, savings, and even investment accounts.

You can also use your debit card at ATMs to withdraw cash or to get cashback at most registers—if funds are available.

 

Trainer Tip: Even when using your debit card, choose to pay by ‘credit’ when asked at the register. By using credit, it saves your credit union fees, which in turn allows them to pass savings on to you. The money still comes out of your bank account directly with no interest or extra charges to you.  

 

Credit Cards

Credit cards are popular, but a little more complicated. When you use a credit card, the money is not linked to your savings or checking account, so your account balance doesn’t matter. Instead, you can use a credit card on purchases until you reach your credit limit. When you first apply for a credit card, the issuing institution will let you know what your credit limit is, along with other terms. However, just because you may have a credit limit of $10,000.00, does not mean you necessarily want to spend that much. Remember, you’ll have to pay it back. Plus, unlike debit cards, any purchase will also come with an added interest charge at a rate determined by your institution. That means a $100 purchase could end up costing you $120 or more, depending on how long you take to pay it off.

 

That doesn’t mean credit cards are all bad – they come with many benefits as well. For example, many credit cards have rewards programs that can save you money on purchases, gas, and travel. Using a credit card and paying off the balance each month can also help increase your credit score.

 

Trainer Tip: Some financial institutions offer pre-paid credit cards, which require you to pay a deposit or a certain amount up front for you to use and borrow against. This is an easy way to start building credit, without the danger of running up a large borrowed balance.

 

The Showdown

Now that we know a little about the contenders, let’s see how they stack up against each other. It may to help you to choose where, when and how to use your card(s) effectively:


At OnPath Federal Credit Union, we offer a credit card for everyone, whether you just want a low rate, want to earn rewards on everyday purchases, or need to rebuild your credit, we have the card for you. Learn more about the OnPath FCU Credit Cards here.