Credit cards are not debit cards. Simple. They have different names, because they are different. Yet, still many consumers use credit cards as a replacement for their debit card or cash.
How many times when the cashier has asked ‘credit or debit’, have you selected credit because you weren’t certain of the financial girth of your checking account?
Using credit cards in this manner can end up causing the consumer money and propelling them into debt.
“Credit is a completely separate entity,” said a representative at Credit-Land. “Many people don’t know the ins and outs of a credit card, and due to engrained spending habits continue to use credit cards ineffectively.”
Here is a quick refresher course in the difference between a debit card and a credit card.
How should I properly use a debit card?
Debit cards work best as a replacement for cash. Debit cards allow you to have instant access to your bank account, which is loaded with cash that you have put in. Daily purchases like groceries, clothing, school supplies, gas, etc., are more cost efficient if put on a debit card when cash is unavailable. A debit card is not connected to your credit score and will not charge you any APR or interest fees. Debit cards are great resources for everyone. They provide beneficial access to large or little sums of money—both dependent on you.
When consumers use a debit card like a credit card, they run the risk of running into overdraft fees and balance transfer fees if applicable.
How should I properly use a credit card?
Credit cards should be used for larger and more expensive items. For example, fixing the radiator on your car or purchasing a new laptop would be suitable credit card purchases. These items can be very expensive, and if paid for with cash or credit can leave a consumer without finances. A good idea would be to implement a rule, as in: ‘I will only use my credit card for purchases over $500.’ Breaking up a purchase like this on a credit card is sensible because it makes the payment more manageable for the consumer. If a consumer were to use a credit card like a debit card
When consumers use a credit card like a debit card they tend to accumulate excess sitting debt. Making everyday purchases with a credit card puts you into a cycle that will literally never end. The decision to use credit for large ticket items will show on your credit card statements, report and score.