Credit Card or Debit Card or Charge Card? Which Card You Need?

Many people can’t decide which card type would suit them the best. Would it be a credit card? A debit card? Or a charge card? Well, they can’t decide. In this article, I’ll discuss their differences (For absolute beginners), and then their pros and cons.

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The differences

I should start by describing the differences between a credit and a debit card. Both have 16 digit numbers, a PIN code in the back and expiration date. The difference between them is quite simple to comprehend.

A debit card is issued against a savings account. Whatever money you spend, is drawn from the deposit account that you have with the bank. When it comes to a credit card, it’s different. When you are using a credit card, the money that you are spending is not yours. It belongs to the agency that issued you the card. You are only borrowing money from that agency.

Charge card

A charge card has structural similarities with a credit card. When you use a charge card, it generates a line of credit. But you are supposed to pay it down at the end of a calendar month. If you don’t pay the money in time, a separate fee would be generated, which you’d have to pay; it’s sort of a late fee.

Debit card pros

There are a few advantages of debit cards, which is why, they are most widely used. The first benefit is the cardholder can avoid a fee. It’s very simple, all he needs to do is not to pay more money than what he has in his bank account. That’s all!

A debit card helps you control your spending because the moment you go beyond your account limit, you are slapped a fee. You wouldn’t want that, do you? With a debit card, you’d spend a bit reluctantly, and be frugal. Besides, debit cards don’t generate interest and other charges if you pay off your balances.

Debit card cons

Since debit cards are a safe option, they don’t have too many cons. Two disadvantages that come in mind are the absence of the reward program, and secondly, always having to check the account balance driven by the fear of overdrafting.

Credit card pros

With a credit card, you can purchase anything and everything. You don’t always have to deal with the two voices in your head. You like something, you purchase it. Simple. There are rewards too. You can enjoy discounts on purchases, travel points, and many more. If you promptly pay off the debt that your credit card generates, your credit report would reflect that, and make it fairly easy for you to secure a loan.

Credit card cons

Alongside the pros, there are few cons of having a credit card. Credit cards are flexible as they let you buy stuff even when you don’t have any money in your bank. But this is double-edged sword because the line of credit generated against your card needs to be repaid.

If you are in a financially distressing condition, it’d be incredibly hard for you to pay off the loan. The interest rates on credit cards are huge, and people desperately look for ways to cut down on it. In the United States, an average person has a debt of more than $46000. Such an enormous amount of debt is pulling the country down, you’d add to the debt problem.

That’s not all. If you fail to pay down the debt in time, your credit report would reflect that, making it difficult for you to get a loan in the future.

Charge card pros

Just like the credit card, a charge card eliminate the need for you to produce hard cash at the time of purchasing something. Charge cards also come with excellent reward programs, offering 5% cashback on certain purchases. Additional services and facilities also come with those cards.

Charge card cons

Charge cards (not all) require the cardholder to pay an annual fee. Besides, the fear that a line of credit will keep on accumulating, and you won’t be able to pay down the debt is palpable with charge cards too. Obtaining a charge card is not easy either. Companies that issue charge cards are quite strict in deciding whom they will issue the cards. Unless a person has decent credit, they won’t issue him the card.

Understand your priorities

To decide which card is suitable for you, you need to sort your priorities. Are you a shopaholic or a frugal person. If spend like a crazy maniac after entering into a retail outlet, a credit card may be what you need.

On the other hand, if you are frugal and need a card only for situations where you don’t have money to pay, you need a debit card. If you have excellent credit, and expect a robust bonus program, go for a charge card. Hence, what you need depends entirely on who you are.

What do you think of the article? Do you have a debit, credit or a charge card? Is the card right for you? Why so? Let us know in the comment section.