Debit Cards and Credit CardsSTEP 1: SUBTRACTION
Debit Cards are not Credit Cards. Know the difference! Both types of cards don't add credit/money to your account! When a Credit Card says you have a $10,000 dollar limit. That does not mean you have $10,000 of free money given to you to spend! That money isn't yours! You have to pay that back and with INTEREST! This is the type of interest you don't want! A Debit Card looks just like a credit card but it is connected directly to your bank account. So if you have $500 in your account that is how much you have on your Debit Card. Both of these items have many conveniences and flaws that can put you into the RED extremely FAST. Neither of them put more money into your account. Think of them both as plastic Zeros. Credit Cards don't give you money they let you take money from someone else. Debit Cards take money out of your own account. You don't gain anything.
Credit Cards are things you do not want to have unless you know you can afford them. Think of them as Loan Sharks. You go and borrow money from this card to buy something that you couldn't afford right now. There's a time limit on when you can pay back the amount you borrowed from it. There's another catch however. See, you borrowed money from this card, this card now is going to tack on Interest for letting you borrow money from it. That means that if you borrowed $700. dollars that, depending on the type of Credit card you have the interest rate could change, means you'll have to pay $700 dollars back PLUS interest for using it! So that $700 could then be $720.67 that you owe back. If you can't afford to pay the Card back on time with it's interest you get a LATE FEE and more time to pay it back. Now, you have more time to pay them back but now you owe them $780.67. If you couldn't afford to pay them back the $700 dollars the first time are you ever going to be able to pay back the $780.67? This is how we fall into DEBT also known as the RED.
Debit Cards look just like Credit cards but are connected to your bank account. You don't have a huge amount available to you to spend. You have what it is in your account, either checking or savings or both. So if you have $500.32 in there then that is how much is on your Debit Card. So if you want that $700. Item you best save up for it because you'll need to pay the store the $700. Plus have enough left over in your bank account to keep you from getting a penalty fee for falling below the limit of your account.
Debit cards are also extremely convenient to use. You can just swipe the card nearly anywhere to buy something and it's directly taken from your bank account. BUT there's no way for you to keep track of how much you've spent like you have in a check book, unless you get a second registry to keep track of all your purchases. If you don't you're quickly able to fall into DEBT just as fast as or even faster than the Credit card!
STEP 2: KNOWING THE TEAMS of FAIL
Both types of cards are easy to get a hold of but if you already know about the hidden costs of each card it isn't very hard to see where you should place your focus on. Remember we're all about being RICH!
Credit Cards
- Borrow money from somewhere else that you have to pay back with extra money for using.
- Charge you fee's if you can't pay it back on time.
- Can be used nearly anywhere to purchase something.
Remember: Never spend more than you can pay back and pay it back as soon as possible!
Debit Cards
- Use your own money in your Bank Account.
- Can be use nearly anywhere to purchase something.
- Some Debit card machines will charge a fee for taking out straight cash to pay for something.
- No way to keep track when making multiple purchases.
STEP 3: WHEN IT'S OK
Yes there are times when using a Debit or Credit card is Ok. Rarely! But there are times when it's worth it to get something cheaper.
UNDERSTAND THIS: DO NOT USE CREDIT unless you have Extra Money in your Account. Using credit means it's not immediately taken out of your account like a debit is. Credit typically shows up within the next billing cycle so you have approximately until your next pay check, providing it's bi-weekly, to come up with the funds. If you can't pay off the amount by the time your next pay check arrives DON'T use CREDIT. Remember your bills may have to come out of that pay check as well so BE CAREFUL.
The good points of a Debit Card and particular type of credit card are discounts. Most Credit Cards that are allowed in this type of spending and staying rich are store Credit Cards such as Macy's, NY&Company, Victoria Secrets, just to name a random few from my own collection. These cards are only used when I'm going to get a percentage off for using it with something. Particularly a sale! Who doesn't love an extra 10-15% off an already sale item?
As long as these cards don't card you a fee for using them, in store cards typically don't then you'll be fine. It's the BIG name cards you have to watch out for the ones that have Platinum, Gold, and Silver in their name and want to charge you interest for using them. These cards typically come to you in the mail with your name pre-printed on them so all you have to do is activate them. Do yourself a favor and SHRED THEM ASAP. You don't NEED the Loan Sharks.
STEP 4: CURVE BALL AHEAD
Keep your eyes open because some Debit cards now are offering cash back for using the credit option! That's right for making the amount/bill arrive later to be taken out of your account you recieve a percentage, most likely 1% of the 2% back! That isn't too bad considering you'd be gaining a few extra coins and dollars back here and there. Just remember if you're going to Credit be certain you have extra in the bank first to cover it.
$$- Simple word of advice, if you have to use the credit option on your debit card try not to use it on Gas. Gas stations have no idea how much you're going to pump so it takes out an automatic hold ranging from $.99 cents to $100! Try to pay for gas in cash if you can or debit.
Words of Wisdom
While we're all moving into the world of plastic and technology please consider this. When the power goes out and your at the store you can't use a check or plastic. The only thing they'll accept is cash. Carry some cash on you at all times strickly for this emergency.
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