How are Credit Cards & Debit Cards different ? Don’t loose your nerve if you are not aware of the answers. mymoneykarma will explain the difference to you in simple terms
What is a credit card?
A credit card is a device issued by a bank or a financial institution which permits you to borrow funds for a short period of time i.e. usually a month. Banks start charging interest one month after a purchase is made. And the borrowing limits of the holder will depend on the in individuals “credit rating” which tells the credit worthiness of the holder.
Debit card on the other hand, they are linked to your back account and acts as a substitute for the liquid cash as the holder directly transfers the amount from this back account when a purchase is made. Debit card holder is not liable to repay the amount to the bank as they use their own funds while making purchases.
Prepaid debit cards are more or less like a debit card but come with limited functionality. Instead of using the funds which are in your bank account, using a prepaid debit card means using the money deposit you made on the card, you basically have to be ahead of your spends. Just like a debit card, you’re not borrowing money from a bank when you utilize prepaid cards.
Why credit card is essential?
For someone with little or no knowledge, it might look like debit or prepaid cards are the best way to pay because they do not engage in borrowing money and believe to stay away from debt.
Apart from building credit, a credit card if used as a principal form shall also help you earn reward points and decrease fees. On the other side normally debit does not offer attractive reward points and prepaid card comes with huge fees
Best Ways to use Credit card:
A credit card is just going to help you improve your credit rating in the event that you utilize it properly. This improved credit rating can help you get better deals on other loans you might want to take such as home loans or personal loans.
Here are the best tips to use use the credit cards:
- Pay your bill on time each month.
- Make complete payments each month, don’t carry over unpaid credit. Credit card obligation is costly and can hit your credit ratings.
- Manage you card is such a way that the outstanding on your card is below 30% of your accessible credit at all times during the entire month. Make a payment in the event you are closing near to the maximum usage limit.
- Have a gap of minimum of six months before you apply for a new credit card.
- Check your credit card transactions at least once a week. This will help you track your spending, and also any fraud against your card. This can be done easily on mymoneykarma.com.
In the end:
No matter all cards look and feel the same, credit cards are altogether different from debit and prepaid cards. Utilizing a credit card efficiently is an incredible approach to construct and keep up a sound credit profile. Link all you credit cards at mymoneykarma.com to stay on top of them realtime.