The Bill Is Paid By The Card Company

Category: Finance.

While only a few years ago there were clear differences between credit cards and debit cards, today those distinctions have been blurred with debit cards that can be used in many of the same capacities as credit cards and vice versa.

Of course, there are still some issues like card protection and resolution policies that distinguish debit from credit. Both can be used to make withdrawals at ATM using PIN numbers and both can be used at the check outline to make purchases. The question that many people have is this: "Which is better debit or credit? " After describing each card, we can take closer look at what each has to offer as well as the common downsides to each type of card. You simply enter your card s number and the purchase is completed just like that. Credit cards allow you make immediate purchases at a store or on the internet using an established line of credit. Now, what you, of course ve just bought isn t actually paid for at that moment. The bill is paid by the card company.

If a credit card is authorized by the store, it means that the card is recognized as having sufficient funds to cover the purchase, but actually payment to the establishment may not come for weeks after, even as long as a month. You will also receive a bill requiring you to pay back the amount of your balance, or a portion of it. Most debit cards function in the same general way. The specific guidelines for payment and other charges will vary with each credit card company. You input the number or swipe the card to make a purchase. Of course, here is the fundamental difference: any money you use with a debit card must be put there by you.

Like a credit card, the company who issued your card will pay the merchant through whom you made the purchase. You have to have money in your account. Many banks issue debit cards that take the funds directly from your checking account. Once the balance reaches zero, you cannot use your debit card until more funds are added. Advantages And Disadvantages. Moreover, you have what is generally a reasonable time to pay off the balance, or even just make a monthly payment on the balance.

Obviously, the main advantage of a credit card is having access to money when you do not actually have the money to make your purchase. The disadvantage is that with this access comes the temptation to overuse the card and built a high balance. With a debit card, the advantage to having one is knowing how much money is in your account already and using the funds there to make your purchase. This balance can be hard to bring under control and even with payments, the interest rates and other finance charges can leave you paying on a card for a long time. This means there will be not bills or finance charges. You also protect yourself from getting into financial debt by using only the money that you have. The card functions the same way that cash and eliminates the need to carry cash around with you.

At the same time, if you need to make a purchase but don t have the funds on hand, then you are out of luck. Choosing between them and deciding whether the benefits outweigh the disadvantages is a matter of personal judgment. Ultimately, the decision you make about whether to use credit or debit is related to the sort of spending habits you have, what other money sources you have, whether you ve devoted money to building savings and other investments to provide financial support when you may need to buy something or not.

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