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Credit Cards vs. Debit Cards - Which Is Better?

In this second of a series on credit cards we're going to cover the advantages and disadvantages of credit cards versus debit cards. To understand these differences we first have to explain how a credit card and debit card work, at least generally speaking.

In general, the way a credit card works is you go to a store, or these days even online, pick out the item you want, plug in your credit card number and your purchase is complete. The item isn't actually paid for yet, as far as you're concerned, because no money has changed hands. After the transaction the merchant will receive payment from the credit card company who issued you the card, usually within 30 days and in turn you will receive a bill from your credit card company, also within 30 days, at which time you must remit at least a partial payment. Each credit card company has different terms. Some, like American Express, require you to pay your balance in full.

The way a debit card works is basically the same in most respects. You make your purchase, plug in your number or swipe your card and the purchase goes through. The merchant, again, will get paid by the company who issued you the debit card. Here is where the difference is. With a debit card the money already has to be in your account. In other words, you've already paid in a certain amount of money to be available to your debit card. By using the card the money is simply transferred out of your account and your balance is reduced until it reaches zero, at which time you have to pay more money into the account or the card can't be used.

The advantages of a credit card are that you don't have to have the money available at that time to pay for your purchase. You will usually have at least 30 days to pay for the item and even then, based on the terms of your card, may not even have to pay the whole balance.

The disadvantages of a credit card is that it becomes way too easy to use them and run up large balances. Then when it comes time to even pay partial payments it can be very difficult to make those payments. Add to that the finance charges and people with credit cards can run up large debts that they sometimes never recover from.

The advantages of a debit card is that you know you have the money in your account to pay for the item and you don't have to worry about future bills or finance charges. It's as good as cash without having to carry cash around with you.

The disadvantages of a debit card is that if you don't have the money in your debit card account then you can't use it. In a sense it's pretty much the same as if you don't have cash on you.

Many people feel that a debit card is just a compact cash equivalent and doesn't really offer much more convenience than cash. Others feel it is the only sure way to prevent yourself from falling into a financial hole that you may never recover from.

The debates between credit and debit cards will probably go on forever.

Michael Russell
Your Independent guide to Credit Cards

Credit Card Features

In this last article of the series on credit cards we're going to discuss some of the features of credit cards. These are as numerous as the number of cards itself. These features will not be in any particular order.

Of course the main feature of a credit card is the interest rate you pay on any unpaid balance. With most cards, after your initial purchase, you get 30 days to make your payment. If you pay the balance off in full, which is actually required with some cards like American Express, then there is no interest charge because there is no balance left to pay. However, if the charges are not paid off within 30 days then the remaining balance is carried over with an interest rate charge. The rate depends on a number of factors including the current APR and the customer's credit rating. Persons with a good credit rating get a better rate than those with a poorer credit rating.

Another feature of credit cards is of course your credit limit. This is the amount of money you are allowed to charge to your card before the credit card company cuts you off. Again, the credit limit will usually depend on the cardholder's credit rating. Persons with a good rating will have a higher credit limit than those with a poorer rating.

A feature of credit cards that most people overlook, and this is where they get killed, are fees associated with just having the credit card. This is called an annual fee. Today, many cards have no annual fee but for those with poor credit these are hard to come by. Other fees are cash advance fees, balance transfer fees, late payment fees and penalties, which usually result in higher interest rates, over credit limit fees, credit limit increase fees, setup fees, return item fees, and a host of miscellaneous fees that each cardholder should review before using their card.

Then of course there is the kind of card itself, which is a feature. There are basically three types of credit cards; secured cards, regular cards and premium cards. Secured cards require a security deposit. The larger the security deposit the higher the credit limit the person gets. Secured cards are usually gotten by people with limited credit histories who have trouble getting cards. Regular cards don't require any security deposit and have higher credit limits than those cards but not as high as premium cards. They also don't have as many features and benefits. Premium cards have the highest credit limits and come with a number of extra features such as product warranties, travel insurance, or emergency services.

Other features of credit cards are rebates on purchased items. Some of these cards refer to these as cash back incentives. This is where when you make a purchase, say for $100, you get a percentage of that money back. The percentage of the money you get back depends on the card. One of the first credit cards to offer this feature was the Discover Card.

These are the basic features of most credit cards. To get a list of the specific features of the card you have or want to get you will have to contact the credit card company itself for this information.

Michael Russell
Your Independent guide to Credit Cards

Bad Credit is EVIL

Bad credit is one of the worst financial situations to be in. A bad credit can affect you in a lot of ways. With a bad credit you can have difficulty getting a loan. Anything like poor financial skills or bankruptcy can lead to bad credit. Your credit rating can go down with a bad credit. This can be hindrance in all the legalities. With a bad credit, you may get a loan but it comes with a high rate of interest.

However, there are ways to improve your bad credit. Having a bad credit is not the end of the world. There are still some options that a person can think of. Before applying for a loan, you need to repair your credit. There are various factors that can encourage you to repair your credit.

- You faced some financial problems in the past that have landed you in this situation

- You had faced a bad credit history but now you want to repair it

- It may be that you had error in your credit report card

A good credit is necessary to get any further credit. There are certain facilities for people with bad credit but these facilities have their darker side also (like a loan with a high rate of interest). Once you realize that you have a bad credit, you need to repair it as soon as possible. You will need a good credit for all kinds of loan ?home loan, car loan and personal loan.

Bad Credit loans

Bad credit loans are tailor-made loans for people with bad credit. When in bad credit, no bank or lender will give you a loan as he will fear that you will not be able return the amount of loan due to your bad credit history. However, some lenders do provide bad credit loans too. But these loans have a higher rate of interest than the loans that a person with a good credit would take.

Fixing your bad credit

If you have a bad credit, it becomes imperative for you to repair it immediately. You can improve this by paying off your pending bills quickly. If you are buried under multiple debts, you can take a debt consolidation loan that would help you pay off small loans. Moreover, take your report from the credit agencies and see the areas where you need to improve. If you can afford a consultant who will give you a sound advice, that would be a better option.

Joseph Then provides advices about Personal Finance and dealing with bad credits. You can visit the website http://www.BadCreditBin.com for more information.

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