There often is debate about which card is better to use; a credit card or debit card. Sure using your debit card directly takes the money out of your account, instead of a credit card where it is charged up until the statement balance, but let us takes a look at the costs associated with each.
Costs with Using a Debit Card
ATM fees are probably the most times where you notice a fee; a charge directly from the ATM when you make the withdrawal, usually a few dollars but if you use it at say a casino or gentleman’s establishment, it could be upwards of $20. Your bank could also be adding in an extra dollar as well for using an ATM of the bank you do not belong to. Overdraft fees can get you at typically over $30, not to mention meaning your account is empty, so pay attention daily to your online activity to make sure you stay on track.
Costs with Using a Credit Card
Perhaps the most expensive cost when it comes to using a credit card would be the interest. Sure if you pay off the statement balance by the due date there will be no interest added, but if you start to carry over the balance, especially month over month as you sink deeper into debt, you begin to make most of your monthly payment towards interest. Some cards offer reasonable rates, but there are still the 15% APR cards out there, especially depending on your credit. Late fees could get you if the payment misses the due date, which is capped at $25, and could even spike your interest rate even higher. Going over the credit limit can get you a $25 fee as well, so make sure you pay attention to your balance versus the credit limit. Some credit cards charge an annual fee, so unless you get that waived, you should stay clear of those.
My Victoria Secret card is great for purchases specifically for that store, and without an annual fee it’s a great low cost card to use and it limits my spending to one specific place 🙂 That being said, every time I hit my victoria secret credit card login it seems like I might be overspending there as well.
So what does this all mean? Well there are actually pros and cons for using each type of card, so make sure you understand all of the in’s and out’s that go into both. Not using the card you should be using and it costing you extra money is not getting you ahead. Take some time and analyze your spending and see what makes sense to you.