It’s hard imagine a time when noncash options weren’t available at retail stores. Now almost everywhere you go accepts credit cards.
Credit cards have been around since the 1950s, but debit cards were not introduced until the mid-1970s. By 2006, there were roughly about 984 million bank-issued Visa and MasterCard credit and debit cards in the United States alone.
Credit cards and debit cards can often times be used interchangeably, but there are notable differences between the two.
Debit cards are linked to your bank account so the money you spend is automatically deducted from your checking account. This type of card provides convenient alternatives to cash, especially if you are an online shopper. Debit cards can also help with budgeting your money.
Use your card to pay your bills and day-to-day expenses and your monthly statement will provide a good snapshot of how much you spend per month.
There are other benefits as well: unlike credit cards, your bank balance goes down with each debit card transaction, so you’re less likely to overspend. There are a lot of banks that offer “overdraft protection” which allows you to exceed your balance, but you still have to be careful with this since you will end up paying interest and some extra fees.
Credit cards basically allow you to use someone else’s money to make purchasez while you pay the money back later. If you do so within the billing period — generally, 15 to 45 days — you can avoid paying late fees or any interest on it.
Often times when you don’t pay the balance in full and are charged interest you might begin to hate your credit card.
If it takes you two years to pay off a $500 balance, for example, and you’re being charged 18 percent interest, you’ll end up paying nearly $100 more in interest.
If you use them responsibly though, credit cards can offer other advantages.