Debit vs. Credit Cards (What’s the difference?)

There are two types of payment cards that you are probably already familiar with, debit cards and credit cards. Debit cards, during a transaction, take money directly from your bank account. Debit cards do not carry a risk of putting one into debt as it only spends the money you already possess. Credit cards, however, are a little bit different. The bank pays for the transaction and instead gives you a bill every month to pay back. Credit cards allow you to purchase an item first and pay later. If you consistently pay off your bill each month and avoid exceeding your limit, a credit card is a great way in today’s society for one to build up your credit score. However, improper money management and reckless buying could lead to one going into credit card debt.

Your credit score is a score calculated by three credit bureaus: Equifax, Experian, and TransUnion. It’s used by banks and other lenders to make a prediction on how good of an investment you are for a loan, whether for a house, car, or simply your credit card limit. It also gives insight to a potential employer on how trustworthy you are. Having a low credit score can have consequences like increased insurance rates, higher interest or denial of loans, or even being rejected from a job. Credit score follows you for your entire life, along with something known as retirement plans.