When faced with the option of credit or debit, do you know what the differences are, and how choosing one over the other can impact your credit ratings? The Equifax Finance Blog explores your options and the consequences for using one form of plastic over the other in the new article, ”
For credit cards, you have the benefit of the card not being linked to your bank account, so you can rest easier as you lessen the risk of someone getting access to and draining your funds. There is also a billing cycle, so you can make purchases and pay for them later. The risk here is that at the end of the billing cycle, you are charged for all unpaid items plus interest. The delayed costs to credit cards mean that it is easy to get carried away when using them, so you can very quickly end up under a pile of debt. In addition, it can hurt your credit score if you misuse them by hitting your limit, paying late, carrying too high a balance and other risky behaviors.
Debit cards are great for avoiding interest or getting yourself into debt, but since they draw directly from your bank account, there are risks if they are stolen or used for fraudulent activities. In addition, because you are only using the debit card with your own funds, it isn’t a form of borrowing and using them doesn’t build credit.
There are many other great tips on how best to improve your
credit ratings, save for retirement and avoid debt on the Equifax Finance Blog.