Money has always been one of the most valuable asset on earth, and be it physical cash or electronic money(soft money) they are all invaluable. This is why, everyone seeks the most ideal way to spend, invest, save etc all the monies they get to make either as wages, income, stipends, salaries, gifts etc. The digital age have tried to manage and oversee this important asset for everyone’s better convenience. At such, the existence of financial institution cards were developed, they exist today in three most common forms – Credit cards, Debit cards and Charge cards. But, what are the differences between them, that makes them matter in managing our financies ultimately.
What a Credit Card Is?
A credit card, is a flat rectangular piece of object usually plastic issued by your financial institution, permitting its owner to borrow funds based on one’s credit score, the card issuer sets a borrowing limit and it is paid back with interest and other charges, the amount borrowed without having to physically fill out a paper form at your bank before getting a mild loan to sort out an immediate financial problem. The amount refund, terms and conditions vary with banks or financial institutions, some may require installmental payments while some may require payment in full when the billing date is due. The law requires issuers to give borrowers a 21-day interest-free grace period.
Why Credit cards Matter:
Credit cards allow one to purchase an item now and pay later. This flexibility can help you pay expensive bills or buy large products.
- Earn rewards – It rewards the cardholder for making purchases such as cash back or miles points.
- It Protects against credit card fraud by offering fraud alerts to serve as protection for criminal activities like theft, or information during travel.
- No foreign transaction fees
- Increased purchasing power
- Not linked to checking or savings account.
- Putting a hold on a rental car or hotel room.
What a Charge card really is?
A charge card is a type of credit card that enables the cardholder to make purchases which are paid for by the card issuer. The cardholder is obligated to repay the debt to the card issuer in full by the due date, usually on a monthly basis, or be subject to late fees and restrictions on further card use. Wikipedia
Why Charge cards Matter:
- There’s no spending limit, which means that you don’t have to worry about your card being declined. Obviously, this can be an advantage if you need to make regular large purchases, which is a reason why this card is popular with business owners or the self-employed.
- The primary difference is that charge cards require you to pay the entire spending balance each month. Failure to pay up will earn you penalties of paying stiff fees and on unpaid balances, and if they get too accumulated it can prompt suspension of your card. You also do not have the flexibility to pay off big purchases over several months as you do with a typical credit card.
- There’s no interest charged, there really isn’t any long-term debt involved, so interest isn’t charged like they are on credit cards. This is great for avoiding a lot of debt, but you do lose some flexibility in paying off a large purchase over a few months rather than just four weeks.
What a Debit card Is:
A debit card otherwise called “check cards or bank cards” is a payment card that deducts money directly from a consumer’s checking account when it is utilized.
Why Debit cards Matter:
- Speed, convenient and flexible
- Safer than carrying cash, allows you to walk around with the veto power of technically moving around with all the money in your account but with a good dose of safety than if you carried the same physically around, you will have to worry about theft, abducting etc.
- More convenient than cheques – cheques would reauire your time, queue, and other delays before you can finally meet a necessity but a debit card saves time and meets needs better while eliminating the cost of purchase cheques.
- Make purchases anywhere Mastercard® is accepted
- 24/7 access to funds via ATMs
- Avoid fees and service charges – has no annual fees, or late payment charges, except for bank withdrawal charges. Debit cards typically have few or no fees attached.
- Allows for accountability of spendings and encourages better budgeting – making you take full responsibility for your transactions.