What is a credit card?

A credit card allows you to establish a good credit history if you make payments on time. Credit cards allow you to make purchases that you can pay for later. When using it, the cardholder is not paying with his money, but the bank is lending him said sum. The credit (or borrowed money) will have to be repaid, either at the end of the month, through a percentage or a fixed fee.

Advantages of credit

• Credit history record.
• More promotions or rewards .
• More time to pay for purchases.
• More protection against fraud.

Requirements to obtain a credit card

• Social Security Number (SSN) or Individual Taxpayer Identification Number ( ITIN ).
• Proof of address in the United States.
• Proof of income.
• Savings or checking accounts in your name.

What you should know: Some banks offer facilities for students or people who do not have an SSN. Check the requirements in different financial institutions and choose the one that suits you best.

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Remember that having a credit history is essential to live in the United States, since it will make it easier for you to contract basic services (such as Internet or telephone), the process of renting a car, buying a house or even obtaining a job. .

What is a debit card?

A debit card is an instrument that allows people to save and use the money they have saved in their account whenever they want. It’s like an electronic wallet, and with your debit card you only spend what you have in your checking and savings accounts.

Advantages of debit

They are accessible to anyone, no credit history is needed.
Greater control of money.
Greater security compared to cash and checkbooks.
Lower cost of operation.

Debit Disadvantages

• Limited use (based on balance).
• Less protection against fraud.
• Fewer promotions or rewards.

Requirements to obtain a debit card

• Proof of address in the United States.
• Driver’s license or official identification document.
• SSN or ITIN .
• Initial deposit.

What you need to know: Please note that requirements may vary from bank to bank. In some banking institutions you can process your debit card, even if you do not have the social security number. In these cases it is necessary to present the passport with the valid visa.

Difference between credit and debit cards

As we saw above, there are several differences between credit and debit cards. The main one is that the funds available to the first are contributed by the financial institution where the client obtained it and, therefore, they must pay that entity monthly for at least part of the loan. Instead, the funds on the debit card are tied to the balance the cardholder has in their own bank account.

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What you should know: Debit cards such as PODERcard do not require monthly payments and do not report their financial activities to the credit bureau. PODERcard is a financial tool with which you can make your payments without having to handle cash.

Credit and debit operation

To help you better understand the difference between credit and debit cards, we share the following comparative tables with which you can better understand how they work, their financial repercussions and how safe they are.

Source of funds

Credit : The money is provided by the financial institution that grants you the credit card and you make monthly payments, either part of the amount borrowed or in full.

Debit : You only have the money that you contribute to your debit account.

Funds deduction

Credit: When you use your credit card, it is your bank that pays the seller for the purchase you made.

Debit : Using your debit card funds are transferred directly from your bank account.

Access to funds

Credit : The vast majority of credit cards have a credit limit; that is, the amount of money you can borrow per month.

Debit : You only have access to the funds available in your debit account.

Financial impact

Bills

Credit : You can make purchases that are out of your budget, since you do not need to have available funds to make them. Just remember not to go over your credit limit.

Debit : Because you only have your own funds, it’s easy to keep your spending within your budget.

Charges

Credit : Almost all credit cards charge interest if you don’t pay your balance in full and for making late payments.

Debit : They generally don’t charge interest, but they almost always charge fees for withdrawing more money than you have in your bank account.

incentives

Credit: Financial institutions regularly offer rewards such as gift cards, cash back or frequent flyer miles.

Debit: The cardholder can withdraw cash from their account at ATMs or as refunds when making a purchase.

credit score

Credit: Paying your credit on time helps you maintain a good credit score and improve it if necessary.

Debit: Debit cards don’t affect your credit history, so you can use them without affecting your credit score.

Credit and debit card security

Fraud Protection

Credit : They have good protection against fraud and theft because the funds are not withdrawn immediately. It’s easy to block your lost or stolen credit card through online banking.

Debit: You will almost always be asked for your personal identification number (PIN) to authorize purchases. It’s easy to block your card for loss or theft through online banking.

Responsibility in case of loss or theft

Credit: Almost all credit cards have $0 liability protection on fraudulent purchases. If you report your card on time, it will be easier to dispute fraudulent charges.

Debit: You may be charged an amount of money (the amount depends on the bank) if you notify the bank two days after the card is lost or stolen.

Refund

Credit: You may be able to receive refunds for items damaged during shipping.

Debit: You are more likely to have to work with the merchant if items arrive damaged.

Factors to choose between a credit or debit card

Bank cards, both credit and debit, are financial products. These are instruments managed by banks and financial institutions for the management of finances, personal or business.

Currently there are endless financial products that allow people to invest, save or obtain some type of financing. In the case of debit and credit cards, these are aimed at saving and financing, respectively.

To choose the one that best suits you, you have to consider your needs. If you want to know which card is best for you, take these factors into account:

Your ability to pay

If your budget is very tight and you do not have much room to make extra payments, credit can be counterproductive.

The stability of your income

Whether or not you have a stable source of income is very important because it can help or prevent you from planning payments.

Order in your personal finances

The organized management of finances is essential to make payments on time and calculate the accumulated expense.

Your financial goals

To defer your payments and extend your terms a little more, credit is the ideal option. On the contrary, debit is the alternative to start saving.

credit vs. Debit: Which is better for me?

In reality, there is no card that is better or worse. The difference is in the form of payment. With a credit card, the bank finances the purchase and defers the collection, while with a debit card the payments are charged directly to the customer’s account, so that the bank does not finance the purchase and, therefore, does not charge commission .

The decision of which card is better depends exclusively on the needs of the user. Also, don’t discount the idea of ​​having both types of cards and thus take advantage of the features of both.

Take control of your money and remember that KNOWING is POWER!

 

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