Credit Cards vs Debit Cards - Essay Example

Paying the credit card expenses within the billing period offers the user an opportunity to pay the money without interest. The disadvantage is that the interests pile up rapidly in case the money spent is not paid within the billing period. When used responsibly, credit cards can be of great help as they help the user build credit, which can eventually result in rewards and gifts. This paper focuses on effects that credit and debit cards has, how it can put you far in debt and how it impacts your credit.

The advantage of having a debit card is that you can use it to shop in various places all over the world. Additionally, most ATM cards are pre-set such that they can provide debit option thus there is no need for cardholders to carry money around. On the other hand, credit card use entails purchasing good after which you sign or provide you credit card pin number as an assurance that you will pay the debt later (Nelson, Nelson, & Stroup, 2012). Most people prefer using debit cards to credit card arguing that using debit cards prevents one from over expenditure since it makes one feel like you are using cash payments.

The fact that debit cards are connected to a checking account enables the users limit purchases and only buys items that they can afford to pay for at the moment. Additionally, most establishments that offer debit cards do not have any charges for any transactions. On the other hand, credit cards holders have to pay quite a high interest if they fail to pay the bills in time in addition to card charges (Nelson, Nelson, & Stroup, 2012; Carbo-Valverde, et al., 2007). An advantage that credit cards have over debit card is that payments for goods purchased using credit card can be withheld till the buyer is satisfied that the quality of the product is satisfactory.

On the contrary, sellers make instant deductions for goods purchased using debit cards. The Fair Credit Billing Act supports such action since it posits that the purchaser has no liability for fraudulent transactions and for goods, whose quality is unsatisfactory or undelivered services. This applies for any disputable purchases. This gives credit card holders protection against deceitful merchants or service providers or in case of theft (Basel, 2006). One disadvantage of being a debit cardholder is that, in case of debit card theft, you may have to pay for all purchase transactions done using your card, which may include overdrafts particularly if you fail to realize and notify your bank in a period of 60 days.

Debit cards thus have restricted consumer protection as compared to credit cards. While doing online or over the phone purchases, credit cards are the preferable option since they offer protection to the user thus helps take care of any misadventure (Directgov, 2012), Credit card users have an opportunity to build a proper credit by ensuring punctual bill payment. Good credit history is important and can help in securing loans, insurance, or in getting a job. Loans borrowed by individuals with a good credit history have a lower interest rate as compared to those for persons with unsuitable or no credit history.

Additionally, some credit card offer incentives that card holders can use to obtain gifts as well as get discounts (Barrett, 2009). Debit cards provide for overdrafts, which must be made at a specified period. However, it is advantageous in that the interest rates for such