Those magic pieces of plastic that instantaneously transfer money from our pockets to the stores are one of modern society’s most convenient inventions. The ease of paying with a card is only one benefit – it is easier to keep up with your cash, if it gets stolen you can cancel the card and not lose anything, and most come with some sort of spending benefit. But these magical pieces of plastic can become dangerous if you don’t know the difference between a credit and a debit card.

The most fundamental difference between debit and credit cards is where the card gets your money. A debit card pulls money directly from your checking account. This is probably the safest and easiest way to be cautious with your money, as the transaction is more or less instantaneous and comparable to paying with cash.  A credit card charges your purchase to your line of credit, and most companies give you a 30-day grace period to pay your purchase before interest starts accumulating.

What this means is that there are good and bad reasons to use a credit or debit card for certain purchases. Using your debit card is essentially the same thing as cash, just more convenient. You cannot spend more money than you have, but beware of over drafting your account by checking its balance regularly.

When making purchases with a credit card, you are essentially taking a loan from the credit card company. Many of us use credit cards for larger purchases that we cannot afford, with the intention of paying it off monthly. When doing so, keep in mind the interest you pay each month and remember the quicker you pay for your purchase, the more money you will save. The plus side of using credit and paying your bills on time is the benefit of building a solid credit score this will be beneficial when the time comes for life’s bigger purchases such as a home or new car.

Remember, having a good credit score is like having a good reputation in the banking world so be sure and take your money responsibility seriously, pay all your bills on time. This will help make certain you reap the rewards of a great credit score while keeping you on track to a healthy financial future.

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