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Carlina Teteris/Moment/Getty Images September 30, 2022 Meredith Hoffman is a personal finance writer covering credit card news and advice at Bankrate. She is originally from Columbia, S.C., and received her bachelor's degree from the Univ. of North Carolina at Wilmington. Before joining Bankrate in October 2019, Meredith worked as the news editor of Wilmington’s local newspaper, The Seahawk. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer. Bankrate logo The Bankrate promise
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At Bankrate, we have a mission to demystify the credit cards industry — regardless or where you are in your journey — and make it one you can navigate with confidence. Our team is full of a diverse range of experts from credit card pros to data analysts and, most importantly, people who shop for credit cards just like you. With this combination of expertise and perspectives, we keep close tabs on the credit card industry year-round to: Meet you wherever you are in your credit card journey to guide your information search and help you understand your options. Consistently provide up-to-date, reliable market information so you're well-equipped to make confident decisions. Reduce industry jargon so you get the clearest form of information possible, so you can make the right decision for you. At Bankrate, we focus on the points consumers care about most: rewards, welcome offers and bonuses, APR, and overall customer experience. Any issuers discussed on our site are vetted based on the value they provide to consumers at each of these levels. At each step of the way, we fact-check ourselves to prioritize accuracy so we can continue to be here for your every next. Bankrate logo Editorial integrity
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So, how is a credit card different from a debit card? To understand , you need to know what a credit card is and what credit cards can offer that debit cards can’t. Let’s start with how a debit card works. When you use a debit card to make a purchase, the cost of the item you are buying is deducted — or debited — from a linked bank account. Think of it as a cash-equivalent payment tool. Debit cards may be plastic, but every time you pay with a debit card, you’re actually spending cash you’ve deposited into a bank account. A credit card is different. Think of it as a card that literally offers you credit — that is, the ability to buy something now and pay for it later. If you can’t pay off your credit card bill in full, you have the option to pay it off over time. Most credit card issuers charge interest on unpaid balances, but for some people, the flexibility of carrying a balance when they need to is more than worth the extra interest charges. There’s one other big difference between credit cards and debit cards, and that has to do with security. Although both credit cards and debit cards have protective measures in place to help shield you from fraud, credit cards are usually the more secure financial tool. Nearly all major credit cards offer zero fraud liability, which means you won’t be responsible for paying off fraudulent or unauthorized charges. Debit cards, on the other hand, come with different levels of liability, depending on how quickly you are able to report a lost or stolen debit card. If it takes you more than two business days to report a missing debit card or let your bank know about fraudulent charges, for example, you could be on the hook for as much as $500. This is why many financial experts recommend using credit cards over debit cards, especially when making purchases online, at gas stations or anywhere else that might be a . Important credit card terms
When considering applying for a credit card, there are many terms that may seem unfamiliar or confusing but understanding what they mean is key to finding the best card for your lifestyle. Here are some of the most common terms you may encounter: Interest rate: Interest is a fee that banks charge on the line of credit they extend to their customers. vary depending on the card and the credit score of the customer applying. You will be charged interest if you carry a balance from month to month. Annual percentage rate (APR): The of a credit card is another name for the interest rate. APRs typically range from 12 percent to more than 24 percent. Credit limit: A is the spending limit on a credit card. For people with limited or no credit history, an initial credit limit may only be a few hundred dollars. For more veteran card owners, credit limits can be very high. Credit score: A credit score is a rating that allows banks and credit card issuers to determine your creditworthiness. Ranging from 300 to 850, there are a that determine your credit score. Credit card balance: A credit card balance is the amount of money you have spent on your credit card and what you owe to the credit card company at the end of your billing cycle. Cash advance: A is when you use your credit card to withdraw cash. Cash advances are subject to high fees, have no and are typically not recommended unless absolutely necessary. Pros and cons of using credit cards
Credit cards come with a lot of advantages, but there are a few drawbacks to using credit that you should keep in mind. In most cases, the negative aspects of credit cards can be avoided by . If you always make your credit card payments on time, for example, you never have to worry about how a late payment can affect your credit score. If you keep your credit card purchases within your budget, you won’t have to worry about — or getting out of credit card debt in the future. Here are some of the biggest pros and cons of using credit: Pros Cons You can make purchases now and pay them off later. Making purchases you can’t pay off can lead to . You can earn rewards on everyday expenses. Learning takes time. You can pay off your balance in full or Any balance not paid off in full can accrue . You can take advantage of money-saving features, like offers on purchases and balance transfers. If you don’t pay off your balance , you could get stuck with high interest charges. Credit cards are easy to use and widely accepted. Certain cards (such as Discover or American Express) might not be accepted by every merchant. Good credit habits help you build a positive credit history and credit score. Poor credit habits could . Credit cards can . A credit card fraud investigation may take up to 90 days to complete. The bottom line
Used responsibly, a credit card can be a powerful financial tool. Once you understand the basics of and how they can help you , you can begin to explore the various Then, you can begin the process of for your financial needs, and learning to use credit to achieve your long-term goals. SHARE: Meredith Hoffman is a personal finance writer covering credit card news and advice at Bankrate. She is originally from Columbia, S.C., and received her bachelor's degree from the Univ. of North Carolina at Wilmington. Before joining Bankrate in October 2019, Meredith worked as the news editor of Wilmington’s local newspaper, The Seahawk. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer. Related Articles