Debit cards and charge cards: How do they compare to credit cards?

So you want a credit card, do you? You may think you do, but is that really what you want. Debit cards, credit cards and charge cards are all financial transactions cards, but each run differently, making them suitable for different situations.

Plain and simple: the credit card

The credit card allows you to borrow money from the issuer of the credit card. Interest is charged on the debt, and you are allowed to pay this off at a slow pace, as long as you pay off a certain minimum percent and do not exceed your maximum.

Credit cards come in two main forms, interest free days and no interest free days cards. Interest free days cards do not charge you any interest for a certain number of days, but you are required to pay all of the money back by the end of this period or they will begin to charge interest. No interest free days cards do not give you this interest free period, but waive the yearly fees that often apply to interest free days cards.

The card that is more suitable for you will depend on whether the interest saved on your purchases with an interest free days card would more than compensate for the annual fee. Also, if you fail to pay the fee by the due date on interest free days cards you are often charged interest from the date of purchase, meaning you pay twice: one in interest and once in fees.

The lesson is, the card that is most suited for you depends on your financial situation and spending patterns, but if you can't be sure you will pay of the fees in time, you will probably regret using an interest free days card.

The safe option: the debit card

A debit card is simply one which draws money from your account. It only allows you to make use of the money which you actually have. If you fear you might misuse a credit card then a debit card is the best option for you. However, this card does not allow you to take money on credit and will thus restrict your expenditure.

The charge card

A charge card is like a credit card, except that you are expected to pay off all of the fee by the end of a number of weeks or months. If you fail to do so you are charged a penalty. In this way a charge card is good for those who wish to avoid interest payments and who are confident they will be able to pay the card off in time.

So did you need a credit card?

A credit card can help you to make purchases that would previously have been barred to you, but it is not the only type of card that is available to you. So, before you sign up for a credit card, make sure to consider the alternatives.