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Which is Right For Me: A Credit Card, Charge Card or Debit Card?

The answer to this question all depends on how you intend on using it. Many assume the term “charge card” is interchangeable with “credit card,” when they are very different. In the simplest terms, credit cards allow you to carry debt every month but charge cards don’t – they require full payment every month. Therefore, you can’t use them to get into debt. You also cannot get into debt with a debit card, which is linked directly to your bank account. Basically, you can only spend with you have. Here are the highlights of all three:

CHARGE CARDS:
Charge cards are a good option for people who want the convenience of using plastic but know they’ll pay their bill in full each month. Charge cards have been around since 1950, when Diner’s Club came out with their first card, which was made of cardboard. In 1959, American Express debuted the first plastic charge card and is still the primary charge card issuer today. The idea of a charge card has evolved over the years and now American Express offers certain cards that allow flexible payment plans. These balances do incur interest charges, just like on a credit card. A big advantage is that charge cards do allow you to improve your credit score, because you’ll build a history of paying on time.

CREDIT CARDS:
If you are a timely payer and are not prone to going into debt, a credit card is a good option for you. It allows you to defer payment (at a price), maintain and/or improve your credit history, and rack up rewards on the cards that offer them. There is generally no annual fee associated with a credit card, and you get free purchase protection and the opportunity to earn points and rewards. However, with a credit card, you have a spending limit; if you go over that limit, your charge can be denied or you can face over-limit penalties.

DEBIT CARDS:
Debit cards, which are linked directly to a bank account, can be beneficial if you prefer to pay cash but don’t like to carry cash with you. Debit cards are great if you want the convenience of a credit card without the temptation to spend more than you actually have — especially since debit cards are generally accepted everywhere a credit card is. You may also be able to earn points, perks, or cash-back by using your debit card if you get one from a bank that offers such a promotion.

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