Money Matters

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Weigh your options regarding credit and debit cards

Credit and debit cards are how many people make their purchases, both big and small. Many people would rather swipe a card at the checkout counter than count cash. These cards offer unmatched convenience and can help keep receipts organized and purchases accountable with minimal effort.

But credit cards and debit cards are not perfect. One of the biggest disadvantages to using cards to make all purchases is the tendency to lose track of your spending. When paying with cash, consumers can visibly see the money leaving their pockets and know when that money has run out. Paying by card is an abstract concept that doesn't become real until bills are received or bank statements are reviewed.

Although debit and credit cards are frequently used interchangeably, there are times when one is preferable over the other. Here's how to decide which card to use.

* Need to build credit? Use a credit card if you are trying to establish a positive credit history. However, you must pay your bill in a timely fashion, and it helps to pay the entire balance each and every billing cycle to develop a good credit score.

* Don't want a large monthly bill? Debit cards withdraw money directly from your account at the moment the transaction occurs. Much like spending with cash, debit cards let users know when they have run out of cash, as cards will be denied if the transaction is not approved. If you do not want to pay a large bill at the end of the month, debit cards are the better choice.

* Prefer greater security? Great strides have been made to thwart would-be identity thieves and keep financial data safe. However, as was evidenced by the major data breach in Target's payment system in late 2013, when millions of credit and debit card numbers and PIN codes were hacked, no system is entirely foolproof. Credit cards offer added security because if fraudulent purchases are made, your credit card account will be quickly frozen and you will not be held accountable. When using debit cards, you are spending your own money up front. Fraudulent purchases may be fixed over time, but it could leave a deficit in your account until matters are resolved.

* Want to minimize fees? Debit cards do not charge interest or minimum charge penalties. There's no need to worry about being late for a payment and getting charged a fee, and causing your balance to skyrocket. Gas stations and other retailers that may charge more per purchase for using credit cards will treat debit cards like cash and offer the same discounts.

* Enjoy perks? Credit card companies will sell you their card over another based on various perks. In addition to competitive interest rates, perks may include being able to accumulate travel points, cash-back dollar amounts, advanced ticketing offers for shows and sporting events, discounts and coupons for certain retailers, and many other benefits.

More and more consumers are relying largely on credit cards and debit cards to make their purchases. Each type of card has its benefits and disadvantages, so consumers must weigh their options to determine which type of card works best for them.