While debit cards and credit cards are very similar in appearance and function, there are plenty of differences. Both options allow for better financial management thanks to monthly statements. This can help you remain on-budget and target recurring purchases. However, 

Debit Cards

Debit cards provide access to your personal checking account and are administered by your bank. When you swipe or insert your card to make a purchase, funds are drawn directly from your account, so you can never spend more money than you have in the bank at any given time. Some institutions allow for overdrafts and issue a fee anytime you withdraw more than what’s deposited in your checking. Interest is not charged on debit cards since you’re using your own money.

When setting up a debit card, you’ll be issued — or able to choose — a personal identification number (PIN), which is used to withdraw money from ATMs or make purchases at certain merchants. These cards can be used virtually anywhere, including online. 

Credit Cards

Credit cards can be administered by your bank or a secondary institution. You’ll receive a line of credit, or a set amount of money you’re allowed to borrow against, usually based on your income. For example, if your line of credit is $5,000, you’ll only be able to spend that much per month at maximum. When you receive your monthly statement detailing your purchases, you must then make a payment — usually a minimum of 2%-5% of the bill — by a certain date. Timely payment positively affects your credit score, a number that describes to lenders the amount of risk involved should you apply for a loan. The better the score, the less risk and the more likely you’ll be approved; 670-850 is optimal.

Credit cards often come with various interest rates and fees if you miss payments or only pay the minimum amount. Avoid these by paying off your total credit card bill each month. Also, many cards offer rewards programs, including free airline miles, cash back, and other benefits. There is no PIN associated with using a credit card; instead, you’ll be asked to provide a signature or valid ID.

As a trusted financial institution in Russellville, AR, First State Bank issues both debit cards and credit cards to local customers. With more than eight decades of experience, this bank provides checking and savings accounts, loans, and investment products to help plan for your financial future. They also offer business services, including loans to expand and grow your enterprise. Call (479) 498-2400 today to speak with a banking representative about setting up an account. You can also learn more about banking services by visiting their website.