{"id":494,"date":"2022-07-08T10:00:05","date_gmt":"2022-07-08T02:00:05","guid":{"rendered":"http:\/\/www.druryjournal.com\/?page_id=494"},"modified":"2022-08-01T19:11:05","modified_gmt":"2022-08-02T02:11:05","slug":"thinking-smart-in-selecting-a-credit-or-debit-card","status":"publish","type":"page","link":"https:\/\/www.druryjournal.com\/?page_id=494","title":{"rendered":"Thinking Smart In Selecting a Credit or Debit Card"},"content":{"rendered":"\n

We all hear lots of things about credit cards \u2013 both good and bad.  Some say they should be avoided because they encourage overspending and accumulating too much debt while others, including myself, say they are a valuable component to a sound financial\/spending plan if used in the right way.  The intention of this blog is to help people navigate through this maze of financial instruments and make sound decisions regarding which ones are the right fit for them.  I am 100% convinced that there is no one-size-fits-all answer, and that it depends entirely on the individual\/family and his\/her\/their spending habits.<\/p>\n\n\n\n

So, which of these two scenarios best suits you\/your family?  I believe the answer lies with the answer to these simple questions that one should ask himself\/herself:<\/p>\n\n\n\n

  1. Do I have a family budget?<\/li>
  2. Do I know how much I can afford to spend on certain items within a given moth while still living within my means?<\/li>
  3. Am I able to manage my own and my other family members\u2019 spending such that I won\u2019t unintentionally exceed my budget?<\/li>
  4. Do I have a liquid savings account that I could tap into for emergencies and\/or unexpected expenses?<\/li>
  5. Do I have enough budget in the \u201cmiscellaneous\u201d line item of my family budget to cover the things that we often buy that we often don\u2019t have as budget line items (e.g., home\/car repairs, special occasion gifts for others, etc.)?<\/li>
  6. If I see myself in danger of exceeding my budget during a particular month, do I have the ability and discipline to set spending priorities and alleviate\/defer certain purchases so as to stay within budget?  (We must be honest with ourselves here.)<\/li>
  7. If I make a major purchase via credit card, do I have a way to pay this expense off within 30 days, either by pulling from savings or tapping into a lower interest or tax-advantaged loan or line of credit.  (E.g., a HELOC can be great for home improvements, as long as the purchase meets the tax deduction criteria.)<\/li><\/ol>\n\n\n\n

    Some of these questions are easier to answer than others, and some answers are very dependent on one\u2019s situation.  For instance, I had a budget the first few years I started working after college (usual early-career financial struggle), and I have one now that I am retired and currently have less income than when I was working full time.  However, during my peak earning years, I didn\u2019t have a budget at all, because I was living below my means, and I knew that I could somehow absorb nearly any unplanned expense.<\/p>\n\n\n\n

    Moreover, you don\u2019t have to answer \u201cyes\u201d to every question to be one who would benefit by using credit cards.  Instead, I recommend taking an honest look at your answers as they are (individual answers) and also as an aggregate, then decide from there.  If you aren\u2019t sure, then I\u2019d recommend talking through it with a trusted friend or family member.  However, ultimately, this is a decision that we must all make for ourselves.<\/p>\n\n\n\n

    Credit Versus Debit Card?<\/u><\/strong><\/p>\n\n\n\n

    Once an overall answer to the above questions is established, I believe the rest is rather straight forward.  If it\u2019s an overall \u201cyes\u201d, then I believe you would benefit by having and using credit cards in your day-to-day spending.  However, if \u201cNo\u201d, then perhaps you should limit your use of credit cards or not have one at all.  This isn\u2019t always black and white.  The stronger the \u201cYes\u201d, the bolder we can be in using our credit cards.  Likewise, the stronger the \u201cNo\u201d, the more wary we should be.<\/p>\n\n\n\n

    Meanwhile, I\u2019m sure nearly all of us need and have debit cards, as they also serve as our ATMs.  In addition, certain merchants do not accept credit cards and accept only debit cards (example Arco gas stations in CA).  I believe debit cards are also a great alternative to credit cards for those who should minimize\/avoid credit card usage.<\/p>\n\n\n\n

    Bottom line, the short answer to the \u201ccredit or debit card\u201d question is both.  However, one will likely predominate over the other depending on one\u2019s individual situation as discussed above.<\/p>\n\n\n\n

    This leaves us with what might appear to be a daunting task \u2013 sorting out the various credit and debit cards and deciding which ones are best for our various situations.  In the next couple sections, I will discuss the pros and cons of each type of card (credit and debit) and offer up some thoughts in selecting one that will best suit one\u2019s needs.<\/p>\n\n\n\n

    Credit Cards<\/u><\/strong><\/p>\n\n\n\n

    Credit cards are a very convenient and powerful vehicle in executing many daily and some major purchases.  They are quite easy to use \u2013 just tap, swipe or insert chip into the card reader, and that\u2019s it!  They also have an advantage of racking up expenses and monthly charges before you have to pay the bill.  This not only provides the opportunity to \u201cfloat\u201d a month\u2019s worth of charges, but it also provides an opportunity to reverse fraudulent and other untended charges without impacting our bank accounts.  Furthermore, what I like most about credit cards is they enable me to capture and track a given month\u2019s expenses.  When I use cash, I\u2019ll admit it is much harder for me to recall how the money was spent.<\/p>\n\n\n\n

    However, the ability to \u201cfloat\u201d charges also comes with the latitude to pay only the minimum balance each month.  Although a very tempting way to manage today\u2019s cash flow, it can quickly overwhelm us over time with high accumulated expenses plus the high interest that we usually pay on the balances we carry forward to successive months, thereby significantly increasing our total expense.  This is where the discipline comes in.  Moreover, many of us also like the convenience of automatically having our checking\/savings accounts auto debited each month to pay our full credit card statement balance for that month \u2013 a \u201chands off\u201d approach to paying our bills on time.<\/p>\n\n\n\n

    Credit Card Overview<\/strong><\/p>\n\n\n\n

     Let\u2019s first start with a basic overview of what a credit card is.  There are two dimensions to this.<\/p>\n\n\n\n

    1. Credit card network:  I\u2019m sure we\u2019re all familiar with the four major networks: American Express, Discover, MasterCard, and Visa.  They work at the \u201cmacro\u201d level by facilitating movement of money between financial institutions, mainly between banks (consumer\u2019s checking\/savings account) and merchants.  Each operates independently in a somewhat similar manner, using its network of credit card issuers, merchants, and other institutions involved in credit card transactions.  They also set the fees a merchant pays (AKA \u201cswipe\u201d fees) for credit card transactions.<\/li>
    2. Credit card issuer:  In tandem with the credit card networks, the credit card issuers work at the \u201cmicro\u201d level by issuing specific credit cards to specific individuals.  They also determine eligibility criteria and set interest rates.  In addition, they provide the financial backing to merchants and banks, and certain credit card benefits.  Most major banks issue credit cards, including B of A, Capital One, Chase, Citibank, US Bank, and Wells Fargo.  Although not banks per se, American Express and Discover are also issuers, as these networks also issue their own credit cards.<\/li><\/ol>\n\n\n\n

      For more general information on credit cards, credit card\/payment networks and credit card issuers, I recommend reading \u201cCredit Card Issuers Versus Networks \u2013 What\u2019s The Difference<\/a>\u201d by MoneyTips.<\/p>\n\n\n

      \n
      \"\"<\/figure><\/div>\n\n\n

      Selecting The Right Credit Card<\/strong><\/p>\n\n\n\n

      This is a very personal decision, and it depends on several factors including:<\/p>\n\n\n\n

      1. Credit card network<\/li>
      2. Eligibility Criteria<\/li>
      3. Interest Rates<\/li>
      4. Annual Fees<\/li>
      5. Rewards program<\/li><\/ol>\n\n\n\n

        Usually, the choice of credit card network doesn\u2019t matter much, but some merchants exclude certain networks or work with only one network.  For instance, Costco accepts only Visa, and some merchants don\u2019t accept American Express, presumably due to their often higher \u201cswipe\u201d fees.  In general, MasterCard and Visa are the most versatile, both domestically and internationally.  Thus, I would strongly recommend having a MasterCard, Visa, or both in your credit card portfolio.<\/p>\n\n\n\n

        Eligibility criteria is probably a key factor to those with middle or marginal FICO scores whereas those with a solid credit history\/high FICO scores are usually accepted by nearly all, including the premium credit cards that offer more benefits.<\/p>\n\n\n\n

        Interest rates should be paramount to those who carry a balance, as this sets the credit card holder\u2019s borrowing costs.  However, for those who pay their statement balance in full each month, interest rates are of little to no consequence.  This is because paying your statement balance in full each moth nearly always results in zero interest paid by the credit card holder.<\/p>\n\n\n\n

        Annual fees vary from zero to several hundred dollars.  It seems that around $50 is quite common.  It should also stand to reason that, in general, the greater the perks and rewards program, the higher the fees.<\/p>\n\n\n\n

        The benefit of a credit card rewards program is a key reason I am so high on credit cards for those who pay their statement balance in full each month.  So, if you are one of these people, this is where I believe you should spend most of your time searching, as there is a plethora of rewards programs of different shapes and sizes.  This could make the task very daunting, but there are some simple steps and tools to help us navigate this big maze.<\/p>\n\n\n\n

        If you are closely tied to a particular merchant\u2019s rewards program (e.g., airline, hotel, gas, retailer, etc.), it may behoove you to start with what that merchant has to offer.  For example, having lived in Atlanta, GA (major Delta Airlines hub) at one time, I chose the Delta SkyMiles American Express card because of my high Delta Frequent Flyer (AKA SkyMiles) balance resulting from past business travel.  I am also a Marriott Vacation Club timeshare owner, so I chose the Marriott Bonvoy Boundless Visa card, issued by Chase Bank.  This has proven to be a great supplement to earning my Marriott Bonvoy (hotel rewards) points by other means.  In short, my close affiliation with these two companies narrowed it down enough for me.<\/p>\n\n\n\n

        Otherwise, I would recommend a much broader search, perhaps starting with a less specialized rewards program, such as \u201ccash back\u201d.  The good news is there are some good free tools out there to help one more easily navigate the many options.  I would just be wary of those tied to a particular issuer or rewards program, for obvious reasons.  Lending Tree’s “Top Credit Card Offers From Our Partners<\/a>” has a pretty comprehensive, easy-to-use tool.  I also like the \u201cRewards Credit Cards \u2013 2022<\/a>\u201d tool by cardratings.  There are many more.<\/p>\n\n\n\n

        And of course, friends, family and co-workers\/colleagues can be great sources of information too.  Happy hunting!<\/p>\n\n\n\n

        Debit Cards<\/u><\/strong><\/p>\n\n\n\n

        As I mentioned earlier, a good debit card is a \u201cmust have\u201d for nearly everyone.  Debit cards can also be a suitable alternative to credit cards for those who view themselves at risk of running up a high credit card debt, as charges hit one\u2019s bank account immediately upon transaction.  However, because of this, one needs to constantly monitor his\/her bank account, unless of course, it\u2019s a pre-paid debit card.<\/p>\n\n\n\n

        For conventional debit cards, most of us simply go with the debit card that comes with our checking\/savings account or line of credit.  For prepaid debit cards, it might be worth shopping around some.  I would recommend a Google search on \u201cbest prepaid debit cards\u201d.  That should get you started.  In my quick search, CNET’s “Best Prepaid Debit Cards 2022<\/a>” and CNBC’s “Best Prepaid Cards<\/a>” seemed to offer some good, unbiased choices.<\/p>\n","protected":false},"excerpt":{"rendered":"

        We all hear lots of things about credit cards \u2013 both good and bad.  Some say they should be avoided because they encourage overspending and accumulating too much debt while others, including myself, say they are a valuable component to a sound financial\/spending plan if used in the right way.  The intention of this blog […]<\/p>\n","protected":false},"author":1,"featured_media":501,"parent":326,"menu_order":0,"comment_status":"open","ping_status":"closed","template":"","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","advanced_seo_description":"","jetpack_post_was_ever_published":false,"footnotes":""},"class_list":["post-494","page","type-page","status-publish","has-post-thumbnail","hentry"],"jetpack-related-posts":[{"id":326,"url":"https:\/\/www.druryjournal.com\/?page_id=326","url_meta":{"origin":494,"position":0},"title":"Wealth Management","date":"July 1, 2022","format":false,"excerpt":"I always say that if you are constantly worried about money or personal\/family finances, then either something is wrong or there is opportunity to improve your overall financial health and well-being. This page covers various aspects of business and finance, ranging from personal financial planning to current economic issues and\u2026","rel":"","context":"Similar post","img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.druryjournal.com\/wp-content\/uploads\/2022\/07\/finance.png?fit=1200%2C628&ssl=1&resize=350%2C200","width":350,"height":200},"classes":[]},{"id":564,"url":"https:\/\/www.druryjournal.com\/?page_id=564","url_meta":{"origin":494,"position":1},"title":"Important Things To Know About Credit Card Balance Transfer Offers","date":"July 9, 2022","format":false,"excerpt":"It seems that hardly a week goes by without receiving a balance transfer offer from one of my credit card companies.\u00a0 These offers always sound very appealing in that most offer 0% APR for the first 12 to 18 months.\u00a0 I learned at an early age that, if something sounds\u2026","rel":"","context":"Similar post","img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.druryjournal.com\/wp-content\/uploads\/2022\/07\/balance.png?fit=1200%2C628&ssl=1&resize=350%2C200","width":350,"height":200},"classes":[]},{"id":2010,"url":"https:\/\/www.druryjournal.com\/?page_id=2010","url_meta":{"origin":494,"position":2},"title":"How To Immigrate Your Relatives to the USA and Obtain Automatic Citizenship for Minor Children","date":"September 12, 2022","format":false,"excerpt":"US Immigration laws are very complex, bureaucratic, and sometimes a bit confusing.\u00a0 However, it\u2019s not so daunting if you break it down into the individual steps.For a family member to immigrate another family member to the US (adults and children), the sponsoring family member must submit an I-130 (Petition for\u2026","rel":"","context":"Similar post","img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.druryjournal.com\/wp-content\/uploads\/2022\/09\/caloy-citizenship.png?fit=1024%2C683&ssl=1&resize=350%2C200","width":350,"height":200},"classes":[]},{"id":351,"url":"https:\/\/www.druryjournal.com\/?page_id=351","url_meta":{"origin":494,"position":3},"title":"Why Is Inflation So High and When Will It Subside?","date":"July 1, 2022","format":false,"excerpt":"There has been a lot of discussion and handwringing on this subject lately.\u00a0 The Reuters article in the link below captured Janet Yellen\u2019s assertion that inflation is here to stay, at least for some time.\u00a0 I\u2019m not sold on this as an absolute reality, and I believe we can change\u2026","rel":"","context":"Similar post","img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.druryjournal.com\/wp-content\/uploads\/2022\/06\/10-Year-CPI-Data-May-2022.png?fit=1200%2C661&ssl=1&resize=350%2C200","width":350,"height":200},"classes":[]},{"id":692,"url":"https:\/\/www.druryjournal.com\/?page_id=692","url_meta":{"origin":494,"position":4},"title":"Planning the Trip That\u2019s Right for You","date":"July 14, 2022","format":false,"excerpt":"If someone were to ask me \u201cWhat\u2019s the ideal way to travel, and what would be your ideal trip?\u201d, my answer would be sure to start with \u201cIt depends\u2026\u201d.\u00a0 This is because, as we know, the objective of a given trip with all of us is entirely situational.\u00a0 Sometimes we\u2026","rel":"","context":"With 2 comments","img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.druryjournal.com\/wp-content\/uploads\/2022\/07\/airplane-views.png?fit=1200%2C628&ssl=1&resize=350%2C200","width":350,"height":200},"classes":[]},{"id":405,"url":"https:\/\/www.druryjournal.com\/?page_id=405","url_meta":{"origin":494,"position":5},"title":"How To Save Money and Make Your Income Go Further","date":"July 4, 2022","format":false,"excerpt":"During these times of turbulence and high inflation, there probably very few subjects more relevant than this one.\u00a0 Yet we sometimes tend to gloss over certain spending\/saving habits that have proven successful, time and time again.\u00a0 Let\u2019s talk about a few of them here. 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