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Credit card vs. debit card. What’s the difference?

by Samantha Kerr, AVP – Signature Banker

Whether you choose to use a credit or debit card can depend on your specific financial situation. Something to keep in mind is that the pros of a credit card can become cons if not used responsibly.

Credit cards can improve your credit, provide a secure way of spending, and earn rewards. If not used properly, however, credit cards can negatively affect your credit score as well as lead to an increase in spending and debt.

Here are five tips on when and how to use a credit card:

  1. Only spend what you have available in your deposit account. Put the items you know are budgeted for on your credit card, i.e., gas, groceries, etc.
  2. To avoid paying interest charges, pay off your statement balance every month.
  3. Keep your budgeted spending in a separate checking or savings account that earns interest, that way you can monitor your spending while earning interest. You can pay your credit card balance directly from this account when it’s due.
  4. Take advantage of cards that earn rewards and have no annual fee.
  5. Have a credit limit at least three times higher than your average monthly credit card bill. This will keep your credit utilization percentage low, which plays a role in your credit score.

If a credit card isn’t a good fit, a debit card can be a convenient way to make purchases. Here are a couple tips on how to use your debit card.

  1. Talk with your banker about options to keep your card from declining. They can help you decide what the best action plan is and walk you through your daily spending limits.
  2. Monitor your transactions daily and report unauthorized transactions as soon as you can. If you are unsure of a transaction or have misplaced your card, you can go to card maintenance within the NBC Mobile app and turn off the ‘Active’ setting. If you find that the transaction was authorized or locate your card you can easily switch the card status back to ‘Active’. If you report the card as lost or stolen on the app, the card will not be able to be reopened and you’ll need to contact your banker for a new card.

Every situation is unique and we’re here to help. Schedule an appointment with a banker by selecting the “Let’s Talk” button.

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